PROCUREMENT FINANCE Specialised Funding Solutions 4th Annual BEE Conference 7-9 December 2010

1. PROCUREMENT FINANCESpecialised Funding Solutions4th Annual BEE Conference7-9 December 2010

2.  �The wealthiest places on earth are not the gold and diamond mines of the world, nor is it the oilfields of world. The wealthiest place on earth is the cemetery. Buried in the cemetery are dreams that died as dreams, songs that were not sung, poetry that was not written and businesses that were not incorporated!� Dr. Myles Munroe

3. SME Sector Overview

5. Procurement Trends Average BEE spend reported by Top 50 is 44% of discretionary procurement at an average value of R1.83 billion Only 9% for small business (QSE & EME) 6% for Black-Owned and 1% for Black Women Owned. Shows a bias towards larger business in procurement practices. Also points to a lack of access to small black business

6. Procurement & ED Trends Current Targets

7. CHALLENGES IN PREFERENTIAL PROCUREMENT Stringent Processes For a small business to be eligible for opportunities in, for instance 50 companies, they have to deal with 50 different vendor registration processes. Corporates � the collection, collation, verification and management of documentation and information of eligible suppliers can be tedious. Lack of Visibility SME�s - Their target market is a decision maker whose time is limited and his/her decisions will always be influenced with what is convenient, this limits his/her accessibility to eligible opportunity seekers. Corporates � have challenges in finding and accessing these eligible SME�s to procure from. There is no comprehensive, reliable source of these SME�s where corporates can access them. Ineffective Communication When opportunities are advertised, the responses are not a true reflection of the number of opportunity seekers but only people who use that particular medium. Lack of Financial and Operational Capacity It causes a delay for procurement managers when an SMME they have chosen to do business with can not secure finance needed to deliver the work. SME�s � Access to financial institutions to financially capacitate the SME to adequately service the contract is a major huddle for doing business. Credibility The option of using the same SMME all the time is larger influenced by the fact that references, certification, ratings and accreditations given by SMME in their profiles can not be authenticated

8. SA�s structural Problem Money alone does not solve the problem Technical skills but no business skills Management of cash flow is key Business financing decisions important To buy or to lease? To rent or to own? Permanent or contract?

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11. ABSA�s Vision, Objectives and Value Proposition ABSA�s objectives: ABSA to be the first in the financial sector to add procurement value to their SMME corporate clients This forms part of ABSA�s long term strategy to provide value �beyond banking� The value proposition to SMME clients will form part of ABSA�s existing �Loyalty Programmes� providing customers with options to choose the Business Essentials package or the Business Advantage package Value for the SMME corporate clients will be to belong to a national database that will promote their access to the market place � Buying organisations. The objectives of the concept is: To offer ABSA�s corporate clients (SMME�s) the opportunity to belong to a National SMME Supplier Database to increase access to the market place To provide potential buying organisations with the opportunity to either: Search for potential verified suppliers either locally, regionally or nationally Identify, locate and communicate to potential suppliers and Have a secure and transparent eMarketplace to facilitate placement of RFQ�s/Tenders to a larger community of national suppliers To provide the SMME suppliers an opportunity to understand their performance (self assessment) to potential buying clients and to identify areas for development 11 First mover advantage Facilitation of trade eMarketplace Visibility of buyer and supplier information Platform to transact, i.e. sending of enquiries, RFQ�s, etc�First mover advantage Facilitation of trade eMarketplace Visibility of buyer and supplier information Platform to transact, i.e. sending of enquiries, RFQ�s, etc�

12. Why Absa Business Bank?

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16. Supplier Value Proposition 16 Supplier value proposition Intelligent access to the business opportunities (Tenders and RFQ�s) of approximately 4�000 Southern African buyers. Access to the performance expectations of buyers. Access to a comprehensive evaluation and development support platform to assist suppliers in their development Access to a development support community who can assist suppliers to develop in line with the performance requirements of the buyer community. Access to development funding for BEE suppliers of up to R1 million per supplier through the dti BSDP programme. Access to development and operational funding through Absa Small Business, where a buyer contract is used as collateral. Access to invoice factoring through Absa Small Business to assist in cash flow. The automatic updating of their information on the ERP systems of large buyer organisations. An electronic trading (B2B) platform to integrate into the procurement functions of buyer organisations and reduce cycle times from order to payment.Supplier value proposition Intelligent access to the business opportunities (Tenders and RFQ�s) of approximately 4�000 Southern African buyers. Access to the performance expectations of buyers. Access to a comprehensive evaluation and development support platform to assist suppliers in their development Access to a development support community who can assist suppliers to develop in line with the performance requirements of the buyer community. Access to development funding for BEE suppliers of up to R1 million per supplier through the dti BSDP programme. Access to development and operational funding through Absa Small Business, where a buyer contract is used as collateral. Access to invoice factoring through Absa Small Business to assist in cash flow. The automatic updating of their information on the ERP systems of large buyer organisations. An electronic trading (B2B) platform to integrate into the procurement functions of buyer organisations and reduce cycle times from order to payment.

17. Buyer Value Proposition 17 A significant reduction in the hassle and risk of working with a large base of small suppliers. Intelligent access to a potential suppliers base of approximately 140�000 suppliers, where; The compliance issues have been collected (Tax clearance certificates, BEE rating certificates etc) Visibility on the operational strengths and weakness of these suppliers to assist in the selection and development process. A development support network to assist these suppliers, which include development skills as well as financial support. The ability to significantly improve their BBBEE rating with broader support. A reduction in payment administration (and possible cash flow) with Absa small business providing the invoice funding. Less administration through the electronic trading platform.A significant reduction in the hassle and risk of working with a large base of small suppliers. Intelligent access to a potential suppliers base of approximately 140�000 suppliers, where; The compliance issues have been collected (Tax clearance certificates, BEE rating certificates etc) Visibility on the operational strengths and weakness of these suppliers to assist in the selection and development process. A development support network to assist these suppliers, which include development skills as well as financial support. The ability to significantly improve their BBBEE rating with broader support. A reduction in payment administration (and possible cash flow) with Absa small business providing the invoice funding. Less administration through the electronic trading platform.

18. Contact details Sisa Ntshona General Manager : Absa Business Bank Specialised Finance Solutions �7th Floor, 11 Diagonal street, Newtown, Johannesburg +27 11 556 7788 sisa.ntshona@absa.co.za