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KZN Growth Fund Investment Promotion Stakeholder Forum 14 February 2012

KZN Growth Fund Investment Promotion Stakeholder Forum 14 February 2012. Manoj Nathoo. Strategic Objectives. Provide project finance to viable companies in KZN Enhance economic growth and development in KZN Increase employment Promote BEE “Crowd-in” private sector investment in KZN.

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KZN Growth Fund Investment Promotion Stakeholder Forum 14 February 2012

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  1. KZN Growth Fund Investment Promotion Stakeholder Forum 14 February 2012 Manoj Nathoo

  2. Strategic Objectives • Provide project finance to viable companies in KZN • Enhance economic growth and development in KZN • Increase employment • Promote BEE • “Crowd-in” private sector investment in KZN

  3. History of the Growth Fund • KGF established in March 2005 by KZN provincial government (initiative of the then MEC, Dr ZweliMkhize) • Other participants signed up end 2008 • PPP - Government funding as well as other sources as below • KZN Government: R362m • Standard Bank: R200m • DBSA: R225m • INCA: R300m • Total: R1,087m • KZN government has already committed further funding for an Fund 2.

  4. Funding Criteria • KZN based projects • Debt funding provided: R30m – R80m • Target Sectors: • Energy/ Power • Telecoms, ICT, BPO • Tourism • Bulk Infrastructure • Transport and Logistics • Other – bio-fuels, manufacturing, agri-processing, mineral beneficiation • Loan period of 5 – 10 years • Exclusions: working capital, property finance, acquisitions

  5. Funding Criteria • Minimum BEE participation - 30% of equity of which at least 50% by value to be from KZN • Job Creation – sustainable • Project to be at advanced stage of implementation to enable disbursement within 6 months of application • Minimum equity contribution of 10%. Could be more in certain industries • Interest rates approximately at prime plus

  6. The following table gives an overview of the current portfolio sector spread: Sector Limits and Availability

  7. Application Process • Business Plan / Application sent to KGF Team • Two stage screening process • Initial Screening done against high level criteria • Full Appraisal done – full analysis of business, tests for viability, risk assessment, etc. • Presented to Investment Committee • Presented to Trustees for final approval • Legal closing and aftercare arrangements made • Average time to obtain final approval depends on speed of obtaining information and negotiations but roughly 3 months

  8. Process (continued) • Due Diligence • Technical • Market and Demand • Operational • Legal • Environmental • Financial Model audit • etc • Formulation of appropriate funding structure • Recommendation by IC and approval by Trust

  9. What do we look for? • Sponsors’ experience and level of commitment • Sector and mandate fit • BEE participation • Availability of Suppliers for raw materials • Availability of off takers for the product or service • Technology partner and reputation in the respective industry • Operation and maintenance by a reputable and experienced operator • Market and demand for product or service • Minimum 10% equity participation • Project viability

  10. Common Hurdles that can cause delays or rejections • Viability Concerns (insufficient margins, high overheads, etc) • Equity Contribution • Off-take agreements / market appetite • Regulatory approvals (EIA, demarcations, etc) • Incomplete or improper business plans • Insufficient infrastructure • Proper PPP procedures not followed

  11. What makes us different? • Interest and Capital repayment holidays • Sculptured repayment profile • Own contribution • Security • KZN Focused • Viability-based funder

  12. Questions? KZN Growth Fund 15th Floor, Nedbank Building 303 Anton Lembede St (Smith St) Durban Ph: 031 304 1116 manoj.nathoo@kzngrowthfund.co.za www.kzngrowthfund.co.za

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