Presentation to the Parliamentary Select Committee

1. Presentation to the Parliamentary Select Committee Presented by : Thakhani Makhuvha Chief Executive Officer Cape Town 21 November 2012

2. Overview and Background Challenges that led to the establishment of sefa • Limited success in fostering a strong and large SMME sector • Weak small business performance • Poor uptake of Khula and Samaf products • Poor visibility among small businesses • Duplication of services amongst government agencies • High cost of delivering financial services to SMMEs

3. Overview and Background (Cont) Establishment of sefa • Cabinet support for an integrated approach • sefa was established on 1st April 2012 as a wholly owned subsidiary of IDC (merger of Samaf, Khula and the small business activities of the IDC) • Established in terms of IDC Act • Shareholder compact between IDC and EDD incorporates sefa • sefa’s Corporate Plan informed and guided by a number of Legislative and Policy Prescripts (eg New Growth Path, Outcome 4 and other National Imperatives and legislation)

4. Vision, Mission and Values Vision To be the leading catalyst for the development of sustainable Survivalist, Micro, Small and Medium enterprises through the provision of finance

5. Vision, Mission and Values Mission Our mission is to provide access to finance for Survivalist, Micro, Small and Medium businesses throughout South Africa by: • Providing finance to small businesses on a wholesale and direct basis • Providing credit guarantees to small businesses • Supporting the institutional strengthening of Financial Intermediaries so that they can be effective in assisting small businesses • Creating strategic partnerships for sustainable small business development and support • Monitoring the effectiveness and impact of finance provision, credit guarantees and capacity development in the small business sector • Developing (through partnerships) innovative finance products, tools and channels to catalyse increased market participation in the provision of affordable finance to small businesses

6. Target Market sefa’s target market consists of small businesses that have not been able to access finance from banks and the finance sector. These include: • Survivalists and micro-enterprises – those requiring loans of anything between R500 and R50 000 • Small enterprises – loans between R50 000 and R1 000 000 • Medium enterprises – loan between R1 000 000 and R5 000 000

7. Overall Strategic Objectives The strategic objectives of sefa are to: • Increase access and provision of finance to small businesses and thereby contribute towards job creation. • Develop and implement a national footprint for effective product and service delivery. • Build an effective and efficient sefa that is a sustainable performance driven organisation. • Build a learning organisation . • Build a sefa that meets all legislative, regulatory and good governance requirements. • Build a strong and effective sefa brand emphasizing accessibility to SMMEs

8. Overall Strategic Objectives The strategic objectives of sefa are to: • Increase access and provision of finance to small businesses and thereby contribute towards job creation. • Develop and implement a national footprint for effective product and service delivery. • Build an effective and efficient sefa that is a sustainable performance driven organisation. • Build a learning organisation . • Build a sefa that meets all legislative, regulatory and good governance requirements. • Build a strong and effective sefa brand emphasizing accessibility to SMMEs

9. Strategic Objective 1 Increase access and provision of finance to SMMEs and thereby contribute towards job creation Current Status (year to date): • 99 SMEs financed through direct lending to the value of R25 million • 16 333 micro enterprises financed through wholesale partners • New approvals to micro finance institutions of R10 million • New approvals to retail financial institutions of R50 million • New approvals through credit indemnity scheme of R7 million • 1 990 jobs created and estimated 11 433 in micro-enterprises • Current pipeline in excess of R173 million for wholesale funding • Current pipeline of R105 million for direct lending • Initial training of staff in retail lending and lending platform

10. Strategic Objective 1 (cont) Immediate Priorities: • Conclude transactions in the pipeline to increase SMMEs accessing sefa funding • Continuously identify small businesses that require funding • Design business support programmes • More intensive training of staff (especially in direct lending) • Conclude agreements with private and public sector partners • Pre-loan support (egseda, Mpumalanga Economic Growth Agency , Gauteng Enterprise Propeller) • Business Support Centres (eg SAICA Business Hubs) • Funding of small business opportunities arising out of IDC projects • Procurement opportunities (eg SOEs, government departments) Medium to Long Term Priorities: • Extend footprint (see next slide) • Manage growth in the number of businesses financed • Extend partnerships to other provincial governments, government agencies, community based organisations and private sector.

11. Strategic Objective 2 Develop and implement a national footprint for effective product and service delivery Current Status: • Regional offices in all 9 Provinces • 3 Pilot offices fully operational in terms of direct lending • All other offices accepting applications • 5 Khula and samaf offices have merged Immediate Priorities: • Complete merging of 4 regional offices by the end of October • Capacitate all offices for direct lending through staff training and strengthening lending systems Medium to Long Term Priorities: • Establish 52 Branch and Satellite offices in order to cover all districts leveraging on the Post Office/Post Bank network

12. Strategic Objective 3 Build an effective and efficient sefa that is a sustainable performance driven organisation Current Status: • EDD Bargaining Chamber established and Transfer Agreement signed • Placement of staff from Samaf and Khula almost complete • CEO and some Executive positions – recruitment in process • Structured Change Management process well underway Immediate Priorities: • Align staff to the current organisational needs • Continue to build a new organisational culture geared to delivering • Re-skill staff where necessary • Develop the sustainability model of sefa • Sign MoU with IDC to provide institutional development support • Analyse the cost driving activities and increase efficiency Medium to Long Term Priorities: • Analyse the cost driving activities and improve operational efficiencies

13. Strategic Objective 4 Build a learning organisation Current Status: • Limited R&D capacity • Continuously building body of knowledge of small businesses and small business funding through interaction with other entities Immediate Priorities: • Make use of IDC’s Research and Information capacity • Benchmark using available existing research Medium to Long Term Priorities: • Establish R&D capacity and capability

14. Strategic Objective 5 Build a sefa that meets all legislative, regulatory and good governance requirements Current Status: • Unqualified audit reports for year ending March 2012 for Samaf and Khula • Board and Sub-Committees established and functioning • Compliance brought into line where gaps existed Immediate Priorities: • Address audit findings identified by external auditors • Recruit Compliance Officer • Update all policies, systems and procedures Medium to Long Term Priorities: • Improve corporate governance and compliance

15. Strategic Objective 6 Build a strong and effective sefa brand emphasizing accessibility to SMMEs Current Status: • Limited promotional activity • Corporate identity developed with assistance from IDC • Communication plan developed and being finalised Immediate Priorities: • Improve service as the main brand building initiative • Align communication plan with organisational plan, step by step, concluding first phase by February 2013 Medium to Long Term Priorities: • Continued focused communication and brand awareness campaigns

16. What is Different With sefa’s Wholesale Model? • Partner with stronger financial intermediaries such as Small Enterprise Finance (SEF) and Women’s Development Business • Develop demand driven products that can be distributed through intermediaries that operate in line with sefa’s developmental objectives • Increase utilisation of the Credit Indemnity Scheme by all registered banks and other non bank financial intermediaries through improved processes • Influence interest rate charged by intermediaries to SMMEs (eg through capping of interest rates) • Institutional strengthening of intermediaries through targeted capacity building grants and technical support (eg systems and skills development)

17. What is Different With sefa’s Retail Model? • Provide finance directly to SMME’s that are unable to access private sector funding • Implement simpler loan- and approval processes (eg. forms, contracts) • Increase efficiency in terms of processing of applications (current average turnaround time = 60 days, to be reduced to 30 days in the next 18 months) • Affordable pricing of products • Co-locate regional offices with IDC and other DFI’s wherever possible to enhance cost efficiencies • Pro-actively target businesses in sectors identified in the New Growth Path (e.g. green economy, manufacturing, agro-processing and tourism) • Provide post loan support to funded SMMEs (in partnership with public and private institutions such as SEDA and SAICA) • Link with IDC enables funding of small business opportunities arising out of mega projects • Identify sustainable opportunities for small businesses from Public Sector procurement programmes and provide funding to SMME’s to take advantage of these

18. Products & Services - Retail

19. Products & Services - Wholesale

20. Products and Services - Non Financial Services

21. Co-Operatives support Programme The following will be undertaken to support Co-operatives: • Set a target on the number of co-operatives to be supported and value to be disbursed • Set clear outcomes in terms of the support provided • Benchmark internationally including drawing on other African states • Provide capacity building support and mentorship to Co-operatives.

22. 2013-2017 Performance Targets –Approvals

23. 2012/2013 Performance Targets

24. 2013-2017 Impact Targets -SMMEs Financed & Jobs Created/Sustained

25. Performance Overview – SMMEs Financed

26. Performance Overview – Approvals

27. Performance Overview – Jobs Created/Sustained

28. Targeted Group Funding • 30% of funding disbursed targeted towards youth-owned enterprises. • 45% of funding disbursed targeted towards priority rural provinces. • 40% of funding disbursed targeted towards women-owned businesses, progressively increasing in subsequent years. • 70% of funding disbursed targeted towards black-owned businesses.

29. Delivery Network The retail network consisting of regional, branch and satellite offices will span across the nine provinces and all districts of the country. Added to these will be Financial Intermediaries who will also distribute sefaproducts throughout the country to ensure access by qualifying SMMEs. Initially sefawill roll-out its retail products through the existing regional offices whilst the branch and satellite offices are being set up. The regional offices are:

30. Delivery Network

31. THANK YOU