Introducing the IDC : Your partner in Development Finance 18th January 2008

1. Introducing the IDC: Your partner in Development Finance 18th January 2008 Kugan Thaver Head: Transportation, Financial Services & Other SBU T: +27 11 2693740 / 3479 F: +27 834081910 kugant@idc.co.za

2. Corporate profile • Self-financingstate-owned development finance institution (Act No 22 of 1940) • Provides financing to entrepreneurs engaged in competitive industries • Follows normal company policy and procedures in its operations • Pays income tax at corporate rates and dividends to its shareholder • Independent Board of Directors • Reports on a fully consolidated basis, with its Annual Report freely available to the public

3. IDC Operational Divisions Industrial Division • Chemicals • Textiles • Wood, Paper & Other. • 2010 & Construction • Risk Capital Facility • Metals Services Division • Transportation, Financial Services • Techno Industries • Motion Picture & Media • Franchising • Healthcare and Education • Tourism Projects Divisions • Mining • PPP • Food & Beverage

4. Leadership in Development Strategy • Overarching objective is job creation, achieved in priority areas through: • Providing support to SME and entrepreneurs • Supporting expansionary and Broad-based BEE • Sectoral development strategies • Competitive pricing • Focused service delivery • Expanding IDC reach in: • Townships • Rural Areas • Lesser Developed Provinces • Rest of Africa • Through the provision of Finance for ECONOMCIALY VIABLE & SUSTAINABLE PROJECTS

5. Transportation, Financial Services & Other SBU • Logistics • Freight Forwarding • Containerisation • Warehousing/Storage Facilitation • Owner driver operations • Ship and Aircraft Finance • Bus Tender Scheme and (Taxi Recap) • Asset Finance

6. Sector Role of a DFI in the Supply Chain Industry • Promotion of new entrepreneurs by increasing access to finance • Supporting the expansion and growth of existing businesses • Promotion of BEE participation in the industry (Startup , Expansion & Acquisition Finance) • Engaging with existing financial institutions and industry in ensuring that market gaps and failures are addressed • Ensuring overall sustainability and job creation in the industry • Promotion of sector innovation • Development of South Africa’s and Rest of Africa’s logistics network

7. Generic Financing issue • Overall Management of Cash Flow • Terms obtained and given by the buyer and seller • No co - operation between accounts and procurement( within company and with clients) • Inexperienced Management • Lack of communication across the supply chain

8. Financing Role of a DFI • Co-financing with existing private sector institutions • Increasing access to affordable finance • Working with Industry players to address jointly market failures through provision of risk capital • Business Support • Provision of products such as: • Bridging Loans, Guarantees and Revolving credit facilities • Commercial Loans • Export/Import Finance • Acquisition Finance( Equity)

9. BEE in the Supply Chain • National Imperative • BEE Codes will affect all sectors • Companies will have to incorporate BEE in all aspects of their business • Established Business – Equity or Enterprise Development • Vendor financing and assistance may be required • Can only work if all stakeholders play a role and partner each other • Focus- New Entrants or Acquisitions

10. 4 Plagues for new Entrants • Lack of minimum Contribution • Working Capital • ITC • Experience

11. ABSA/IDC & Daimler Chrysler JV’s • To be at least 25.1% black owned and managed; • To apply for a maximum of R30 million in finance; • To have a profitable contract (primary vs secondary) with a term of at least three years; • To provide a cash contribution of at least 2.5%; • To be operationally involved in the business; and • ITC will considered • Working Capital of 3 months provided

12. BEE Acquisition Funding • IDC’s role is limited to facilitation of transactions where BEE company and target company have agreed to a deal • IDC takes risk primarily on the underlying operations • Buying parties must demonstrate commitment through Cash contributions • Sureties &/or put options if requested • Active participation by BEE party is essential • Broad Based • BEE Vesting • Transfer of Skills( Relevant exposure)

13. Issues to consider (Acquisition)

14. Financing criteria Who should apply? Emerging entrepreneurs and existing businesses wishing to raise finance for ECONOMICALLY VIABLE PROJECTS: • Minimum R1,000,000 for debt financing, minimum R5,000,000 for equity transaction, and minimum R500,000 for bridging facility. Loan finance • Primary economically viable contract for term of the loan • Asset finance and working capital for new contract • 3- 5 year period depending on cash flow needs • Prime linked interest rate • Moratorium period on capital if required • Security in the form of personal surety, bonds on assets, cession of shareholder loans • To provide a cash contribution of at least 2.5%-10%(BEE) • Business Support Equity finance • Minimum stake of 25.1% to be acquired, exceptions will considered on a deal by deal basis and must be motivated • Operational involvement by the acquirer in the entity must be demonstrated • Consortium must have a broad based element in beneficiaries • Reasonable contribution by the consortium • Minimum return of 8% RATIRR and upside

15. IDC process • Basic Assessment • Due Diligence • Final Approval by Committee • Legal • Post Finance Monitoring • 3 weeks to 3 months

16. Advantages of IDC • Professional skepticism and due diligence process reduces client risk profile • Focus on economic merit rather than balance sheet security • Tailored facility/is to suit projected cash-flows (and capital repayment deferments, etc) • International Risk capital support • Technical support program • “Soft Funder”

17. The partner of choice • Ability to take higher risk • Long Term View • Reputable Partner • Balance of Profitability Vs Development • Proven track record of implementing and advising on BEE transactions • Proven Track record on leading industry development and successful projects

18. THANK YOU www.idc.co.za kthaver@idc.co.za 011 269 3479