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Presentation to Portfolio Committee on Economic Development 30 October 2012

Presentation to Portfolio Committee on Economic Development 30 October 2012. Introduction Khula vision, mision and Values Overview of 2011/12 activities Khula Direct implementation Financial results Concluding remarks. OUTLINE. Our Vision

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Presentation to Portfolio Committee on Economic Development 30 October 2012

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  1. Presentation to Portfolio Committee on Economic Development 30 October 2012

  2. Introduction • Khula vision, mision and Values • Overview of 2011/12 activities • Khula Direct implementation • Financial results • Concluding remarks OUTLINE

  3. Our Vision • To be the development finance partner of first choice in the field of SME development. • Our Mission • To provide finance, mentorship services and small business premises to SMEs through a network of partnerships and to encourage the sustainable development of SMEs whilst ensuring that Khula remains financially viable • Our Values • Entrepreneurial - we understand the challenges faced by SMEs • Efficient - we break down all the red tape • Innovative - we understand our customers` needs and drive innovation • Approachable - we treat fellow staff, clients and other stakeholders with the respect we expect to receive Khula mandate, vision, mission and values

  4. Products and Services

  5. Geographic distribution of Khula offices and partners Khula regional offices Financing partner location

  6. RFI Portfolio

  7. JVs/Funds Portfolio

  8. Overview of 2011/2012 Activities

  9. The launch of Khula Direct Pilot • Khula managed to improve its collection rate during the period under review. An amount of R76.2m (2011: R56.5m) was collected, 34% increase when compared with the previous financial year • A 79.9% decrease in impairments, bad debt provisions and bad debt write offs compared to the previous financial year, (from R150.7m to R30.3m) • Level of commitment and High quality outputs from work-streams in preparation for merger • Formation of Small Enterprise Finance Agency and its future prospects • Unqualified audit report Highlights

  10. Cumulative disbursements in the last 5 years of R1,1 bn • 1,617 SMEs financed through intermediaries in 2011/12 • 2,118 job opportunities created in 2011/12 • 82% of SMEs financed were black owned in 2011/2012 • 45% of facilities disbursed were in rural provinces in 2011/2012 Disbursements to Intermediaries

  11. No new approvals were made for RFI’s/Funds due to the prior year approvals still being utilised and stricter criteria applied. • Level of approvals lower than budgeted largely driven by: • Stricter lending criteria by commercial banks; • Poor economic climate, especially affecting SMEs; • Risk aversion by financing partners and • Reduced funding from shareholder • Global economy Approvals

  12. Loans to RFI’s decreased by 22% in the period under review • Funds decreased by 8% • Credit indemnity decreased by 35% Loan book Growth

  13. Property Portfolio

  14. Property Portfolio • Provide development properties for largely black entrepreneurs • Large number of properties located in underdeveloped areas requiring larger maintenance budget • Estimated employment ± 6,000 jobs • The industrial parks were earmarked for retention to re-develop /upgrade in order to stimulate & “grow” entrepreneurs (small manufacturers) in these areas. • The returns will be Employment creation & will also serve as an ideal platform for skills exchange.

  15. Rentals billings R 45.9m (2011: R41.6m) • Property Portfolio expenditure and overheads R 45.2m (2011: R48.1m) • R2.2m in 2012 (2011: 15m) provided as doubtful debt for rental arrears • 2012 carrying value R195.3m (fair valuation increase of 4% since 2011) • Current actions to improve performance: • A Comprehensive strategy to turnaround the property portfolio has been completed and is in the process of being implemented. • The strategy has segmented the properties into 3 categories. • Outright sale • Redevelopment • Retain and turnaround • Strategy to be reviewed by new Board, together with IDC and EDD Property Portfolio

  16. Adverse impact of economic crisis on SMEs • Reduced allocation of capital by the shareholder • Reduced lending through Khula’s intermediaries • Focus by financing partners on distressed SMEs to ease effects of poor economic climate • Higher than normal bad debt provision across the sector due to poor economic conditions • Low interest environment affecting revenue streams Factors affecting overall performance

  17. Khula Direct Implementation

  18. Business case approved in December 2008 • Between 2008 and April 2010, Khula undertook extensive research, study visits and consultations with key stakeholders • Business plan approved during 2010/11 financial year • Funding of R55m secured for pilot project in East London and Tshwane offices • During the financial year Khula direct managed a collection rate of 98% and impairments of 0% • OUTLOOK: • Khula Direct went live in all 9 provinces in 2013 financial year and disbursements has exceeded 11m YTD. Khula Direct Implementation

  19. Financial Performance For the year ended 31 March 2012

  20. Financial Performance

  21. Company Revenue decreased with 8.9%, the lower volume of disbursements had an adverse impact on the loan related fees and interest earned. • Operating expenditure (excl. impairments, bad debts provisions and bad debt write offs) was contained well during the year, in response to the constrained income-generating activities. • Impairments and provisions stabilised during the year as a result of the provisioning exercise that was undertaken in previous years, showing a decrease in movement of 79.9%. • Total assets increased by 4% when compared to previous year, mainly due to an increase in the value of investment properties. • Loans and advances declined by 18% - correlating to the improved collection rate, as well as the reclassification of NBF (a RFI which was acquired in July 2011), to equity. The acquisition also resulted in an amount of R31.9m impairment, relating to the goodwill on the acquisition of NBF. • Uncommitted cash R403.7m (2011: R110.9) resulting in an increase in investment income.

  22. Revenue

  23. Expenditure and Overheads

  24. Administration expenses - Group

  25. Bottom line

  26. Abridged Balance Sheet

  27. Impairment as % of total financing Provisions: 2012: 44% 2011: 31% 2010: 14% 2009: 16% 2008: 9%

  28. Assets - Analysis for the last five years

  29. As of the 1st of April 2012, Khula was merged with the South African Micro Finance Apex fund (samaf) as well as the business operations of the Industrial Development Corporation’s (IDC) small business funding portfolio. • The new entity is called the Small Enterpise Finance Agency (sefa). Concluding Remarks

  30. Thank You

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