Presentation Outline

1. South African Micro-finance Apex FundsamafANNUAL REPORT2010/11Presented by Mr. Loni Mamatela Acting Chief Executive OfficerDate: 13/ 10/2011

2. Presentation Outline • Mandate, Vision, Mission, Values & Objectives • Operating Model • 2010/2011 Performance Highlights • samaf National Footprint • 2010/11 Financial Performance • Auditor General Report • Challenges • Way forward

3. Mandate • samaf’s mandate is to create work opportunities and sustainable livelihoods through the facilitation and provision of affordable access to finance to micro, small and survivalist businesses for the purpose of growing their income and asset bases. It is also required to act as a catalyst in the development of a vibrant micro-finance industry in South Africa. The primary purpose is: • To facilitate the provision of affordable access to finance by micro and survivalist businesses; • To extend financial and non-financial services to reach deeper and broader into the rural areas, informal settlement and peri-urban settlement of South Africa; • To contribute towards the reduction of poverty and unemployment; • To build a strong, effective and efficient wholesale (Apex) Fund; • To contribute to better quality of life; and • To contribute towards a sustainable and vibrant micro financial industry in South Africa.

4. Vision & Mission Mission Vision • To provide developmental finance and non-financial services to financial intermediaries through: • Mobilization of financial intermediaries • Wholesaling of funds • Development of institutional capacity • Lobbying and advocacy towards policy development • Development of valuable partnerships (between government , businesses and communities) • “To be a leader in developmental micro finance” (in South Africa)

5. Values & Objectives Objectives • 1. Contribution to poverty alleviation goals through; • Funding Intermediaries( Enterprise loans and poverty alleviation loans) • Capacitating Financial Intermediaries • Regulation and Prudential Standards • 2. Exceed our stake holder expectation through; • Improving outreach through expanded satellite network / offices • Improving internal turnaround standards • 3. Improvement of processes to achieve service delivery excellence through; • Improving financial reporting and management • Strengthening risk management • Increased compliance of legal and other regulations • 4. Leverage performance through capacity and people through; • Organisational Development • Balance Scorecard & Performance Management • Organisational Design & Change Management • 5. Building sustainable Apex Fund • Improved quality of lending portfolio and internal control environment

6. samaf Operating Model PR & COMS External Internal External Education Selection Research DIRECTOR GENERAL Support Primary / Core OPERATIONS REG FI’s CONSUMERS Strategic Oversight IT FIN SC HR CB Internal Audit EDD MARKET SAMAF

7. 2010/11 Performance Highlights • Disbursements of R41m were made to FI’s in respect of loans and grants. • 14 Micro Finance Institutions, 23 Financial Services Cooperatives and 24 stokvels were supported. • The total number of borrowers increased by 13.5% from 35 884 to 40 726. • 80% of loans by the FI to end users were in rural communities and 95% were micro-enterprise loans. • The number of end user savings increased by 20 % from 25 840 to 31 129 • Installment repayments by FIs average 90% • 272 individuals from 68 institutions nationally participated in capacity building workshops. • samaf received an unqualified audit report

8. Approved Funding (Rm) • An increase of 41% as compared to the previous financial year was achieved

9. Total Disbursements (Rm) • Capacity building increased by 192% as compared to the previous financial year • On lending funds increased by 71% as compared to the previous financial year 19.8

10. On- lending per Province (R)

11. Capacity Building per province (R)

15. samaf NATIONAL FOOTPRINT • M= Micro Finance Institutions • F= Financial Services Co-operatives M4/F4 M3/F5 M0/F4 M2/F1 M0/F6 M0/F3 M0/F5 M1/F=6 M3/F3

16. 2010/11 Financial Performance Statement of Comprehensive Income

17. 2010/11 Financial Performance Operating expenditure

18. Auditor General Report • OPINION • An unqualified opinion was expressed, however issues were raised as part of emphasis of matter. • EMPHASIS OF MATTER • Going concern • The Economic Development Department is re-organisingits small lending business institutions by merging samaf, Khula and small business activities of the Industrial Development Corporation (IDC). samaf will not cease its operations. • Material losses to the amount of R1 047 923 were incurred as a result of the write off of loans provided to financial intermediaries. • In addition, material impairments to the amount R 4 795 527 were incurred on loans provided to Financial Intermediaries.

19. Auditor General Report (cont…) • REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS • Usefulness of information • Predetermined objectives • The reported performance information was deficient in respect of the following criterion: • Measurability: Indicators are not well defined. • Reliability of information • The reported performance information was deficient in respect of the following criterion: • Accuracy: the amounts , numbers and other data relating to actual performance have not been recorded and reported appropriately. • Completeness: All actual results and events that should have been recorded have not been included in the reported performance information. 19

20. Auditor General Report (cont…) Compliance with laws and regulations Procurement and contract management A service with a transaction value between R10 000 – R500 000 was procured without inviting at least 3 written price quotations from prospective suppliers as required by Treasury regulations. Expenditure management The accounting officer did not take appropriate steps to prevent irregular expenditure, as per the requirements of the section 38 (1)(c)(ii) of the PFMA. A payment of R107 333 was made although the correct procurement process was not followed.

21. Auditor General Report (cont…) • INTERNAL CONTROLS • Leadership • The leadership did not exercise appropriate oversight in ensuring that the prior year and current year annual financial statements complied with the reporting framework. • The entity did not have sufficient skilled resources. The Acting Chief Executive Officer is filling the position of Chief Financial Officer. • Financial and performance management • Management did not have adequate controls to ensure the accuracy or completeness of the financial statements and the report on performance information. • Management did not ensure that certain accounting policies were correctly adopted • Management’s internal control systems relating to IT were inadequate in providing reasonable assurance that the IT high risk areas were properly managed and controlled. 21

22. Challenges • Lack of governance and administration skills within the FIs • General lack of micro-financial skills both internally and externally • Capacity constraints at the provincial offices • Vast distances travelled to the FI’s within the provinces • samaf did not have sufficient skilled resourcesparticularly at executive level • Uncertainty and low staff morale due to the impending merger of samaf, Khula and IDC small business activities

23. Way forward • Revised business processes to reduce turnaround times • Implementation of the capacity building impact analysis tool • Implementation of change management to address the merger issues • Address audit findings by: • Reviewing existing policies and developing new relevant policies and procedures • Tightening controls by communicating policies as well as punitive measures that may be necessary in the event of transgressions. • Ensure that corporate and individual targets are aligned, clearly defined and agreed upfront with all members of staff

24. THANK YOU

25. Acronyms