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IDFC PRESENTATION TO SMALL BUSINESS DEVELOPMENT PORTFOLIO COMMITTEE

IDFC PRESENTATION TO SMALL BUSINESS DEVELOPMENT PORTFOLIO COMMITTEE. IDFC LEGISLATIVE. Provincial Development Finance Institution ; Established through an act of the KZN Provincial Legislature, i.e. Ithala Development Finance Corporation Act, Act No. 5 of 2013 ;

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IDFC PRESENTATION TO SMALL BUSINESS DEVELOPMENT PORTFOLIO COMMITTEE

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  1. IDFC PRESENTATION TO SMALL BUSINESS DEVELOPMENT PORTFOLIO COMMITTEE

  2. IDFC LEGISLATIVE • Provincial Development Finance Institution; • Established through an act of the KZN Provincial Legislature, i.e. Ithala Development Finance Corporation Act, Act No. 5 of 2013; • Wholly owned by the KZN Provincial Government and reports to the Department of Economic Development, Tourism and Environmental Affairs; • Been in existence for over 50 years having assumed various names; • Headquartered in Umlazi, a township located South of Durban next to the old airport

  3. MANDATE, MISSION & VISION Mandate: “Promote, support and facilitate social and economic growth in the province of Kwazulu-Natal” • Vision: • “To be the catalyst for growth, economic development and empowerment” • Mission: • “To drive economic development and empowerment, whilst remaining financially sustainable”

  4. IDFC STRUCTURE

  5. OBJECTIVE OF INSTITUTION

  6. REPOSITIONING STRATEGY – THE BACKGROUND • IDFC REPOSITIONED THE ORGANISATION TO ADDRESS THE FOLLOWING: • Financial sustainability • A lack of funding to drive investments • Limited number of Ithala-initiated economic development projects • Weak business support services reflected in the high failure rates of funded SMME’s and Co-operatives • Lack of alignment with government programmes, especially on rural economic development and agricultural revolution

  7. REPOSITIONING STRATEGY – THE BACKGROUND • Objectives of the Repositioning Strategy are to ensure that Ithala: • Delivers effectively and efficiently on its mandate in a dynamic and challenging environment • Aligns its core business activities to the Provincial Growth and Development Strategy (PGDS) • Reclaims its historical relevance and position itself as the premier development agency in the Province • Becomes financially sustainable and less reliant on government funding to drive its investment programmes

  8. REPOSITIONING STRATEGY - PHASES • The overarching corporate strategy consists of 3-phases over a 5-year time horizon. • Phase 1 seeks to remediate the business; • Phase 2 builds on the revised business platform; • Phase 3 extends Ithala’s focus and widens its set of activities.

  9. IDFC STRUCTURE • IDFC has three Strategic Business Units (SBU’s) • Business Finance – provides financial and non-financial support to SMME’s and Co-operatives • Properties– provides physical infrastructure to retail, light industrial, heavy industrial and SMME businesses • Ithala Limited – is a ‘ring-fenced’ institution, wholly owned by IDFC that provides financial services to the retail market.

  10. BUSINESS FINANCE – MODEL OF OPERATION Value Proposition Delivery Model Target Customers • Financial support • Non-financial support • Business Centres located in 5 out of 11 districts in KZN • SMME’s • Co-operatives Partners Core Activities Cost Structure • Provincial Government • Service providers • Origination • Technical evaluation • Post Investment Management • Business support 65% - 55 employees 15% - professional services 20% - other Funding • Interest Income • Service charges • Government Grants

  11. BUSINESS FINANCE – KEY INFORMATION • Financial and Investment Performance • Profitability: Turnaround from R76m loss in FY 2012/13 to R16m profit in 2013/14. • Investment: Book size is +/-R900m and Non-Performing Loans have been reduced from 61% in 2012/13 to 20% in 2013/14. • Footprint: • Business centres located in Umlazi, Durban, Pietermaritzburg, Richards Bay, Newcastle and Port Shepstone; • Financing Products: • Micro-Finance • Procurement Finance • Agri-Finance • Asset Finance • Franchise Finance • Commercial Property Finance • Structured/Project Finance

  12. PROPERTIES – MODEL OF OPERATION Value Proposition Delivery Model Target Customers • Premises • Implementing Agent • Property development • Property portfolio (retail, industrial and SMME) • Retailers • Industrialists • SMME’s • Government Departments Partners Core Activities Cost Structure • Eskom • Municipalities • Provincial Government • Leasing • Bulk services • Project management 15% - 210 employees 40% - Bulk services, 20% - Rates & Taxes 10% - Maintenance Funding • Rental Income • Service recoveries • Management Fees

  13. PROPERTIES –KEY INFORMATION • Footprint: • Twenty one (21) shopping centres located in rural and peri-urban towns • Three (3) industrial estates located in Mandeni (KZN-North), Ladysmith and Newcastle • Eight (8) light industrial parks seven (7) located in Durban and one (1) in Richards Bay; • Forty (40) SMME parks, eight (8) located in Midlands, thirteen (13) located in Northern region and nineteen (19) located in Southern and Central region • Property Portfolio (Size – GLA): • Total portfolio – 1,176,279 GLA • Retail – 138,443k GLA • Industrial Estates – 847,988 GLA • Light Industrial Parks – 132,930 GLA • SMME Parks – 56,918 GLA • Financial: • Profitability: Profit of R126m in 2013/14. • Investment: The property portfolio is valued at approximately R1.8 billion and yields approximately 5% on average per annum

  14. ITHALA SOC LIMITED – MODEL OF OPERATION Value Proposition Delivery Model Target Customers • Deposits • Personal Loans • Home Loans • Insurance • Branch network • Retail market Partners Core Activities Cost Structure • Service providers • Insurance Underwriters • Deposit taking • Lending • Insurance • 50% - 444 employees • 30% - 49 Branches • 20% - Other Funding • Interest Income • Service fees • Deposits

  15. ITHALA SOC LIMITED – KEY INFORMATION • Footprint: • Forty-nine branches spread across the length and breath of KZN and predominantly in rural and peri-urban towns; • Financing Products: • Deposits • Personal Loans • Home Loans • Insurance – Short and Long term • Vehicle and Taxi Finance • Financial and Investment Performance • Profitability: Loss of R68 million in FY 2013/14 • Investment: Book size is +/- R2.15 billion • Deposits: Customer size is +/- R1.98 billion

  16. SMME & COOPERATIVES IMPACT ON SMME & COOPERATIVES

  17. 2013-14 CLOSE-OUT SUMMARY Approvals Advances Districts: Ethekwini, Ugu, Umgungundlovu, UThukela, UMzinyathi, Amajuba, Zululand, UMkhanyakude, UThungulu, ILembe, Sisonke

  18. 2013-14 CLOSE-OUT SUMMARY No. of Business Financed No. of Jobs Facilitated Districts: Ethekwini, Ugu, Umgungundlovu, UThukela, UMzinyathi, Amajuba, Zululand, UMkhanyakude, UThungulu, ILembe, Sisonke

  19. SMME PORTFOLIO – MIDLANDS REGION

  20. SMME PORTFOLIO – NORTHERN REGION

  21. SMME PORTFOLIO – SOUTHERN & CENTRAL REGION

  22. SMME PORTFOLIO – SUMMARY 473 of the 595 units were occupied as at the end of July 2014.

  23. Thank you

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