F UND

1. NATIONAL EMPOWERMENT FUND Growing Economic Participation PRESENTATION TO THE PORTFOLIO COMMITTEE ON TRADE AND INDUSTRY Nchakha Moloi Acting CEO 4 MARCH 2005

2. CONTENTS • Who is NEF? • What does NEF do and why? • How does NEF do it? • What are the resource requirements? • How can performance be measured? • Challenges. • Questions.

3. NATIONAL EMPOWERMENT FUND (NEF) NEF TRUST NEF VENTURES WHO IS NEF? • In terms of the NEF Act • Capitalisation from National Treasury and share-set-aside • Specific product offerings in terms of June 2004 product relaunch • Joint Fund between IDC and the NEF • Separate investment criteria and fund mandate • Transactions between R3m to R10m • Minimal overlap with NEF Trust Transformer product only • NEF screens and processes applications as Fund Manager • Capitalisation on a 50/50 basis between both organizations • Fund Size R170m, with initial expectations of an additional R30m to be earmarked for a smaller Fund • Management fees paid by IDC and NEF respectively

4. WHAT DIFFERENTIATES NEF? • Exclusive generalist funding for BEE • Not focused on personal credit worth/ security • Focused on the “Hurt Factor” (livelihood dependent) • Appetite for risk with a development focus

5. CONTENTS • Who is NEF? • What does NEF do and why? • How does NEF do it? • What are the resource requirements? • How can performance be measured? • Challenges. • Questions.

6. Main objective To be a catalyst in facilitating economic equality and transformation Driven by • Current market needs • Broad-based empowerment charter • Government policy and other sectoral charters • Addressing past failures of BEE structures New focus Maximise the empowerment dividend WHAT DOES NEF DO AND WHY?

7. THE NEF IS A DFI OPERATING UNDER THE UMBRELLA OF THE dti

8. NEF POSITIONING IN ADDRESSING MARKET FAILURE • Identification of market failures particularly regarding participation of HDPs in economy • Avoid duplication of other DFI offerings • Positioning of NEF to complement other DFIs and financial institutions

9. CONTENTS • Who is NEF? • What does NEF do and why? • How does NEF do it? • What are the resource requirements? • How can performance be measured? • Challenges. • Questions.

10. Entrepreneurs & Rural communities BEE RETAIL EQUITY OWNERSHIP ENTREPRENEUR SUPPORT * Offer to BEE public to subscribe for shares at a discount *Provide capital as transaction catalyst Government Departments & Sectoral Charters * Part of NEF exit strategy on listed investments * Partnership with DFI's & public sector Targets Vetting of financial structures in compliance with charter and scorecards GROUP & ENTREPRENEURIAL SCHEMES RURAL & COMMUNITY SUPPORT * Focus on community development Process * Partner with specialist organisation * Future Women Fund * Co-operatives ADVISORY STRATEGIC PROJECTS Targets Division Process Division Division MARKET MAKING UNDERWRITING FOR IPO’s Process BEE FACILITATION Support BEE access to market capital especially Targets * Provide liquidity for BEE sales * Partner with IDC/DBSA, commercial investor * Warehousing BEE equity * Direct equity in mega-projects * NEF transformational adjudicator & implementation * Ensure BEE shareholding remains * Facilitate BEE investment opportunities Established BEE companies and Government departments requiring equity warehousing for BEE

11. Entrepreneur Support • Operational involvement at senior management level • Financial commitment (relative to the individual and not the size of the transaction) • Demonstrate sustainability of the business • NEF investment into operating companies • Compliance with laws and regulations(e.g. Income tax, Employment Equity) • Rural & Community Support • Community involvement at all levels • Strong social upliftment benefits • Co-funding with other investors (NEF will not be the sole investor) • Projects must be undertaken in conjunction with a recognised partner • Market Making • Track record of operational involvement • Established businesses • No dilution of management capacity • Compliance with laws and regulations (e.g. Income tax, Employment Equity) KEY QUALIFYING CRITERIA

12. Generator Accelerator Transformer Size of investment • R250 000 to R1m • R1m to R3m • R3m to R10m Principal goal • Create new HDP-owned and managed enterprises • Grow and develop existing HDP-owned and managed enterprises • Transformation of enterprises at the ownership, decision-making and control levels Types of organisations supported • Close corporations) and private (Pty) Ltd companies. • CCs and (Pty) Ltd companies • Unlisted limited companies Principal use of investment capital • Acquisition of equipment • Financing of working capital • Bridging finance • Acquisition of licenses/franchises • Rehabilitation, lease and performance bonds • Primarily to fund business expansion, either by acquisition or organically • Management buy-outs • Management buy-ins • Employee buy-ins, Employee share ownership plans Types of investment • Debt (secured and unsecured) • Equity • Secured debt • Convertible debt • Preferred equity • Equity • Secured debt • Convertible debt • Preferred equity • Equity HDP equity thresholds (including NEF stake) • >75% • >50% • >25% Term of investment • 3 – 7 years • 3 – 7 years • 3 – 7 years DETAILED INVESTMENT CRITERIA – ENTREPRENEUR SUPPORT

13. EVALUATION FRAMEWORK THE FRAMEWORK TRACKS THE DEAL FLOW PROCESS THROUGH THE FOLLOWING GENERIC STAGES: • Eligibility screening; • Assessment of commercial viability (including historic analysis) and sustainability of financial forecasts, incorporating review of the business plan; • Evaluation of management’s ability to implement the business plan; • Proposed investment structure and capacity of business to service/ bear the required cost of funding; • Identifying risks inherent in the business, formulating the due diligence investigation plan and setting due diligence materiality limits; • RECOMMENDATION TO EXCO (PRE DUE DILIGENCE); • Performance of due diligence and evaluation of results; • Final review of due diligence and comparison to investment structure; • FINAL RECOMMENDATION TO EXCO AND IC

14. Application Form / Screening / Business Plan Preliminary Investment Report Investment Committee Due Diligence Final Investment Report PIDSA Receipt of Investment Application Form & Business Motivation Assessment of application for eligibility Investment Associate perform assessment for commercial viability, incorporating business plan Communication with applicant: decline application or proceed with evaluation Completeness of Business Plan Evaluate Financial forecasts Internal Team Approval Prepare Investment Report for pre-due diligence & proposed Term sheet Approval by EXCO Investment Committee (INCOM) PIDA Present Pre Due Diligence Report to EXCO INCOM Perform Due Diligence (DD) Final Investment Report EXCO INCOM Submission for Approval Presentation to the NEF INCOM / Ventures IC for Final Approval (FICA) 1. Listco R50,000,000 (GP) 2. E & B Conservancy R10,000,000 (EC) 3. Solar Systems R7,000,000 (GP) 4. Vac Air Technology R10,000,000 (GP) R77,000,000 1. E & B Citrus R10,000,000 (EC) 2. EHD Components R9,940,000 (GP) R19,940,000 Pending Applications (01/06/04 – 21/02/05) 70 (Pre-Investment Business Support required to accelerate transactions) Total Applications Received (01/06/04 – 21/02/05) 185 Interim Investment Committee for transactions above R5m approved INVESTMENT PROCESS: TRANSACTIONS > R5m Total WIP:R96,7 mill

15. Due Diligence Final Investment Report Application Form / Screening / Business Plan Preliminary Investment Report Investment Committee Receipt of Investment Application Form & Business Motivation Assessment of application for eligibility Investment Associate perform assessment for commercial viability, incorporating business plan Communication with applicant: decline application or proceed with evaluation Completeness of Business Plan Evaluate Financial forecasts Internal Team Approval Prepare Investment Report for pre-due diligence & proposed Term sheet Approval by EXCO Investment Committee (INCOM) Present Pre Due Diligence Report to EXCO INCOM Perform Due Diligence (DD) PIDSA Final Investment Report EXCO INCOM Submission for Final Approval PIDA Invested Portfolio 1. Greisen Finance (Pty) Ltd. R3,990,000 (GP) 2. Izazi Support Systems R300,000 (MP) 3 JC Backhoe Spares R2,000,000 (GP/PE/KZN) 4. Khanya Plastic R1,800,000 (WC) 5. Ogwini Bakery R1,167,367 (GP) 6. Platinum Koi R900,000 (WC) 7. Quality Frozen Food R2,950,000 (GP) 8. Speedy Umtata R415,000 (EC) 9. Steel Metal & Tools CC R3,374,700 (GP) R16,897,067 1. Exotic Breads R1,700,000 (KZN) 2. Isibane Safety R1,000,000 (WC) 3. Kuzuko R5,000,000 (EC) 4. Notae R960.000 (KZN) 5. National Trans. & Ind. R1,500,000 (WC) 6. Secretarial Unlimited R450.000 (KZN) 7. Theme-U-Snack CC R1,000,000 (WC) 8. Tilt Tango CC R820,000 (WC) R12,430,000 NEF VENTURES– 5 Transactions (As per attached Report) Pending Applications (01/06/04 – 21/02/05) 553 (Pre-Investment Business Support required to accelerate transactions) Total Applications Received (01/06/04 – 21/02/05) 1174 1. Amsterdam T/D ‘65 CC R680,000 (GP) 2. Semaku R1,345.000 (GP) R2,025,000 1. Something Fishy R390,000 (GP) 2. Makarapa Headwear R400,000 (GP) R790,000 NEF TRUST– GES & MARKET MAKING 6 Transactions (As per attached Report) INVESTMENT PROCESS: TRANSACTIONS UP TO R5m Total WIP:R32,1 mill

16. NEF TRANSACTION WIP SCHEDULE

17. NEF TRANSACTION WIP SCHEDULE cont.

18. INVESTMENT PRODUCT PRICING cont. The following calculations provide a sum-of-the-parts breakdown of the NEF’s required returns: Rate p.a. Inflation rate 3% – 6% Real return required 3% - 4% Risk factors 2% - 8% Operating costs 2% - 3% Taxation (income tax & CGT) 2% - 3% Subtotal 12% - 24% Less: empowerment benefit concessions achieved (0% - 5%) Total return required 12% - 19%

19. Totals Gauteng 3878 Western Cape 866 Email 1 & Email 2 1192 Kwa Zulu Natal 654 Mpumalanga 445 Incomplete Data 288 Limpopo 340 Northern Cape 287 Eastern Cape 341 Cellphone Enquires 137 Free state 223 North West Province 464 International 8 Total 9123 GEOGRAPHICAL ANALYSIS OF TOTAL ENQUIRIES RECEIVED (1 JUNE 2004-28 FEBRUARY 2005)

20. GEOGRAPHICAL ANALYSIS OF TOTAL APPLICATIONS RECEIVED (1 JUNE 2004-28 FEBRUARY 2005)

21. CONTENTS • Who is NEF? • What does NEF do and why? • How does NEF do it? • What are the resource requirements? • How can performance be measured? • Challenges. • Questions.

22. Minister NEF Board Audit Committee Human Capital & Remuneration Risk Management Committee Investment Committee Risk / Internal Auditor Vacant Secretarial & Compliance Officer Chief Executive Officer PA Vacant Chief Financial Officer Executive - Group Entrepreneurial Schemes Support Services Executive Executive - Market Making Vacant Executive Advisory Services Vacant Management Accounting Financial Accounting Process and Projects Coordination Underwriting for IPO BEE Facilitation Strategic Projects Rural & Community Support BEE Retail Equity Manager Generator Accelerator Transformer Knowledge Management Human Resources Information Technology Marketing & Comms Legal Advisory Services Office Administration. NEF ORGANISATIONAL STRUCTURE Total number of employees: 42

23. CONSOLIDATED BUDGET

24. NEF CAPITAL DRAW-DOWN SCHEDULE FOR YEARS ENDING 31 MARCH 2009

25. DESIGNATED SOCE’s

26. OPERATIONAL HIGHLIGHTS • Constitution of Board Sub-Committees including Investment Committee completed in October 2004. • Executive and management positions stabilised pending final appointments. • Disbursements on transactions approved, following launch of new products, commenced in November 2004. • Further disbursements in the IT, wine making and transport business sectors took place between November 2004 and January 2005. • Compliance and internal control procedures and processes fully implemented and transactions are closely scrutinised to ensure full compliance prior to disbursement.

27. CAPITALISATION • Investments • R150 million has been earmarked for investment capital to the NEF for the current financial year which has partly been received following the successful signing of the Shareholder Performance Agreement. • The NEF has cash reserves at present (January 2005 – R152 million) to funds its operations and investment activities and will be essentially fully invested through its current funding work in progress (R129 million). • The first tranche of the R2 billion allocation is expected in the first quarter of the next financial year and this is understood to be in the order of R410 million based on the NEF business plan capitalisation draw downs and discussions with National Treasury. • The DG’s and the DPE are currently working on the transfers of the remaining allocation of SOCE equity investments. Significant impact on the balance sheet.

28. CONTENTS • Who is NEF? • What does NEF do and why? • How does NEF do it? • What are the resource requirements? • How can performance be measured? • Challenges. • Questions.

29. NEF TRUST – INVESTMENT PORTFOLIO

30. TRANSACTION HIGHLIGHTS • MUKS Business Enterprise CC • 5 year Term loan for R250 000 • Repayment per loan schedule (fixed IRR) • Structured finance product with Standard Bank Asset Finance R250K Std Bank MUKS NEF Trucks

31. TRANSACTION HIGHLIGHTS • Kula Tissue Products CC • 5 year Term loan R250 000 • Repayment per loan schedule (fixed IRR) • Secured by negative pledge over assets

32. TRANSACTION HIGHLIGHTS • Banra Furniture Manufacturers CC • 5 year Term loan R430 800 • Interest at prime + 2% • 1% royalty on turnover • Secured by personal surety

33. TRANSACTION HIGHLIGHTS • Wax Works (Pty) Ltd • 5 year Term loan R650 000 • Interest rate at prime + 2% • Secured by personal surety

34. TRANSACTION HIGHLIGHTS • Platinum Koi • Term loan R1 000 000 at 13% • Repayable over 5 years after 6 month “holiday” • Secured by cession of shares, trade accounts, bank balances and a General Notarial Bond over stock with personal surety

35. NEF VENTURES – INVESTMENT PORTFOLIO

36. TRANSACTION HIGHLIGHTS • Blink Magazine • 40% equity, senior secured shareholders loan and senior debt facility: R3 500 000 over 3-5 years • Interest on senior debt at prime + 2% • Put option on equity on loans settlement • Lindiwe Wines • KWV supported • 49% equity, term loan facility: R3 075 000 exit in 5 years

37. REQUIREMENT DUE DATE • Annual Report 24 Sep 04 (done) • Budget 2006 15 Oct 04 extension (done) • Corporate Strategy/ Business Plan 15 Oct 04 extension (done) • Internal Audit 31 Jan 2005 – IA Manager 1 Jan 2005 – IA Co-source • Q3 Report 31 Jan 2005 (done) • S38 Certificate 31 March 2005 (in progress) • Materiality Framework 10 Feb 2005 (presented to AC) • Dti Performance Agreement 31 Jan 2005 (done) • Risk Assessment 31 March 2005 (in progress) ENTERPRISE GOVERNANCE Statutory Compliance: • Emphasis of matter in terms of PFMA / Treasury Regulations were raised in the March 2004 External Audit Report. • These are being dealt with and will be fully cleared by March 2005 • Ongoing PFMA / NTR compliance is being fully adhered to as described alongside.

38. CONTENTS • Who is NEF? • What does NEF do and why? • How does NEF do it? • What are the resource requirements? • How can performance be measured? • Challenges. • Questions.

39. FIRST NEW PRODUCT DISBURSEMENTS "NOVEMBER 2004" Launch new product "June 2004" Started trading "2002" NEF Act 1998 NATIONAL EMPOWERMENT FUND DELIVERING ON ITS MANDATE

40. CONTENTS • Who is NEF? • What does NEF do and why? • How does NEF do it? • What are the resource requirements? • How can performance be measured? • Challenges. • Questions.

41. National Empowerment Fund QUESTIONS ?