NEF : PROGRESS AND PROSPECTS

1

• NEF PROGRESS AND PROSPECTS
• PRESENTATION TO THE PARLIMENTARY
• SELECT COMMITTEE ON ECONOMIC AND FOREIGN AFFAIRS
• (NATIONAL COUNCIL OF PROVINCES)
• Sydney Maree and Vijay Ramluckan
• 2 September 2003

2
BACKGROUND

• History
• Established by NEF Act 105 of 1998
• Part of the DTI Group of DFIs
• Capitalisation through equity set asides of SOEs
• NEF designated equity in 12 SOEs

3
NEF SOE EQUITY ALLOCATION

• MTN Group
• Telkom
• SAA
• Uthingo
• ACSA
• Connex Travel
• Viamax
• SAFCOL
• Syncat
• Transwerk Perway
• Sentech
• Sun Air

1.5 5 5 5 10 10 10 10 10 10 10 15
4
HISTORY

• MTN Group shares transferred no other shares
  transferred
• Current MTN share valuation approximately
  R427million
• R200million general Venture Capital Fund
  established in 2001, an NEF and IDC joint venture
• Systems, processes and staff progressing
• New board of directors appointed in 2003

5
CURRENT STATUS

• Acting CEO appointed August 2003 Mr Sydney
  Maree
• Mandate currently under review
• Capitalisation upon finalisation of the mandate
• Finalisation of mandate pending

6
GOALS

• Spread ownership to HDPs
• Encourage and promote savings, investments and
  meaningful economic participation of HDPs
• Promote and support the development of businesses
  pioneered by HDPs
• Promote the understanding of equity ownership and
  investments amongst HDPs
• Contribute towards employment creation in South
  Africa
• Encourage Enterprise Development
• Play a central role in broad-based BEE Financing

7
STRATEGY

• Focus on BEE SMEs, broad-based and mass
  empowerment
• Enterprise development
• Job creation
• Savings and wealth creation
• Procurement
• Market making
• Routine transactions
• Financial and investment literacy programmes
• Guided by the NEF Act and Government policy
• Focus on transformation sensitive sectors
• Other Government initiatives

8
STRATEGIC OBJECTIVES

• Facilitate BEE savings, investments and finance
• Improve the accessibility of finance for BEE
  groups
• Provide value added services and products to BEE
  groups
• Focus on areas neglected by banks
• Greater propensity for risk provider of risk
  capital
• Complement current BEE products offered by other
  DFIs
• Leverage private institutional funding
• Create public-private partnerships
• Seek co-investment opportunities

9
PROPOSED FUTURE STRUCTURE
Corporate Centre
Private Equity
Venture Capital
Investment Advisory Services
Guarantee products
Financial products for BEE business development
Investment products for mass broad-based
empowerment Advice to BEE Advice to Government
Parastatals
10
PRODUCT OFFERINGS (currently under review)

• Finance for black business
• Private Equity
• Venture Capital
• Financial products for mass-based empowerment
• Community-based projects
• Employee share schemes
• Co-operatives
• Rural-based projects
• Guarantee Products
• Warehousing of equity
• Investment products for mass empowerment
• Mass-based savings and investment products
• Advisory services
• Market making

11
NEF VENTURES
AIM Finance economic empowerment and black
business development
Nature of the Fund
Terms of the Funds Investments

• NEF and IDC joint venture
• R200 million general VC fund
• Seed, start up, early stage, expansion capital
  and MA deals
• Finance HDPs with minimum collateral into viable
  projects
• Investment size of R3 million to R10 million,
• R250 000 to R3 million fund to be introduced in
  due course
• Investment instruments
• equity
• quasi equity
• debt
• Investment horizon three to seven years
• Return commensurate with risk
• Investment of R5m completed

• Fund transactions where HDPs have an equity
  interest and are operationally
• involved, at senior management level.
• Invest in unlisted companies.
• The Fund will seek minority stakes in businesses
  (up to 49).
• Majority stakes in certain instances where there
  is a clear mechanism to reduce stake to below 49
  in the short term.
• Will invest directly into the underlying
  operating business rather than in an investment
  holding company.
• Invests in South African companies conducting
  business predominantly within South
  Africa.

12
PRIVATE EQUITY

• Private Equity division will provide acquisition
  and enterprise finance to
• support empowerment.
• Focus will be on medium to large and mature
  companies
• with a profit history.
• Large transactions
• Funding will be provided for
• Developing growth companies
• Management buy-ins (MBIs)
• Management buy-outs (MBOs)
• Leveraged buy-outs (LBOs) and
• Recapitalisation of BEE investment structures
• Awaiting capitalisation

13
INVESTMENT ADVISORY SERVICES
Overall aim
Investment Services Offers

• To increase HDPs participation in financial
  markets and
• formal savings vehicles.
• Emphasis is on the development of mass
  empowerment broad-based investment and savings
  products.
• These will be supported by targeted investor
  education programmes.
• Structured investment products designed to limit
  downside risk without compromising attractive
  returns
• Awaiting approvals for first mass empowerment
  retail offering scheduled for 2004

• Retail share schemes for broad-based empowerment
  using the NEF balance sheet
• Retail share schemes for broad-based empowerment
  using listed shares of non-empowerment companies
• Warehousing of shares for forward sale through
  mass empowerment schemes
• Provide advisory, management and administrative
  services for mass empowerment products to private
  government companies
• Empowerment unit trusts
• Economic and financial literacy campaigns

14
GUARANTEE PRODUCTS

• Assistance with performance guarantees
• Assistance with financial guarantees
• Product designed to reduce cost of funding for
  BEEs
• Improve accessibility of funding for BEEs
• Leverage private institutional funding

15
ADVISORY SERVICES

• Assist / Advice for Government Parastatals
• Provide assistance with business plan compilation
• Advise on deal structure, pricing, etc
• General economic and business advice to community
  base organisations

16
MARKET MAKING

• Prevent dilution of BEE shareholding
• Seek strategic investments for BEE investment
• Warehouse investment on behalf of appropriate BEE
  structures

17
NEF CHARTERS WORKING GROUP

• Assist with BEE financing strategy as part of
  group of DFIs
• NEF products not isolated from charter
  requirements
• Provide advice assistance to government
  organisations developing charters and empowerment
  policy and guidelines
• Interact with other working groups/task teams
• Develop appropriate investment products for
  charters

18

• NEF CONTACT DETAILS

National Empowerment Fund 23 Melrose Boulevard,
Melrose Arch P O Box 31 Melrose Arch Melrose
North 2076 Tel [phone] Fax 011 772
8100 Website http//www.nefcorp.co.za