Absas Funding

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Absas Funding of SMMEs
by Sandra Beswick
Principal Officer Incubator Fund
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• Content
• Background on Absas product offering available
  to BEE and SMMEs
• Debt Funding
• Extend Public Works Programme (EPWP)
• New Enterprise Banking
• Normal Banking Products
• Joint Fund
• Equity Funding - Incubation Concept
• Vision and Objectives
• Brief History
• The Incubator Fund
• Investment Opportunities
• Investment Criteria
• Investment Process

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• Absas product offering available to SMMEs
• Absas objective is to deliver the optimal
  financing solution to suit the needs of the
  clients
• Absas advantage is that we can provide the full
  suite of banking products
• The emphasis is on BEE transactions in the SMME
  segment.
• Debt Funding
• Extended Public Works Programme
• New Enterprise Banking
• Normal Banking Channels
• Equity Funding
• Incubator Concept and Fund

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• Extended Public Works Programme
• This programme is the governments catalyst to
  create work opportunities within 5 years by
  utilising Labour Intensive Construction methods
• It is a large scale expansion of the use of
  Labour Intensive Construction Methods to build,
  upgrade and maintain the social and economic
  infrastructure in all the underdeveloped rural
  and urban areas
• Absa is the preferred finance partner to provide
  a financial solution in terms of the programme
• Absa will for the duration of the learnership
  provide contractors with services such as
  overdraft facilities, asset finance and
  enrichment training in relation to banking
  services
• Contact Roger Sharneck [phone]

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• New Enterprise Banking
• Facilitates the access to business finance for
  SMMEs consisting of underwriting Absas risk via
  special guarantee schemes such as Khula Guarantee
  Scheme.
• Who qualifies as a candidate?
• Entrepreneurs who lack security but have a 10
  own contribution or existing equity.
• Owner operators or majority shareholders of a
  business who have skills and expertise relative
  to the industry.
• Contact Dawn Jefferson-Green 011 350 4741

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• Joint Fund
• A number of initiatives to assist with
  Entrepreneurial Development Programmes within the
  Public Sector e.g. iKapa Fund with Provincial
  Government of Western Cape
• Specialist funds focused on a specific industry
  sector e.g. Energy Through Empowerment Fund
• These are designed as Debt Funds to assist
  funding for SMEs that do not have access to
  normal banking channels
• Absas contribution matches the partners Rand
  for Rand
• Small Business Fund aimed at providing funding to
  Small Business.

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• Brief History of the Joint Fund
• Launched in October 2003
• To meet the funding requirements for BEE
  transactions especially where capital is not
  easily accessible from normal banking channels
• To comply with the BEE charters as well as
  building a new client base for Absa
• Current Status of the Fund
• Paid out transactions at a value of R 88 million,
• Pipeline of potential transactions R 500
  million.
• Joint Funds with Provincial Government Western
  Cape and ETEF R15 million paid out and R48
  million committed.

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• Equity Funding
• Incubation Concept
• Purpose
• Incubation, is a process focused on the funding,
  provision of mentorship and development
  programmes, earmarked to exclusively support the
  advancement of BEE and Black Entrepreneurs that
  do not have easy access to capital and lack
  business management skills
• One of the objectives of the concept is to create
  sustainable businesses in the SMME sector
• The Incubator Fund provides equity funding as
  part of a comprehensive solution for the
  incubation concept

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VISION AND OBJECTIVES

• To offer a value proposition to BEE and HDI
  Entrepreneurs and existing clients by provision
  of
• Incubation process
• Mentorship programmes and support to assist in
  the after-care management of the Fund and BEE
• to advance the transfer of skills
• training in business and financial acumen
• accessibility to a network.
• Pricing solutions.
• Quasi- advisory role assisting the vendors
  including Absas clients and BEE with the
  structuring of the transaction to suit their
  requirements and those of the Fund.

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• Incubator Fund
• The Fund is a hybrid private Equity Fund
• Private equity investment is the provision of
  equity and equity linked financing to non-listed
  entities
• The investor (Absa) receives a rate of return for
  accepting risk
• The fund is earmarked to invest exclusively for
  the advancement of BEE and Black entrepreneurs
  that do not have access to capital.
• The Fund is a niche market offering
• Absa is client focused, our intention is to
  develop long term relationships with the clients
  of the Incubator Fund
• R250 million has been set aside by Absa for the
  Fund.

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• Unbundling of groups involving BEE
• Black businesses with growth potential where the
  bank is already exposed
• Black shareholders acquiring equity from retiring
  or outgoing shareholders (corporate or
  shareholder re-organisation)
• New black businesses with growth potential and
• Management buy-outs and buy-ins involving BEE

INVESTMENT OPPORTUNITIES
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• INVESTMENT CRITERIA

• Minimum Investment Return required 10 p.a.
• Earmarked exclusively for the advancement of
  Black Economic Empowerment (BEE)
• BEE in Absa BBS 100 small, gt51 medium, gt25
  large
• Black involvement in operations at all levels
  imperative
• Must be a transfer of skills programme
• Investment scope R300 000 to R10m (additional
  to bank funding)
• No sectoral focus portfolio will be balanced at a
  later stage
• Invest only in private companies (Pty) Ltd.

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• INVESTMENT CRITERIA (Contd)

• Fund will take a minority stake up to a maximum
  of 25
• Possible Board representation Absa reserves the
  right
• Personal sureties from shareholders and/or
  management
• Cession of other shareholders shares to Absa
• Exit strategy ideally within five (5) years

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• INVESTMENT PROCESS

• Basic assessment of preliminary information by
  the Fund Managers in the regions
• Detailed information gathering Business Plans,
  Feasibility Studies etc
• Presentation to regional deal forum for approval
  to proceed with the transaction
• Proposal presented to Investment Committee for
  approval meet once a week
• Once approved the due diligence process will be
  undertaken by external consultants.
• Documentation preparation and signing
• Payout once all conditions have been fulfilled
• Value adding, monitoring and reporting on
  performance
• Exit.

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Contact Details

• Sandra Beswick
• 011 350 4932
• sandrab_at_absa.co.za

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Thank you