KHULA STRATEGY PRESENTATION

1
KHULA STRATEGY PRESENTATION TO THE PORTOLIO
COMMITTEE 22 May 2002
2
Corporate Governance

• Main shareholder is DTI
• Independent board of directors sub committees
  internal and external auditors
• Directors endorse the code of Corporate
  Practices and Conduct
• Compliance with the laws of the country and other
  regulations

3
Value statements
The group subscribes to a rigorous code of ethics
which fosters honesty, transparency,
accountability, responsibility and integrity to
our stakeholders.
4
Vision

• To become a financing partner of first choice in
  SMMEs finance.

5
Mission

• To facilitate sustainable access to finance, by
  engaging with the private and public sector,
  through innovative products in order to promote
  SME growth.

6
General external objectives

• Be responsive to the needs of clients and
  stakeholders
• Facilitate mobilisation and flow of resources
  (public private sector) for SMME development
• Support the promotion of a conducive legislative
  environment for the SMME sector

7
General internal objectives

• Procure and maintain a professional, skilled,
  effective, motivated dynamic workforce within
  affordable levels
• Practice the enshrined values of the organisation
• Ensure proper and efficient support structures in
  areas such as finance, admin, marketing
• Ensure adherence to Khula policies and
  operational guidelines
• Effectively manage the business risks

8
Key strategic objectives

• To achieve a return on investment that ensures
  retention of the capital base
• To offer sustainable credit and capital through a
  network of efficient network of distribution
  intermediaries
• To acquire,retain and develop the Human resources
  to meet the short,medium and long term needs of
  Khula
• To develop and implement an integrated business
  marketing strategy

9
Key Corporate Objectives

• Scaling and growing the operations to achieve
  impact.
• Resource committed, competent and capable people.
• Implement effective financial and risk management.

10
Income Statement highlights
11
Employment featuresBy Province as at 31/03/2001
KhulaStart RFI CGS Individual CGS Portfolio Total
Gauteng 1.47 28.92 36.17 16.58 28.24
North West 0.01 4.18 7.07 1.03 4.15
Mpumalanga 9.2 6.68 2.47 4.16 6.65
N. Province 16.28 8.56 0.68 12.96 8.63
Free State 8.18 3.3 9.55 5.18 3.58
KZN 58.79 16.48 23.83 10.37 17.84
Western Cape 0 15.74 8.47 12.96 15.12
Eastern Cape 4.79 8.21 3.30 0 7.98
Northern Cape 0 0.79 3.84 8.81 0.86
Unknown 0 7.15 4.62 27.95 6.96
Total 22,800 746,215 17,056 2,623 788,694
12
EMPLOYMENT FEATURES

• Average employment
• KhulaStart 1.92
• RFIs 8.34
• Credit Guarantee Scheme(Individual) 12.01
• Credit Guarantee Scheme (Portfolio) 8.34
• Total new jobs since 1996 (66 of total direct
  jobs) 521,307
• Total direct jobs (new and sustained) 788,650
• Indirect jobs created and sustained 394,325
• Assumed multiplier of 1.5 X 788,650
• Total jobs direct and indirect
• 1,182,975

13
Gender of enterprise customers
14
Spacial Composition
15
Estimated number of people financially benefiting
from business
Type of Business Average per business Estimated total for all businesses
KhulaStart 6.23 73,981
RFI 15.86 1,417,154
CGS Individual 17.95 25,489
CGS Portfolio 9.04 6,888
TOTAL 1,523,512
16
Image of Khula or its agents
Khula Programs who would recommend Khula
KhulaStart 88
RFI 94.3
CGS Individuals 84.5
CGS Portfolio 76.8
Thuso Mentorship 80.6
17
New Directive from DTI

• Khulas original mandate too broad
• Special circumstances in servicing sector
• Servicing of Micro and small enterprise sector to
  be moved new institution
• Move will affect 10 of Khula employees
• Exact parameters of separation unclear

18
Various scenarios considered

• Scenario 1
• Retention of the status quo - everything remains
  unchanged.
• Scenario 2
• All MCOs and some RFIs (non-sustainable) 10
  staff affected.
• Scenario 3
• All MCOs and RFIs move across 30 staff impact
• Scenario 4
• Scenario 2 plus Retail option. Open the
  discussion and further research.

19
HISTORICAL SEGMENTATION OF KHULA PORTFOLIO
Small (upper end) Equity Funds
Small (lower end) Credit Guarantees
Very small-RFIs / KhulaStarts/Portfolio
Guarantees/ Sizabantu
Micro-KhulaStarts/ RFIs, Survivalist
20
PROPOSED SEGMENTATION OF KHULA PORTFOLIO
Small (upper end) Medium Equity Funds
Small (lower end) Credit Guarantees
Very small-RFIs /Portfolio Guarantees/Sizabantu
Micro-KhulaStarts/RFIs Survivalist
21
Growth Strategies

• Mobilise banks for mass or scale delivery.
• Training workshops with bankers and marketing
• Mainstream and roll-out a credible mentorship
• To stimulate the provision of venture start-up
  and small scale equity finance.
• To research and package innovative products that
  can mobilise and attract the financial industry
  participation in Khula mandate.
• Build on nation wide communication campaign

22
Growth Strategies

• Segment the market and design a suitable product
  mix and structure accordingly.
• Emerging and matured markets
• To support the distribution network in line with
  market needs.
• capacitate and develop to serve the all market
  segments from under-banked to bankable
  enterprises
• To improve outreach and efficiency of emerging
  market network
• Improve market access through business linkage
  initiatives

23
Key Performance Indicators/Targets
24
Key Performance Indicators/Targets - Credit
Guarantees
2000/01 2001/02 2002/03 2003/04 2004/05 2005/06
R180m R182m R258m R310m R341m R375m
Individual R241m
Portfolio R10m
TTGF R6m
Rehab R0.5m
25
Key Performance Indicators/Targets Regional
Equity Funds 2 existing Funds 3rd Fund
operational 2002/3
2000/01 2001/02 2002/03 2003/04 2004/05 2005/06
Nil R7mil R14mil R19mil R23mil R27mil
26
Key Performance Indicators/Targets
27
Summary of Assumptions

• Required capital is obtained
• Seed activities are inherent risk mitigation
  mechanisms of Khula balance sheet. network and
  capacity support of RFIs and quality mentoring
• Investment levels are necessary to off-set the
  price shortfall results.
• A stable and committed human resource especially
  at senior level is achieved.

28
Summary of Assumptions

• Political support is unwavering all government
  levels and based on sound corporate
  administration.
• Access to markets becomes sensitive to SMME
  needs. Government and state enterprise
  procurement systems adapt
• Financial institutions including insurance
  houses do come to the party

29
Thank you for your Support

• Presented by Brendan Mbatha
• Marketing Executive
• Khula Enterprise Finance (Pty) Ltd
• 22/05/02