TO LAND AND ENVIRONMENTAL AFFAIRS COMMITTEE PRESENTATION TO LAND AND ENVIRONMENTAL AFFAIRS COMMITTEE 01 APRIL 2003 Moeketsi Mofokeng

Khula Enterprise Finance Main shareholder is DTI Established in 1996 Independent board of directors; sub committees; internal and external auditors Wholesale financier not retailer Facilitates access to finance

To become a financing partner of first choice in SME finance. Vision To become a financing partner of first choice in SME finance.

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

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

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

Khula offers assistance through Credit Guarantees – Banks Must be South African Owner/ Manager Business must be in SA Must be economically viable Technical skills essential 10% own contribution recommended

Khula assists through Business Loans – RFI’s & MCO’s Equity Funds Capacity Building grants Low interest loans Equity Funds JV, Equity Stakes Land Reform Credit Facility Transfer of land PDIs Significant shareholding Transfer of skills

Loans Representation in S.A. Limpopo 2 RFI’s; 2MCO’s North West 1 RFI; 1 MCO Gauteng 7 RFI’s; 1 MCO Mpumalanga 3 RFI’s; 5 MCO’s Freestate 1 RFI; 0 MCO’s KwaZulu Natal Northern Cape Eastern Cape 2 RFI’s; 4 MCO’s Western Cape 2 RFI’s; 0 MCO’s

Mentorship Mentorship – 8 Regional Offices BUSINESS PLANS Loans up to R300 000 Client Contribution 25% Khula 75% Loans above R300 000 – R5 m Client Contribution 50% Khula 50% Free mentorship for up to 3 months after loan is granted

SEGMENTATION OF KHULA PORTFOLIO Small (upper end) – Equity Funds Small (lower end) – Credit Guarantees Very small-RFI’s / KhulaStarts/Portfolio Guarantees/ Sizabantu Micro-KhulaStarts/ RFI’s, Survivalist

Image of Khula or its agents Unisa Study, 2001 Khula Programs % who would recommend Khula KhulaStart 88 RFI 94.3 CGS Individuals 84.5 CGS Portfolio 76.8 Thuso Mentorship 80.6

HDE Awareness of organisations UCT Study, 2002

HDE Knowledge of assistance UCT Study 2002

Have been assisted UCT Study

Problems Faced By Entrepreneurs Education and training Technology Infrastructure and competition Crime Access to markets/ Lack of demand Access to finance

Obstacles to finance Collateral Refusal to use own collateral Own contribution Blacklisting Financial records & Business Plans High risk entrepreneurs

Way Forward

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

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

Growth Strategies Continue to engage government on issues relating to the mandate of Khula exploring the retail option

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

Key Performance Indicators/Targets Regional Equity Funds 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 Nil R7mil R14mil R21mil R23mil R27mil

Key Performance Indicators/Targets

Thank You For Your Support