IDFC PRESENTATION TO SMALL BUSINESS DEVELOPMENT PORTFOLIO COMMITTEE IDFC PRESENTATION TO SMALL BUSINESS DEVELOPMENT PORTFOLIO COMMITTEE

IDFC LEGISLATIVE Provincial Development Finance Institution; Established through an act of the KZN Provincial Legislature, i.e. Ithala Development Finance Corporation Act, Act No. 5 of 2013; Wholly owned by the KZN Provincial Government and reports to the Department of Economic Development, Tourism and Environmental Affairs; Been in existence for over 50 years having assumed various names; Headquartered in Umlazi, a township located South of Durban next to the old airport

MANDATE, MISSION & VISION Mission: “To drive economic development and empowerment, whilst remaining financially sustainable” Mandate: “Promote, support and facilitate social and economic growth in the province of Kwazulu- Natal” Vision: “To be the catalyst for growth, economic development and empowerment”

IDFC STRUCTURE IDFC SPECIALISED BUSINESS UNITS Business Finance PropertiesSUBSIDIARIES Ithala SOC Limited Ubuciko Twines & Fabrics

OBJECTIVE OF INSTITUTION Goal 1: Financial Sustainability and Viability Goal 2: Developmental Effectiveness Goal 3:Operational Excellence and Good Corporate Governance Goal 4: Forge Strategic PartnershipsGoal 5: Knowledge Management

REPOSITIONING STRATEGY – THE BACKGROUND IDFC REPOSITIONED THE ORGANISATION TO ADDRESS THE FOLLOWING: Financial sustainability A lack of funding to drive investments Limited number of Ithala-initiated economic development projects Weak business support services reflected in the high failure rates of funded SMME’s and Co-operatives Lack of alignment with government programmes, especially on rural economic development and agricultural revolution

REPOSITIONING STRATEGY – THE BACKGROUND OBJECTIVES OF THE REPOSITIONING STRATEGY ARE TO ENSURE THAT ITHALA: Delivers effectively and efficiently on its mandate in a dynamic and challenging environment Aligns its core business activities to the Provincial Growth and Development Strategy (PGDS) Reclaims its historical relevance and position itself as the premier development agency in the Province Becomes financially sustainable and less reliant on government funding to drive its investment programmes

REPOSITIONING STRATEGY - PHASES The overarching corporate strategy consists of 3-phases over a 5-year time horizon. Phase 1 seeks to remediate the business; Phase 2 builds on the revised business platform; Phase 3 extends Ithala’s focus and widens its set of activities.

IDFC STRUCTURE IDFC has three Strategic Business Units (SBU’s) Business Finance Business Finance – provides financial and non-financial support to SMME’s and Co- operatives Properties Properties – provides physical infrastructure to retail, light industrial, heavy industrial and SMME businesses Ithala Limited Ithala Limited – is a ‘ring- fenced’ institution, wholly owned by IDFC that provides financial services to the retail market.

BUSINESS FINANCE – MODEL OF OPERATION Financial support Non-financial support Financial support Non-financial support Value Proposition Delivery Model Business Centres located in 5 out of 11 districts in KZN Target Customers SMME’s Co-operatives SMME’s Co-operatives Partners Provincial Government Service providers Provincial Government Service providers Core Activities Origination Technical evaluation Post Investment Management Business support Origination Technical evaluation Post Investment Management Business support Cost Structure 65% - 55 employees 15% - professional services 20% - other 65% - 55 employees 15% - professional services 20% - other Funding Interest Income Service charges Government Grants

BUSINESS FINANCE – KEY INFORMATION Footprint: Business centres located in Umlazi, Durban, Pietermaritzburg, Richards Bay, Newcastle and Port Shepstone; Financing Products: Micro-Finance Procurement Finance Agri-Finance Asset Finance Franchise Finance Commercial Property Finance Structured/Project Finance Financial and Investment Performance Profitability: Turnaround from R76m loss in FY 2012/13 to R16m profit in 2013/14. Investment: Book size is +/- R900m and Non-Performing Loans have been reduced from 61% in 2012/13 to 20% in 2013/14.

PROPERTIES – MODEL OF OPERATION Premises Implementing Agent Premises Implementing Agent Value Proposition Delivery Model Property development Property portfolio (retail, industrial and SMME) Property development Property portfolio (retail, industrial and SMME) Target Customers Retailers Industrialists SMME’s Government Departments Retailers Industrialists SMME’s Government Departments Partners Eskom Municipalities Provincial Government Eskom Municipalities Provincial Government Core Activities Leasing Bulk services Project management Leasing Bulk services Project management Cost Structure 15% employees 40% - Bulk services, 20% - Rates & Taxes 10% - Maintenance 15% employees 40% - Bulk services, 20% - Rates & Taxes 10% - Maintenance Funding Rental Income Service recoveries Management Fees

PROPERTIES – KEY INFORMATION Footprint: Twenty one (21) shopping centres located in rural and peri-urban towns Three (3) industrial estates located in Mandeni (KZN-North), Ladysmith and Newcastle Eight (8) light industrial parks seven (7) located in Durban and one (1) in Richards Bay; Forty (40) SMME parks, eight (8) located in Midlands, thirteen (13) located in Northern region and nineteen (19) located in Southern and Central region Property Portfolio (Size – GLA): Total portfolio – 1,176,279 GLA Retail – 138,443k GLA Industrial Estates – 847,988 GLA Light Industrial Parks – 132,930 GLA SMME Parks – 56,918 GLA Financial: Profitability: Profit of R126m in 2013/14. Investment: The property portfolio is valued at approximately R1.8 billion and yields approximately 5% on average per annum

ITHALA SOC LIMITED – MODEL OF OPERATION Deposits Personal Loans Home Loans Insurance Deposits Personal Loans Home Loans Insurance Value Proposition Delivery Model Branch network Target Customers Retail market Partners Service providers Insurance Underwriters Service providers Insurance Underwriters Core Activities Deposit taking Lending Insurance Deposit taking Lending Insurance Cost Structure 50% employees 30% - 49 Branches 20% - Other 50% employees 30% - 49 Branches 20% - Other Funding Interest Income Service fees Deposits

ITHALA SOC LIMITED – KEY INFORMATION Footprint: Forty-nine branches spread across the length and breath of KZN and predominantly in rural and peri- urban towns; Financing Products: Deposits Personal Loans Home Loans Insurance – Short and Long term Vehicle and Taxi Finance Financial and Investment Performance Profitability: Loss of R68 million in FY 2013/14 Investment: Book size is +/- R2.15 billion Deposits: Customer size is +/- R1.98 billion

SMME & COOPERATIVES IMPACT ON SMME & COOPERATIVES

CLOSE-OUT SUMMARY Business TypeR'000GenderR'000AgeSectorR'000 SMME795,125Male587,373Adult614,251Manufacturing123,659 Co-operatives19,525Female141,926Youth200,400Agriculture112,867 Both85,261 Trade & Services183,712 Construction & Tourism374,887 Co-operatives19,525 Total814,650 Business TypeR'000GenderR'000AgeSectorR'000 SMME428,734Male258,900Adult302,061Manufacturing46,466 Co-operatives2,781Female129,455Youth129,454Agriculture109,328 Both43,152 Trade & Services95,407 Construction & Tourism176,095 Co-operative4,219 Total431,515 Approvals Advances Districts: Ethekwini, Ugu, Umgungundlovu, UThukela, UMzinyathi, Amajuba, Zululand, UMkhanyakude, UThungulu, ILembe, Sisonke

CLOSE-OUT SUMMARY Districts: Ethekwini, Ugu, Umgungundlovu, UThukela, UMzinyathi, Amajuba, Zululand, UMkhanyakude, UThungulu, ILembe, Sisonke Business Type Gender Age Sector SMME209Male115Adult147Manufacturing12 Co-operatives17Female80Youth79Agriculture31 Both34 Trade & Services21 Construction & Tourism65 Total Business Type Gender Age Sector SMME 4,339Male2,914Adult3,530Manufacturing144 Co-operatives73Female1,262Youth882Agriculture991 Both236 Trade & Services437 Construction & Tourism2,767 Co-operatives73 Total 4,412 No. of Business Financed No. of Jobs Facilitated No. of Jobs Facilitated

SMME PORTFOLIO – MIDLANDS REGION VACANCY %AGE TOTAL UNITS UNITS OCCUPIED UNITS VACANT Ezakheni Handicraft Ladysmith Handicraft Madadeni Handicraft Mondlo Handicraft 1 & Mpumelelo Handicraft 1 & 23, , Nqutu Handicraft PH 1 & Osizweni Factory Units A & B Osizweni Handicraft A & B TOTAL SMME MIDLANDS6, , ,

SMME PORTFOLIO – NORTHERN REGION VACANCY %AGE TOTAL UNITS UNITS OCCUPIED UNITS VACANT Esikhawini Factory Units , Esikhawini Motor Trade1, Hlabisa Factory Units A & B Kwa Msane F/Unit & Motor Trade Mbazwana Factory Units PH 1& Mkuze Factory Units1, Ncotshane Factory Units A & B Ngwelezane F/Units 2 & Nkandla Factory Units Nseleni Factory Units PH Sundumbili Factory Units 1 & Sundumbili Motor Trade Ulundi Factory Units PH 1 & 22, , TOTAL SMME NORTHERN10, , ,

SMME PORTFOLIO – SOUTHERN & CENTRAL REGION VACANCY %AGE TOTAL UNITS UNITS OCCUPIED UNITS VACANT Bhongweni Factory Units Impendle Factory Units Kokstad Factory Units1, Kwadabeka Factory Units KwaMashu Motor Park PH , , Magabeni Factory Units Mpophomeni Handicraft Mpumalanga Factory Mpumalanga Factory Units F Mpumalanga Motor Centre Ndwendwe Factory Units Plessislaer Factory Units 1&22, , Seaford Industrial Park Umlazi Industrial Park PH 12, , Umlazi Industrial Park PH 22, , Umlazi Industrial Park PH 33, , Umnini Plaza North Umnini Plaza South Micro & Small Vacant Land TOTAL SMME SOUTH & CENTRAL REGION 21, , ,

SMME PORTFOLIO – SUMMARY 473 of the 595 units were occupied as at the end of July VACANCY %AGE TOTAL UNITS UNITS OCCUPIED UNITS VACANT TOTAL SMME PORTFOLIO38, , ,

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