Khula Strategic Plan for 2008/09 Xola Sithole – Chief Executive Officer Zukile Nomafu – Chief Operating Officer Portfolio Committee on Trade and Industry 5 March 2008

Presentation Outline Introduction Introduction Highlights 2007/08 Highlights 2007/08 Strategic Objectives 2008/09 Strategic Objectives 2008/09 Key Initiatives Key Initiatives Corporate Balanced Scorecard Corporate Balanced Scorecard Financial Budgets 2008/09 Financial Budgets 2008/09 Conclusion Conclusion

Introduction The 2007/08 period has been both challenging and excitingThe 2007/08 period has been both challenging and exciting Economic prospects have dimmed slightly, presenting challenges to SMEsEconomic prospects have dimmed slightly, presenting challenges to SMEs Our focus was on sustaining growth within acceptable risk parametersOur focus was on sustaining growth within acceptable risk parameters Focus in 2008/09 will be on expanding geographic footprint and marketing/communication activitiesFocus in 2008/09 will be on expanding geographic footprint and marketing/communication activities

Highlights 2007/08 Diversified product range, including the launch of a reverse factoring product for SMEs Network of 13 partnerships, offering at least 25 different financing products to SMEs Geographic footprint now comprises national network of over 200 branches of intermediaries Loan book has increased from R383m in 2003 to R598m in 2007 Operating income increased from R32m in 2003 to R103m in 2007 Recently launched new corporate identity

Strategic Objectives 2008/09 Objective #1 : To grow Khula’s outreach and impact thus fulfilling our mandate as the flagship development finance institution for small business Objective #2 : To increase awareness of Khula and its products within its target market and achieve high customer satisfaction levels

Strategic Objectives 2008/09 Objective #3 : To build an effective institution that achieves its SME development mandate in a financially sustainable manner Objective #4 : To invest in the development of our employees to create and retain high performance teams Objective #5 : To establish effective and efficient processes to support operational activities and manage risk

Key Initiatives 2008/09 KhulaDirect KhulaDirect Restructuring Regional Offices Restructuring Regional Offices Awareness Campaign Awareness Campaign Recapitalisation Proposal Recapitalisation Proposal

Balanced Scorecard (1/5) AreaTargetWeight Approvals (by value)R764 million5% Disbursements (by value) R757 million10% Portfolio GrowthNet Growth of 10% in Loan Book 5% New PartnershipsMinimum 3 New Partnerships 2.5% Sub-total: SME Financing Activity22.5%

Balanced Scorecard (2/5) AreaTargetWeight Number of SMEs Financed % Expanding Geographic Footprint Measure still to be finalised 5% Black SMEs Financed70% of total SMEs financed (by value) 5% Women-owned SMEs45% of total SMEs financed (by value) 5% Loans below R % of total disbursements 5% Sub-total: Development Impact Measures25%

Balanced Scorecard (3/5) AreaTargetWeight Net Operating IncomeR9 million (before provisions)2.5% Operating Expenses to Operating Income Ratio 89%2.5% Quality of Debtors Book11% Bad Debt Provision10% Quality of Indemnity Book4% claims paid to book 20% claims provisions to book 2.5% Return on Surplus Funds Invested Minimum return in line with industry benchmark 2.5% Credit ControlLess than 5% of loans over 60 days in arrears 2.5% Sub-total: Financial Sustainability Measures22.5%

Balanced Scorecard (4/5) AreaTargetWeight Customer SatisfactionMeasure based on annual survey results 15% Human Capital Development Less than 10% per year staff turnover + achievement of training plan 10% Process OptimisationUnqualified Audit Report5% Sub-total: Other Measures30%

Balanced Scorecard (5/5) AreaWeight SME Financing Activity22.5% Development Impact25.0% Financial Sustainability22.5% Customer Satisfaction15.0% Human Capital Development10.0% Process Optimisation5.0% TOTAL100%

Budgets Highlights Budgeting profit before tax of R25 million Budgeting profit before tax of R25 million Income from core operations expected to grow by 39% Income from core operations expected to grow by 39% Projecting an operating profit vs operating losses in past years Projecting an operating profit vs operating losses in past years Operating cost to operating income ratio drops from 103% to 89% Operating cost to operating income ratio drops from 103% to 89% Business loans to intermediaries to grow by 45% Business loans to intermediaries to grow by 45% Bad debt ratio at 11% - consistent with increase in loan book Bad debt ratio at 11% - consistent with increase in loan book

Concluding Remarks Economic prospects present challenge to SMEs Economic prospects present challenge to SMEs Khula has substantially grown outreach and impact Khula has substantially grown outreach and impact Focus in 2008/09 is on growing geographic footprint further and increasing awareness Focus in 2008/09 is on growing geographic footprint further and increasing awareness Key initiatives to be undertaken include finalising KhulaDirect and restructuring of regional offices Key initiatives to be undertaken include finalising KhulaDirect and restructuring of regional offices Budget structured to support growth objectives and strategic initiatives Budget structured to support growth objectives and strategic initiatives

Thank You