NEF : PROGRESS AND PROSPECTS PRESENTATION TO THE PARLIMENTARY SELECT COMMITTEE ON ECONOMIC AND FOREIGN AFFAIRS (NATIONAL COUNCIL OF PROVINCES) Sydney Maree and Vijay Ramluckan 2 September 2003

2 BACKGROUND History Established by NEF Act 105 of 1998 Part of the DTI Group of DFIs Capitalisation through equity set asides of SOEs NEF designated equity in 12 SOEs

3 NEF SOE EQUITY ALLOCATION MTN Group Telkom SAA Uthingo ACSA Connex Travel Viamax SAFCOL Syncat Transwerk Perway Sentech Sun Air 1.5% 5% 10% 15%

4 MTN Group shares transferred – no other shares transferred Current MTN share valuation approximately R427million R200million general Venture Capital Fund established in 2001, an NEF and IDC joint venture Systems, processes and staff progressing New board of directors appointed in 2003 HISTORY

5 CURRENT STATUS Acting CEO appointed August 2003 – Mr Sydney Maree Mandate currently under review Capitalisation upon finalisation of the mandate Finalisation of mandate pending

6 GOALS Spread ownership to HDPs Encourage and promote savings, investments and meaningful economic participation of HDPs Promote and support the development of businesses pioneered by HDPs Promote the understanding of equity ownership and investments amongst HDPs Contribute towards employment creation in South Africa Encourage Enterprise Development Play a central role in broad-based BEE Financing

7 STRATEGY Focus on BEE SMEs, broad-based and mass empowerment –Enterprise development –Job creation –Savings and wealth creation –Procurement –Market making –Routine transactions –Financial and investment literacy programmes Guided by the NEF Act and Government policy Focus on transformation sensitive sectors Other Government initiatives

8 STRATEGIC OBJECTIVES Facilitate BEE savings, investments and finance Improve the accessibility of finance for BEE groups Provide value added services and products to BEE groups Focus on areas neglected by banks Greater propensity for risk – provider of risk capital Complement current BEE products offered by other DFIs Leverage private institutional funding Create public-private partnerships Seek co-investment opportunities

9 PROPOSED FUTURE STRUCTURE Private EquityVenture Capital Investment Advisory Services Corporate Centre Financial products for BEE business development Investment products for mass & broad-based empowerment Advice to BEE Advice to Government & Parastatals Guarantee products

10 PRODUCT OFFERINGS (currently under review) Finance for black business –Private Equity –Venture Capital Financial products for mass-based empowerment –Community-based projects –Employee share schemes –Co-operatives –Rural-based projects Guarantee Products Warehousing of equity Investment products for mass empowerment –Mass-based savings and investment products Advisory services Market making

11 NEF VENTURES AIM: Finance economic empowerment and black business development NEF and IDC joint venture R200 million general VC fund Seed, start up, early stage, expansion capital and M&A deals Finance HDP’s with minimum collateral into viable projects Investment size of R3 million to R10 million, R to R3 million fund to be introduced in due course Investment instruments: equity quasi equity debt Investment horizon three to seven years Return commensurate with risk Investment of R5m completed Fund transactions where HDP’s have an equity interest and are operationally involved, at senior management level. Invest in unlisted companies. The Fund will seek minority stakes in businesses (up to 49%). Majority stakes in certain instances where there is a clear mechanism to reduce stake to below 49% in the short term. Will invest directly into the underlying operating business rather than in an investment holding company. Invests in South African companies conducting business predominantly within South Africa. Nature of the FundTerms of the Fund’s Investments

12 PRIVATE EQUITY Private Equity division will provide acquisition and enterprise finance to support empowerment. Focus will be on medium to large and mature companies with a profit history. Large transactions Funding will be provided for: - Developing growth companies - Management buy-ins (MBIs) - Management buy-outs (MBOs) - Leveraged buy-outs (LBOs); and - Recapitalisation of BEE investment structures Awaiting capitalisation

13 INVESTMENT ADVISORY SERVICES To increase HDPs participation in financial markets and formal savings vehicles. Emphasis is on the development of mass empowerment & broad-based investment and savings products. These will be supported by targeted investor education programmes. Structured investment products designed to limit downside risk without compromising attractive returns Awaiting approvals for first mass empowerment retail offering scheduled for 2004 Overall aim Retail share schemes for broad-based empowerment using the NEF balance sheet Retail share schemes for broad-based empowerment using listed shares of non- empowerment companies Warehousing of shares for forward sale through mass empowerment schemes Provide advisory, management and administrative services for mass empowerment products to private & government companies Empowerment unit trusts Economic and financial literacy campaigns Investment Services Offers

14 Assistance with performance guarantees Assistance with financial guarantees Product designed to reduce cost of funding for BEEs Improve accessibility of funding for BEEs Leverage private institutional funding GUARANTEE PRODUCTS

15 Assist / Advice for Government & Parastatals Provide assistance with business plan compilation Advise on deal structure, pricing, etc General economic and business advice to community base organisations ADVISORY SERVICES

16 Prevent dilution of BEE shareholding Seek strategic investments for BEE investment Warehouse investment on behalf of appropriate BEE structures MARKET MAKING

17 Assist with BEE financing strategy as part of group of DFI’s NEF products not isolated from charter requirements Provide advice & assistance to government organisations developing charters and empowerment policy and guidelines Interact with other working groups/task teams Develop appropriate investment products for charters NEF CHARTERS WORKING GROUP

18 NEF CONTACT DETAILS National Empowerment Fund 23 Melrose Boulevard, Melrose Arch P O Box 31 Melrose Arch Melrose North 2076 Tel: Fax: Website: