SME Funding Winston Smit 24 November 2010

[Southern Africa/Forests] Slide 2 Key Strategic Drivers for SME in Forestry Sector  Forestry Sector BBBEE Transformation Charter  Land Reform Programme – Restitution and Redistribution  Industrial Policy Action Plan (IPAP)  Transfer of State forestry assets

[Southern Africa/Forests] Slide 3 Sappi – Key Facts  Sappi is a global pulp and paper company and has operations on 4 continents  Sappi subscribes to the BBBEE principles and has recently completed an empowerment deal worth R 842 million  Sappi is a Level 3 contributor  Sappi scored out of 15 for Enterprise Development  Sappi has its own in-house SME development centre

[Southern Africa/Forests] Slide 4 Opportunities for SME in forestry sector The Forestry industry is highly technical and has high barriers to entry, but opportunities exist for SME in the value chain  Plantation management  Planting and weed control  Fire fighting  Harvesting and transport  Pole manufacturing  Charcoal manufacturing  Saw milling

[Southern Africa/Forests] Slide 5 What makes an SME successful?  Passion – entrepreneur must have passion for his product  Funding – crucial in the different stages from pre-startup through to growth phase  Market – access to markets  Technical knowledge – of his product and industry  Business knowledge – how to run and manage a business  Business systems – financial, HR, risk management, etc  Mentorship – crucial to any business especially during pre-startup, startup and growth phases

[Southern Africa/Forests] Slide 6 Funding and funding challenges There are many ways to fund SME’s e.g. preferential capital, private equity and bank loans Challenges:  SME not always attractive for banks  SME not always aware of funding sources and if, how to access it  Lending criteria from financial institutions very onerous  Lack of credit worthiness and SME unable to provide security  Regulatory environment

[Southern Africa/Forests] Slide 7 Institutions currently involved in SME financing  Commercial banks  IDC – involved in the entire forestry value chain  Ithala Bank  Development Bank of South Africa  Forestry companies such as Sappi, Mondi and Hans Merensky  National Empowerment Fund  Government support programmes under DTI, DRDLR and DAFF

[Southern Africa/Forests] Slide 8 The way forward  The success of SME development will require a strong partnership with FIETA, the private sector and appropriate Government Departments  Development of business support centers in the rural areas which can provide much needed business support and advice  Institute securities and guarantee schemes  Institute dedicated grant incentive schemes  Develop mechanisms to reduce transaction costs associated with SME funding and support services

[Southern Africa/Forests] Slide 9 THANK YOU