1. South African Micro-finance Apex Fund samaf ANNUAL REPORT 2010/11 Presented by Mr. Loni Mamatela Acting Chief Executive Officer Date: 13/ 10/2011 1

2. Presentation Outline Mandate, Vision, Mission, Values & Objectives Operating Model 2010/2011 Performance Highlights samaf National Footprint 2010/11 Financial Performance Auditor General Report Challenges Way forward 2

3. Mandate samaf’s mandate is to create work opportunities and sustainable livelihoods through the facilitation and provision of affordable access to finance to micro, small and survivalist businesses for the purpose of growing their income and asset bases. It is also required to act as a catalyst in the development of a vibrant micro-finance industry in South Africa. The primary purpose is: To facilitate the provision of affordable access to finance by micro and survivalist businesses; To extend financial and non-financial services to reach deeper and broader into the rural areas, informal settlement and peri-urban settlement of South Africa; To contribute towards the reduction of poverty and unemployment; To build a strong, effective and efficient wholesale (Apex) Fund; To contribute to better quality of life; and To contribute towards a sustainable and vibrant micro financial industry in South Africa. 3

4. Vision & Mission Mission “ To be a leader in developmental micro finance” (in South Africa ) To provide developmental finance and non- financial services to financial intermediaries through: Mobilization of financial intermediaries Wholesaling of funds Development of institutional capacity Lobbying and advocacy towards policy development Development of valuable partnerships (between government, businesses and communities) Vision 4

5. Values & Objectives 1. Contribution to poverty alleviation goals through;  Funding Intermediaries( Enterprise loans and poverty alleviation loans)  Capacitating Financial Intermediaries  Regulation and Prudential Standards 2. Exceed our stake holder expectation through;  Improving outreach through expanded satellite network / offices  Improving internal turnaround standards 3. Improvement of processes to achieve service delivery excellence through;  Improving financial reporting and management  Strengthening risk management  Increased compliance of legal and other regulations 4. Leverage performance through capacity and people through;  Organisational Development  Balance Scorecard & Performance Management  Organisational Design & Change Management 5. Building sustainable Apex Fund  Improved quality of lending portfolio and internal control environment Objectives Values  Integrity: Dealing with staff and stakeholders in an honest and ethical manner.  Transparency – ensuring compliance with best practice on the dissemination and sharing of information with all stakeholders and consulting with them to ensure comprehensiveness and buy-in to samaf activities.  Professionalism: adhere to specific defined norms and setting standards of workmanship, respect and communication.  Accountability: taking responsibility for the decisions and actions, including allocation of powers and duties.  High Performance: excellent performance and satisfied customers that guarantee long term sustainability of the South African Micro-Finance Apex Fund. 5

6. samaf Operating Model DIRECTOR GENERAL IT FIN SC HR Strategic Oversight FI’s SAMAF Internal Audit ExternalInternal CB Education Selection Research Primary / Core Support MARKET OPERATIONS External EDD REG PR & COMS 6

7. Disbursements of R41m were made to FI’s in respect of loans and grants. 14 Micro Finance Institutions, 23 Financial Services Cooperatives and 24 stokvels were supported. The total number of borrowers increased by 13.5% from 35 884 to 40 726. 80% of loans by the FI to end users were in rural communities and 95% were micro-enterprise loans. The number of end user savings increased by 20 % from 25 840 to 31 129 Installment repayments by FIs average 90% 272 individuals from 68 institutions nationally participated in capacity building workshops. samaf received an unqualified audit report 2010/11 Performance Highlights 7

8. Approved Funding (Rm) An increase of 41% as compared to the previous financial year was achieved 8

9. Total Disbursements (Rm) Capacity building increased by 192% as compared to the previous financial year On lending funds increased by 71% as compared to the previous financial year 9

10. On- lending per Province (R) 10 ProvincesOn-lending EC3,000,000 NC0 WC5,000,000 MP2,637,500 NW0 LP6,845,000 GP4,800,000 FS0 KZN120,000

11. Capacity Building per province (R) 11 ProvincesCapacity building EC2,169,000 NC378,000 WC3,325,000 MP1,904,500 NW400,000 LP4,266,579 GP4,460,000 FS797,500 KZN688,176

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15. samaf NATIONAL FOOTPRINT M4/F4 M0/F4 M0/F3 M1/F=6 M0/F5 M0/F6 M3/F3 M2/F1 M3/F5 15  M= Micro Finance Institutions  F= Financial Services Co- operatives

16. 2010/11 Financial Performance Statement of Comprehensive Income 16

17. 2010/11 Financial Performance Expenditure 2010/112009/10 Compensation30,568,88528,944,728 Goods & Services17,085,89619,727,128 Total Operating Expenditure47,654,78148,671,856 Grants paid18,388,7556,300,000 Loans written off1,047,9237,450,472 Less: Reversal of Impairment(8,727,675)(1,312,818) Total Expenditure58,363,78461,109,510 Operating expenditure 17

18. Auditor General Report OPINION An unqualified opinion was expressed, however issues were raised as part of emphasis of matter. EMPHASIS OF MATTER Going concern The Economic Development Department is re-organising its small lending business institutions by merging samaf, Khula and small business activities of the Industrial Development Corporation (IDC). samaf will not cease its operations. Material losses to the amount of R1 047 923 were incurred as a result of the write off of loans provided to financial intermediaries. In addition, material impairments to the amount R 4 795 527 were incurred on loans provided to Financial Intermediaries. 18

19. Auditor General Report (cont…) 19 REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS Usefulness of information Predetermined objectives The reported performance information was deficient in respect of the following criterion: Measurability : Indicators are not well defined. Reliability of information The reported performance information was deficient in respect of the following criterion: Accuracy: the amounts, numbers and other data relating to actual performance have not been recorded and reported appropriately. Completeness: All actual results and events that should have been recorded have not been included in the reported performance information.

20. Auditor General Report (cont…) Compliance with laws and regulations Procurement and contract management A service with a transaction value between R10 000 – R500 000 was procured without inviting at least 3 written price quotations from prospective suppliers as required by Treasury regulations. Expenditure management The accounting officer did not take appropriate steps to prevent irregular expenditure, as per the requirements of the section 38 (1)(c)(ii) of the PFMA. A payment of R107 333 was made although the correct procurement process was not followed. 20

21. Auditor General Report (cont…) 21 INTERNAL CONTROLS Leadership The leadership did not exercise appropriate oversight in ensuring that the prior year and current year annual financial statements complied with the reporting framework. The entity did not have sufficient skilled resources. The Acting Chief Executive Officer is filling the position of Chief Financial Officer. Financial and performance management Management did not have adequate controls to ensure the accuracy or completeness of the financial statements and the report on performance information. Management did not ensure that certain accounting policies were correctly adopted Management’s internal control systems relating to IT were inadequate in providing reasonable assurance that the IT high risk areas were properly managed and controlled.

22. Lack of governance and administration skills within the FIs General lack of micro-financial skills both internally and externally Capacity constraints at the provincial offices Vast distances travelled to the FI’s within the provinces samaf did not have sufficient skilled resources particularly at executive level Uncertainty and low staff morale due to the impending merger of samaf, Khula and IDC small business activities Challenges 22

23. Revised business processes to reduce turnaround times Implementation of the capacity building impact analysis tool Implementation of change management to address the merger issues Address audit findings by: ‐Reviewing existing policies and developing new relevant policies and procedures ‐Tightening controls by communicating policies as well as punitive measures that may be necessary in the event of transgressions. Ensure that corporate and individual targets are aligned, clearly defined and agreed upfront with all members of staff Way forward 23

24. THANK YOU 24

25. Acronyms AcronymDefinition the dtiThe Department of Trade and Industry EDDEconomic Development Department EXCOExecutive Committee FSCFinancial Services Co-operatives MFIMicro-finance Institution RRSSRegistration, Regulation, Supervision and Stabilisation FIFinancial Intermediary GFIAGobodo Forensic Investigation Accountants PFMAPublic Finance Management Act PARPortfolio at risk samafSouth African Micro-finance Apex Fund SMESmall Medium Enterprise 25