1. Presentation to the Parliamentary Select Committee Presented by : Thakhani Makhuvha Chief Executive Officer Cape Town 21 November 2012

2. Overview and Background Challenges that led to the establishment of sefa Limited success in fostering a strong and large SMME sector Weak small business performance Poor uptake of Khula and Samaf products Poor visibility among small businesses Duplication of services amongst government agencies High cost of delivering financial services to SMMEs 2

3. Overview and Background (Cont) Establishment of sefa Cabinet support for an integrated approach sefa was established on 1 st April 2012 as a wholly owned subsidiary of IDC (merger of Samaf, Khula and the small business activities of the IDC) Established in terms of IDC Act Shareholder compact between IDC and EDD incorporates sefa sefa’s Corporate Plan informed and guided by a number of Legislative and Policy Prescripts (eg New Growth Path, Outcome 4 and other National Imperatives and legislation) 3

4. Vision, Mission and Values Vision To be the leading catalyst for the development of sustainable Survivalist, Micro, Small and Medium enterprises through the provision of finance 4

5. Vision, Mission and Values Mission Our mission is to provide access to finance for Survivalist, Micro, Small and Medium businesses throughout South Africa by: Providing finance to small businesses on a wholesale and direct basis Providing credit guarantees to small businesses Supporting the institutional strengthening of Financial Intermediaries so that they can be effective in assisting small businesses Creating strategic partnerships for sustainable small business development and support Monitoring the effectiveness and impact of finance provision, credit guarantees and capacity development in the small business sector Developing (through partnerships) innovative finance products, tools and channels to catalyse increased market participation in the provision of affordable finance to small businesses 5

6. sefa’s target market consists of small businesses that have not been able to access finance from banks and the finance sector. These include: Survivalists and micro-enterprises – those requiring loans of anything between R500 and R50 000 Small enterprises – loans between R50 000 and R1 000 000 Medium enterprises – loan between R1 000 000 and R5 000 000 6 Target Market

7. Overall Strategic Objectives The strategic objectives of sefa are to: 1.Increase access and provision of finance to small businesses and thereby contribute towards job creation. 2.Develop and implement a national footprint for effective product and service delivery. 3.Build an effective and efficient sefa that is a sustainable performance driven organisation. 4.Build a learning organisation. 5.Build a sefa that meets all legislative, regulatory and good governance requirements. 6.Build a strong and effective sefa brand emphasizing accessibility to SMMEs 7

8. Overall Strategic Objectives The strategic objectives of sefa are to: 1.Increase access and provision of finance to small businesses and thereby contribute towards job creation. 2.Develop and implement a national footprint for effective product and service delivery. 3.Build an effective and efficient sefa that is a sustainable performance driven organisation. 4.Build a learning organisation. 5.Build a sefa that meets all legislative, regulatory and good governance requirements. 6.Build a strong and effective sefa brand emphasizing accessibility to SMMEs 8

9. Strategic Objective 1 Increase access and provision of finance to SMMEs and thereby contribute towards job creation Current Status (year to date): 99 SMEs financed through direct lending to the value of R25 million 16 333 micro enterprises financed through wholesale partners New approvals to micro finance institutions of R10 million New approvals to retail financial institutions of R50 million New approvals through credit indemnity scheme of R7 million 1 990 jobs created and estimated 11 433 in micro-enterprises Current pipeline in excess of R173 million for wholesale funding Current pipeline of R105 million for direct lending Initial training of staff in retail lending and lending platform 9

10. Strategic Objective 1 (cont) Immediate Priorities: Conclude transactions in the pipeline to increase SMMEs accessing sefa funding Continuously identify small businesses that require funding Design business support programmes More intensive training of staff (especially in direct lending) Conclude agreements with private and public sector partners Pre-loan support (eg seda, Mpumalanga Economic Growth Agency, Gauteng Enterprise Propeller) Business Support Centres (eg SAICA Business Hubs) Funding of small business opportunities arising out of IDC projects Procurement opportunities (eg SOEs, government departments) Medium to Long Term Priorities: Extend footprint (see next slide) Manage growth in the number of businesses financed Extend partnerships to other provincial governments, government agencies, community based organisations and private sector. 10

11. Strategic Objective 2 Develop and implement a national footprint for effective product and service delivery Current Status: Regional offices in all 9 Provinces 3 Pilot offices fully operational in terms of direct lending All other offices accepting applications 5 Khula and samaf offices have merged Immediate Priorities: Complete merging of 4 regional offices by the end of October Capacitate all offices for direct lending through staff training and strengthening lending systems Medium to Long Term Priorities: Establish 52 Branch and Satellite offices in order to cover all districts leveraging on the Post Office/Post Bank network 11

12. Strategic Objective 3 Build an effective and efficient sefa that is a sustainable performance driven organisation Current Status: EDD Bargaining Chamber established and Transfer Agreement signed Placement of staff from Samaf and Khula almost complete CEO and some Executive positions – recruitment in process Structured Change Management process well underway Immediate Priorities: Align staff to the current organisational needs Continue to build a new organisational culture geared to delivering Re-skill staff where necessary Develop the sustainability model of sefa Sign MoU with IDC to provide institutional development support Analyse the cost driving activities and increase efficiency Medium to Long Term Priorities: Analyse the cost driving activities and improve operational efficiencies 12

13. Strategic Objective 4 Build a learning organisation Current Status: Limited R&D capacity Continuously building body of knowledge of small businesses and small business funding through interaction with other entities Immediate Priorities: Make use of IDC’s Research and Information capacity Benchmark using available existing research Medium to Long Term Priorities: Establish R&D capacity and capability 13

14. Strategic Objective 5 Build a sefa that meets all legislative, regulatory and good governance requirements Current Status: Unqualified audit reports for year ending March 2012 for Samaf and Khula Board and Sub-Committees established and functioning Compliance brought into line where gaps existed Immediate Priorities: Address audit findings identified by external auditors Recruit Compliance Officer Update all policies, systems and procedures Medium to Long Term Priorities: Improve corporate governance and compliance 14

15. Strategic Objective 6 Build a strong and effective sefa brand emphasizing accessibility to SMMEs Current Status: Limited promotional activity Corporate identity developed with assistance from IDC Communication plan developed and being finalised Immediate Priorities: Improve service as the main brand building initiative Align communication plan with organisational plan, step by step, concluding first phase by February 2013 Medium to Long Term Priorities: Continued focused communication and brand awareness campaigns 15

16. What is Different With sefa’s Wholesale Model? Partner with stronger financial intermediaries such as Small Enterprise Finance (SEF) and Women’s Development Business Develop demand driven products that can be distributed through intermediaries that operate in line with sefa’s developmental objectives Increase utilisation of the Credit Indemnity Scheme by all registered banks and other non bank financial intermediaries through improved processes Influence interest rate charged by intermediaries to SMMEs (eg through capping of interest rates) Institutional strengthening of intermediaries through targeted capacity building grants and technical support (eg systems and skills development) 16

17. What is Different With sefa’s Retail Model? Provide finance directly to SMME’s that are unable to access private sector funding Implement simpler loan- and approval processes (eg. forms, contracts) Increase efficiency in terms of processing of applications (current average turnaround time = 60 days, to be reduced to 30 days in the next 18 months) Affordable pricing of products Co-locate regional offices with IDC and other DFI’s wherever possible to enhance cost efficiencies Pro-actively target businesses in sectors identified in the New Growth Path (e.g. green economy, manufacturing, agro-processing and tourism) Provide post loan support to funded SMMEs (in partnership with public and private institutions such as SEDA and SAICA) Link with IDC enables funding of small business opportunities arising out of mega projects Identify sustainable opportunities for small businesses from Public Sector procurement programmes and provide funding to SMME’s to take advantage of these 17

18. 18 Products & Services - Retail ProductDescription Revolving/Bridging LoansTo facilitate short term capital requirements or bridging finance for delivery of contracts or orders (eg a small business gets a contract to supply stationery, but needs finance to buy the stock) Asset FinanceFor acquisition of fixed assets (eg a small business needs a new machine. sefa provides a loan, repayable over 5 years) Term LoansTo finance longer term business expansion requirements and specific capital acquisitions (similar to asset finance, but not necessarily linked to a specific machine) Working CapitalTo finance purchase of stock, overheads, etc (eg sefa provides a shorter term loan (3 years) to a small shop to buy stock needed to expand)

19. 19 Products & Services - Wholesale ProductDescription Business LoansPartnership with Non Bank Financial Intermediaries for on-lending to SMMEs (eg sefa provides loan to WDB, who lends money to micro enterprises) Funds/ Joint VenturesPartnership with mainly private sector entities for on-lending to SMMEs (eg sefa’s partnership with Anglo to provide finance to small mining contractors) Credit Indemnity Schemesefa provides guarantees to banks, enabling loans to small businesses that do not otherwise have sufficient collateral/security to support facilities. Land Reform Empowerment Fund (LREF) Facility through which sefa lends money to commercial banks and other reputable agricultural lenders for on-lending to land reform beneficiaries

20. 20 Products and Services - Non Financial Services ProductDescription Post-loan Business Support Programme This service is only provided to SMMEs that have benefitted from facilities provided by sefa and its financing partners as a risk mitigating intervention (eg sefa provides a mentor to a small business to assist with specific aspects of running the business) Institutional Strengthening Grants Aimed at providing institutional strengthening and technical assistance to Financial Intermediaries (eg grant funding provided to an intermediary to assist it in improving its systems)

21. Co-Operatives support Programme The following will be undertaken to support Co-operatives: Set a target on the number of co-operatives to be supported and value to be disbursed Set clear outcomes in terms of the support provided Benchmark internationally including drawing on other African states Provide capacity building support and mentorship to Co-operatives. 21

22. 2013-2017 Performance Targets – Approvals 22 Product 2012/ 2013 R’m 2013/ 2014 R’m 2014/ 2015 R’m 2015/ 2016 R’m 2016/ 2017 R’m Total R’m SME Direct Lending 1853704855636302 233 Micro Wholesale 801201702803501 000 SME Wholesale115138196229268946 Credit Indemnity 90 450 Land Reform Empowerment Facility 5055606570300 Approvals Total5207731 0011 2271 4084 929

23. 2012/2013 Performance Targets 23 Indicator SME Direct Micro Finance Wholesale loans to Intermediaries SME Finance Wholesale Loans to Intermediaries Credit IndemnityLREF Total Approvals R185m R80mR115mR90mR50mR520m Average SMME Loan Size R250 000 R4 500 (by intermediaries) R750 000 (by intermediaries) R300 000R150 000N/A No. of SMME's Financed 29210 66716024045311 812 No. of Jobs Created 1 4627 4678001 2002 26713 196

24. 2013-2017 Impact Targets - SMMEs Financed & Jobs Created/Sustained 24 Product Indicator2012/ 2013 2013/ 2014 2014/ 2015 2015/ 2016 2016/ 2017 Total SME Direct Lending No. of SME’s Financed 2929511 1661 4561 6125 477 No. of Jobs Created 1 4624 7555 8307 2818 05927 386 Micro Wholesale No. of Micro Enterprises Financed 10 66716 00022 66737 33346 667133 333 No. of Jobs Created 7 46711 20015 86726 13332 66793 333 SME Wholesale (includes RFI’s, Credit Indemnity and LREF) No. of SME’s Financed 8538429341 0031 1074 739 No. of Jobs Created 4 2654 2104 6705 0155 53523 697 Totals No. of SME’s Financed 11 81217 79324 76739 79249 386143 549 No. of Jobs Created 13 19620 16526 36738 42946 258144 416

25. Performance Overview – SMMEs Financed 25 2012/13 YTD 2012/13 Annual target Number of SMEs Financed – Direct Lending144292 Number of SMEs Financed – Micro Wholesale28 03810 667 Number of SMEs Financed – SME wholesale99853 Approvals – Direct LendingR26.5mR185m Approvals - WholesaleR86.9mR80m Total Number of SMMEs Financed28 28111 812

26. Performance Overview – Approvals 26 2 nd Quarter to date 2011/12 Khula + samaf 2 nd Quarter to date 2012/13 sefa GautengR5.3mR22.1m Western capeR10.9mR4.3m Eastern CapeR0.9mR3.3m Northern CapeR0.0mR0.4m KwaZulu NatalR5.6mR0.7m MpumalangaR0.1mR7.3m LimpopoR20.0mR0m Free StateR0.2mR35.3m North WestR0.0mR20.0m

27. Performance Overview – Jobs Created/Sustained 27 2012/13 YTD 2012/13 Annual target Number of Jobs Created/ Sustained– SME Direct Lending 5161 462 Number of Jobs Created/ Sustained– Micro Wholesale ** 28 03810 667 Number of SMEs Jobs Created/ Sustained– SME wholesale 1 9904 265 Total Number of Jobs Created/ Sustained30 54416 394 ** This is largely attributed to jobs created by the following intermediaries: WDB, SEF and Phakamani.

28. Targeted Group Funding 30% of funding disbursed targeted towards youth-owned enterprises. 45% of funding disbursed targeted towards priority rural provinces. 40% of funding disbursed targeted towards women-owned businesses, progressively increasing in subsequent years. 70% of funding disbursed targeted towards black-owned businesses. 28

29. Delivery Network The retail network consisting of regional, branch and satellite offices will span across the nine provinces and all districts of the country. Added to these will be Financial Intermediaries who will also distribute sefa products throughout the country to ensure access by qualifying SMMEs. Initially sefa will roll-out its retail products through the existing regional offices whilst the branch and satellite offices are being set up. The regional offices are: 29 ProvinceRegional OfficeTelephone Eastern CapeEast London043 726 0756 Free StateBloemfontein051 444 1040 GautengJohannesburg011 838 5482 KwaZulu NatalDurban031 301 1922 LimpopoPolokwane015 291 5428 MpumalangaNelspruit013 755 2370 Northern CapeKimberley053 832 2275 North WestRustenburg014592 6391 Western CapeCape Town021 425 6774 Head OfficeNational Call Centre08600 54852

30. Delivery Network 30 Existing sefa offices Existing Retail Financial Intermediaries Existing Micro- finance intermediaries Planned sefa branch/ satellite offices (branch office is a small staffed office. Satellite office is a desk in eg. seda/Post Office, manned at specific times.) Cities/towns

31. THANK YOU