1. F UND N ATIONAL E MPOWERMENT Growing Black Economic Participation 10 MARCH 2006 PRESENTATION TO THE PARLIAMENTARY PORTFOLIO COMMITTEE ON TRADE AND INDUSTRY Presenters: Victor Mabuza – Asset Manager Andrew Wright – Manager in the CEO’s Office Nozizwe Mthembu – Legal Officer

2. F UND N ATIONAL E MPOWERMENT Growing Black Economic Participation PRESENTATION SECTIONS: POSITIONING PERFORMANCE FINANCIAL CURRENT INITIATIVES CASE STUDIES

3. F UND N ATIONAL E MPOWERMENT Growing Black Economic Participation

4. NEF STRATEGIC FOCUS Broad Based Black Economic Empowerment The Codes of Good Practice Accelerated & Shared Growth Initiative for SA ASGI - SA 6% GDP Growth 10% Investment Growth 10% Export Growth 2014 Government Aims: 1. Access to Finance 2. Job creation 3. Geographic spread 4. Women empowerment 5. Integrated manufacturing economy 6. Efficient, fast & flexible economy 7. Diversity of enterprise 8. Skills transfer & development NEF Act: Objectives The dti Objectives Priority Sectors Arts & Culture, Tourism, Textiles, Agro Processing Automotive, Chemicals, ICT, Aerospace Film Industry, Exports

5. NEF POSITIONING IN ADDRESSING MARKET FAILURE Identification of market failures particularly regarding participation of Black People in ecoonomy Avoid duplication of other DFI product offerings Positioning of NEF to complement other DFIs and financial institutions Examples of market failureNEF productComplementary to other DFIs / Banks Limited access to finance for Black entrepreneurs with no collateral. Bridging finance for honouring preferentially procured supply contracts. Start-up & Expansion capital Places new businesses in bankable positions Khula & IDC Enter buy-in / buy-out transactions from position of weaknessTransformation capitalBanks provide debt funding Lack of equity funding for rural & community infrastructure projects (longer term lower return) Rural & Community SupportLeverages debt funding DBSA, IDC & CPPP Institutional Fund managers focus on large listed companies >R1bn market capitalisation Capital Markets FundAssists with exits IDC Dilution of broad based BEE shareholdings through second round capital raising Liquidity & Warehousing Fund Limited market liquidity to enable Black entrepreneurs to sell some/all of their businesses Liquidity & Warehousing Fund Over-geared historic BEE funding structures, potentially unwind out of the money Liquidity & Warehousing Fund Rescue & restructure Lack of BEE funding for large strategic (greenfield & brownfield) projects Liquidity & Warehousing Fund Co-invest with IDC, DBSA

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7. F UND N ATIONAL E MPOWERMENT Growing Black Economic Participation

8. BEE Participation Thresholds Start upExpansionBuy-in/ out Market Making Liquidity & Warehousing Strategic Projects BEE participation >75%>50%>25% Influence

9. F UND N ATIONAL E MPOWERMENT Growing Black Economic Participation

10. F UND N ATIONAL E MPOWERMENT Growing Black Economic Participation

11. F UND N ATIONAL E MPOWERMENT Growing Black Economic Participation PERFORMANCE

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13. NEF INVESTMENT PROCESS REPORT: Since 1 April 2005 to 28 February 2006 Investment Committee Legal Approx 9,532 ENQUIRIES APPLICATIONS PENDING MORE INFO NEW DEALS ACCEPTED DUE DILIGENCE APPROVED DISBURSED (Including Undrawn Capital) 1,092 worth R801m 28 worth R241m 30 worth R244m 17 worth R282m 60 worth R241m 1,556 NEF work in progress: 135 of R1bn

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24. F UND N ATIONAL E MPOWERMENT Growing Black Economic Participation FINANCIAL

25. F UND N ATIONAL E MPOWERMENT Growing Black Economic Participation

26. F UND N ATIONAL E MPOWERMENT Growing Black Economic Participation

27. F UND N ATIONAL E MPOWERMENT Growing Black Economic Participation CURRENT INITIATIVES

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30. F UND N ATIONAL E MPOWERMENT Growing Black Economic Participation  The creation of innovative savings and investment opportunities for Black people to create wealth (assets)  Provide a meaningful broad-based ownership of SOCE shares by Black people  Unlocking listed SOCE share value for NEF investments through value-adding and empowerment opportunities for Black people  Educating and promoting an understanding of investments and other related savings instruments amongst Black people BEE Retail Schemes: Key Objectives

31. F UND N ATIONAL E MPOWERMENT Growing Black Economic Participation Designated SOCE’s Asset Shareholding % Status 1.MTN Group 1.5received by NEF 2.Telkom 5not yet received 3.SAA 5not yet received 4.ACSA 10not yet received 5.Connex Travel 10not yet received 6.Viamax 10not yet received 7.Syncat 10not yet received 8.Transwerk Perway 10not yet received 9.Sentech 10not yet received 10.Uthingo 5received by NEF 11.SAFCOL 10not yet received

32. F UND N ATIONAL E MPOWERMENT Growing Black Economic Participation Product Offerings Once-off share offerings Collective Investment Schemes Broad-based Share Ownership structuring & administration Assets to be used:  NEF SOCE share set-asides (currently on Balance sheet)  Further SOCE share set-aside allocations (upon transfer to NEF Balance sheet)  NEF invested equity portfolio (when it exercises its exit strategy)  Equity set-asides for BB-BEE groupings by applicant companies (Database access and ESOPs)

33. F UND N ATIONAL E MPOWERMENT Growing Black Economic Participation Targeted Beneficiaries Targeted broad-based groups of Black people: General public (nationally and of all income levels) Savings Schemes (e.g. stokvels, investment clubs, etc.) Rural and Community organisations (e.g. burial societies, co-operatives, etc.) Women-entrepreneur groupings (both rural and urban organised groupings) Other organized groupings (e.g. informal traders, employee share schemes, etc.) Local, Provincial & National Governments (e.g avail affordable funding for their LEDs, IDPs & Strategic Projects)  INDIVIDUALLY OR COMBINATIONS THEREOF

34. F UND N ATIONAL E MPOWERMENT Growing Black Economic Participation CASE STUDIES Choice Technologies Bohang Bead Manufacturers Morobe Trading

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36. Company background Black owned IT and systems integration business (hardware and software solutions) Established in 1997 Staff complement of 5 in 1997 ; 200 in 2005 Based in Gauteng, regional branches in Cape Town, Durban 10 service centers throughout South Africa Shareholding pre NEF funding - 51% owned by Choice Group - 49% owned by Dimension Data

37. Risks Strengths NEF funding Funding amount Salient features of the deal - Negative market perception - Financial risk – Negative cash position - Business risk – Need for more contracts - Established from scratch ( not an equity acquisition) in existence for > 7yrs - Employs over 200 employees (>70% BEE) - Training and skills development for youth - Good track record with stakeholders - Lucrative government & private contracts - Preferred supplier for 2010 soccer world cup - Capital injection to buy out Didata ( R5m ) - Cash injection for working capital ( R15m) - R10m Equity - R10m Debt

38. Strong empowerment dividend ICT is a priority sector Addresses market failure Supporting black entrepreneurship Saved 150 black IT professional’s jobs Liquidity and Warehousing product NEF to hold 49% equity whilst BEE managers return the business to profitability Commercially viable Compliance with funding criteria and NEF Mandate

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40. Company Background Bohang Africa Investments (Pty) Ltd founded in 2003 by Mr. Tlholo Mohlathe. All beads are imported into South Africa. Large scale specialised glass plant in Wadeville producing range of glass beads. Located adjacent to Consol supplying glass and technical expertise. The company will in the first 2 years create 70 new jobs.

41. Risks Strengths NEF funding Funding amount Salient features of the deal - Exchange rate risks - Capital risks - Business risk - First manufacturing facility of seed glass beads in Africa. - Will create 70 new jobs. - Training and skills transfer from Consol - Women Empowerment - Supports 106 000 rural & community crafters - Cash injection for working capital and asset acquisition - R6.75m Equity - R13.5m Debt

42. Strong empowerment dividend Arts & Culture one of NEF’s sector focus Addresses market failure Supporting black entrepreneurship New jobs to be created and supporting 106 000 bead workers jobs Provincial bead SMME industry clusters Strategic Projects product NEF to hold equally with PIC 15% equity with 25% shareholding in the hands of Rural Women Crafters Commercially viable Compliance with funding criteria and NEF Mandate

43. F UND N ATIONAL E MPOWERMENT Growing Black Economic Participation F UND N ATIONAL E MPOWERMENT Growing Black Economic Participation Morobe Trading Enterprises CC (“Morobe”) “Preferential Procurement”

44. Company background Electrification services company 100% owned by a Black woman, Ms. Alettah Ngwetjana (also a Managing Member). Established in 1993 to provide various services. Recently branched into contract work as a result of opportunities provided by preferential procurement policies. Company provides maintenance and installation services as a contractor to Eskom in areas surrounding Polokwane. Company has created 16 jobs. NEF provided non-financial support in a form of advise on business plan and financial modelling.

45. Salient features of the deal NEF invested R1.1 million in a form of 5-year loan. Interest rate charged @ prime less 1% with capital holiday of 6 months. Loan secured by assets and suretyship by Ms. Ngwetjana. Proceeds used for funding working capital and capital expenditure – acquired specialized trucks ABSA provided asset finance as a result of NEF’s funding.

46. NEF facilitated access to finance to enable the business to service the contract. Assisted the business to build the track record and hence improve its credit rating Without NEF’s investment, the company would not have qualified for ABSA facility. Assisted with capacity building of the business. Investment resulted in the creation of 16 jobs. Investment in Limpopo in line with government policy to spread economic development to rural provinces. Direct financial support to SME Compliance with NEF Mandate

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