Panel Discussion on
Leveraging Black Industrialists
for an Inclusive Economy
06 October 2015
Mr Setlakalane Molepo
Divisional Executive: SME
& Rural Development
NEF Mandate…
Established by the
National Empowerment Fund Act No. 105
of 1998, the NEF is a driver and
a thought-leader in promoting and
facilitating black economic participation
through the provision of financial and
non-financial support to black empowered
businesses, as well as by promoting
a culture of savings and investment
among black people.
The NEF is an agency of the dti and is the
only DFI exclusively mandated to grow
B-BBEE
2
JSE BEE Ownership



The direct black equity control over the JSE’s
average market capitalisation of R11.6 trillion as
at 19 Sept 2015 (for Listed Companies), stands at
3% (R349 billion) for shares directly held by black
South Africans.
To reach 25% of black control it requires an
additional 22% worth R2.9 trillion at current
estimated market capitalisation of the JSE.
This is a gap that still needs to be addressed and
funded in order to achieve transformation of up to
25% of JSE market capitalisation.
Source: Who Owns Whom & JSE market data,
September 2015
3
NEF Funds Across the Economic Spectrum
Fund
Focus
Threshold
R250 000 –
R10 million
1
iMbewu Fund
SME Fund providing
Entrepreneurship,
Procurement & Franchise
Finance
2
Women
Empowerment
Fund (WEF)
Achieve minimum 40% of
enterprises owned and
managed by black women
R250 000 –
R75 million
3
Rural &
Community
Development
Fund
Supporting rural economic
development through New
Ventures, Acquisition,
Expansion & Greenfields
Finance
R1 million –
R50 million
4
uMnotho Fund
5
Strategic
Projects Fund
Funding of New Ventures,
Acquisition, Project Finance,
Expansion, Capital Markets,
Liquidity & Warehousing
R2 million –
R75 million
Early-stage investment in
industrial / manufacturing
transactions
Up to R75
million
4
The Industry needs to set aside more funds
for early stage investing
Shortage of
players in SA
High
NEF funding space. Increase of
early-stage players needed.
Personal
& Family
Angels
Risk Appetite
Venture
Capitalists
Private Equity
Equity
Markets
Commercial
Banks
Low
Seed
Start-up
Early growth
Investor Stage of Development
Established
The challenges we are trying to help
address

Few Angel Investors, Venture Capitalist and/or Private Equity in SA;

High risk aversion regarding investment in early stage and high risk projects
e.g. mining exploration;

Expectation gap of returns (IRR) between providers of capital and borrowers;

Investors and funders have difficulty in valuing projects and/or agreeing on
project valuations;
“First-mover dilemma” of entering novel markets to pioneer new project
developments or business ideas in a market lacking investment appetite;


Project promoters unable to raise own equity i.e. lack of required equity and/or
collateral;

Projects normally have a long-term investment horizon (typically 10 to 30
years);

Projects face high financial risks due to implementation delays and cost
overruns;

Low risk appetite of third party investors and/or funders restricted by prudential
limits and investment mandates.
6
Funding Black Industrialists - Objectives
• Creation of new manufacturing and industrial
capacity
• Creation of new jobs as opposed replacement capital
finance
• Investment of new fixed capital into economically
depressed areas or poverty nodes
• Creation of an inclusive economy by increasing
South African participation
• Increase RSA export-earning potential and reduce
import dependency
• Increase co-investment and linkages with foreign
direct investors
7
How we are doing it
Strategic Projects Fund (SPF)
A unit of the NEF established with a mandate to increase
the participation of black people in early-stage projects
Aligned to national Government policy.
Seeks competitive opportunity for the South African
economy and the inclusion of black participation in
opportunities at the outset of projects, as opposed to doing
so during equity closure
8
SPF Project Development Stages
9
Creating Black Industrialists
Together with local & international partners the NEF has developed 20 strategic and
industrial projects worth R25bn, with the potential to support over 80 000 jobs.
The NEF’s future equity rights will total R4.2bn at financial close.
Strategic Industrial Sectors
RENEWABLE
ENERGY
Biofuels
Biomass
Biogas
Solar
Wind
Hydro
MINERAL
BENEFICIATION
Mining &
Mineral
Beneficiation
AGROPROCESSING
INFORMATION &
COMMUNICATIONS
TECHNOLOGY
INFRASTRUCTURE
Telecoms
Broadcasting
Roads
Dams and Bridges
Sewer and Bulk
Services
Chemicals
Agriculture
10
TOURISM
B&Bs
Hotels
Guest
Houses
(Womenowned)
Real Estate
A new opportunity to create industrialists
11
SPF Portfolio – NEF Equity Rights
Project
Sector
Current NEF
Equity
Total Invested
NEF Future
Equity Rights
Total Project Size
RMI
Mineral Beneficiation
30%
13 500 000
15 000 000 000
2 250 000 000
SA Metals
Mineral Beneficiation
29%
40 000 000
1 950 000 000
282 750 000
Coking Coal
Mineral Beneficiation
85%
6 000 000
500 000 000
212 500 000
African Silica
Mineral Beneficiation
50%
9 100 000
1 500 000 000
375 000 000
Coconut Water
Agro-processing
49%
5 000 000
50 000 000
12 250 000
Busamed Hospitals
Healthcare
49%
260 000 000
1 600 000 000
392 000 000
Milk for Life
Agro-processing
49%
2 000 000
50 000 000
12 250 000
Link Africa
Infrastructure
30%
100 000 000
1 000 000 000
150 000 000
Inkomati
Mineral Beneficiation
31%
40 481 000
40 481 000
6 250 000
Biomass to Bioethanol
Renewable Energy
49%
10 000 000
800 000 000
196 000 000
Tyre Energy Extraction
Renewable Energy
68%
57 000 000
50 000 000
17 000 000
KC Energy
Renewable Energy
40%
65 600 000
150 000 000
30 000 000
Tyre Manufacturing Research
Manufacturing
100%
1 590 000
335 000 000
167 500 000
MIBT
Manufacturing
49%
18 600 000
30 000 000
7 350 000
Paediatric Dental Facility
Infrastructure
49%
-
-
-
Auto Disable Syringes
Manufacturing
85%
7 156 600
200 000 000
85 000 000
Mabele Fuels
Renewable Energy
22%
61 750 000
2 155 000 000
697 777 600
25 370 000 000
Totals
12
237 050 000
4 426 650 000
Case Studies
13
Infrastructure - Hospitals
Busamed’s vision is to be a consolidator of the fragmented health care
market. This will be kick-started with the commercialisation of 4 hospital
licenses for 630 hospital beds, spread over three provinces, namely Western
Cape, Gauteng and the Free State. The aim is to develop centres of
excellence, which will provide world-class services. The first hospital (a
cardiologic centre) commenced operations & admitted its first patient on 4
May 2015. The second hospital is under construction. Financial close for the
third and fourth hospitals is targeted to be June and September 2015 / 16
respectively.
investor@nefcorp.co.za
Project
Development Stage
Financial Close - Busamed
NEF Investment to
Date
R260 million
Investment
Requirement
R100 million [$8.1 m or €7.4 m]
Project Promoter
Profile
• Specialist surgeon, retired into business
development and entrepreneurship.
• Founder of Hillcrest Private Hospital and
Ethekwini Hospital & Heart Centre.
• Holds directorships and shares in both listed
and unlisted companies.
• Former president of National Medical and Dental
Associate (South Africa) (NAMDA).
14
Infrastructure - Hospitals
Investment required for 4th and last hospital
R100 million [$8.1 m or €7.4 m]
Renewable Energy – Co-generation
The cogeneration project aims to develop a Combined Heat and Power
(CHP) plant producing steam (60 tph) and power (6MWp) for process plant
usage and is based in the Kwa-Zulu Natal province. The plant is currently
under construction and is expected to come online later this year.
investor@nefcorp.co.za
Project
Development
Stage
Construction – KC Energy
NEF Investment
to Date
R65.6 million
Investment
Requirement
R380m [$30 m or €28.3 m]
Project
Promoters
Profile
• Comprises three entities with complementary
experience and skills in the delivery of energy and
co-generation projects, including but not limited to:
- Registering, constructing and commissioning two
energy projects,
- Pioneering the first greenfield Independent
Power Producer (IPP) operation in South Africa,
- Establishing and managing an Operations and
Management (O&M) for its IPP,
- Successful installation of specified boilers across
Africa, and
- Environmental impact studies for various
industrial projects.
16
Manufacturing – Medical Devices
The project aims to establish a hypodermic disposable syringe and needles
manufacturing plant. There is currently no manufacture of all types of
syringes in South Africa and the SADC region. Detailed engineering designs
are complete and offtake agreements with two international players are at an
advanced stage of negotiations.
investor@nefcorp.co.za
Project
Development Stage
Financial Close – Kenako Medical
NEF Investment to
Date
R75 million
Investment
Requirement
R110 million [$8.9 m or €8.2 m]
Project Promoter
Profile
• Extensive experience in pharmaceutical & medical
device manufacturing & process improvement
projects with international companies.
• An engineer by profession with an MBA.
• American Society for Quality (ASQ) Certified
Quality Engineer.
• Certified Six Sigma Black Belt & Certified. Manager
of Quality and Organisational Excellence.
• Certified Project Management Professional with
Project Management International,
• Currently supplies a number of Hospitals with
range of imported medical devices.
17
Renewable Energy – Bioethanol
The project aims to develop a 90 million litre per annum cellulosic ethanol
biorefinery facility and produce 10MW of power. The project is to be
developed as a holistic green solution to address environmental issues
related to waste disposal as outlined in the National Waste Management
Strategy compiled by the Department of Environmental Affairs and Tourism
(DEAT) while meeting clean and renewable energy objectives of the
Department of Energy (DoE). A manufacturing license has been issued by
the DoE and letters of intent from potential feedstock suppliers received.
investor@nefcorp.co.za
Project
Development Stage
Bankable Feasibility – Mkhondo Biorefineries
NEF Investment to
Date
R10 million
Investment
Requirement
R900 million [$73 m or €67 m]
Project Promoters
Profile
• Operations management, commercial evaluation,
business plan development, process engineering,
project management, capital and cost management,
global refinery economics, linear programming and
strategy development in the coal to liquids, gas to
liquids and crude refining industries.
• Sales, marketing, logistics, strategy and mergers
and acquisitions expertise.
18
Mineral Beneficiation – Pig Iron
The project aims to establish a $200 million pig iron production plant in the
Mpumalanga province. The company has been investigating the possible
opportunity of beneficiating Pig Iron from abundant iron rich Calcine dump
material in South Africa. The project has assessed various sites in the
country and the preferred location has been identified. The plant will be
designed to use the waste heat from the furnace to generate more than
80MW of electricity that can either be supplied to the existing industrial
complex or exported to the national grid.
investor@nefcorp.co.za
Project
Development Stage
Bankable Feasibility – SA Metals
NEF Investment to
Date
R40 million
Investment
Requirement
R1.95 billion [$158.5 m or €145.5 m]
Project Promoters
Profile
• The combined expertise of the project promoters
include the following:
- Iron ore mining, furnace and smelting
technology,
- Engineering and of large infrastructure and
power plants projects,
- Mining waste management and
environmental waste management services,
- International metals trading, logistical and
trade finance expertise.
19
Mineral Beneficiation – Rare Metals
The project aims to establish a chemical refinery plant in South Africa, which
will be able to extract pure metals and add substantial value to the minerals
South Africa exports. The promoter has partnered with two established
magnesium trading companies. The companies have expressed interest to
participate in the various project phases and purchase the bulk of the product
once the project is operational. The project requires R300 million for a
bankable feasibility study.
investor@nefcorp.co.za
Project
Development Stage
Bankable Feasibility – Rare Metals Industries
NEF Investment to
Date
R13.5 million
Investment
Requirement
R15 billion [$1.2 bn or €1.1 bn]
Project Promoters
Profile
• The combined expertise of the project promoters
include the following:
- Modern processing technologies for magnesium
and aluminium-lithium alloys,
- Renowned suppliers of titanium sponge production
technology & titanium plants globally,
- Developers of a number of titanium-magnesium
and zirconium projects across the world,
- Suppliers of organic, synthetic and polycrystalline
silicon technology,
- Mining, electrical & smelter infrastructure, and
- Power system modelling, project management and
energy management.
20
Thank you
Contact Details
WHERE
TELEPHONE
1
Head Office,
Johannesburg
011 305 8000 or 0861843 633 /
0861 THE NEF
2
Eastern Cape
0861 633 327 / 0861 NEF ECP
3
Free State
0861 633 377 / 0861 NEF FSP
4
KwaZulu Natal
0861 633 596 / 0861 NEF KZN
5
Limpopo
0861 633 546 / 0861 NEF LIM
6
Mpumalanga
0861 633 678 / 0861 NEF MPU
7
Western Cape
0861 633 927 / 0861 NEF WCP
8
North West
0861 633 697 / 0861 NEF NWP
9
Northern Cape
0861 633 627 / 0861 NEF NCP
www.nefcorp.co.za
21