Annual Report 2015/16 Presentation. 12 October 2016

Transcription

1 Annual Report 2015/16 Presentation 12 October 2016

2 Presentation outline 1. Economic Environment 2. Operational performance 3. Development impact 4. Performance against predetermined objectives 5. Financial performance 6. Properties 7. Challenges /17 focus areas 2

3 Presentation outline 1. Economic Environment 2. Operational performance 3. Development impact 4. Performance against predetermined objectives 5. Financial performance 6. Properties 7. Challenges /17 focus areas 3

4 Impact of the Economy on SMMEs & Cooperatives % Change (q-o-q) * Reduced business confidence results in lower investment activity Increased unemployment compels people to seek self-employment (entrepreneurship out of necessity) Rising costs - Inability of SMMEs & Cooperatives to pass inflationary pressures to consumers Weak demand conditions result in longer payment lead times (cash flow constraints) & reduced market access opportunities Increased competition due to tight market conditions and cheaper imports Weaker exchange rates increased the cost of imported capital goods Cut back on enterprise development initiatives by larger corporates Drought impacts negatively on rural economies & agricultural sector output Reduced business opportunities from government in light of tighter fiscal stance Q1 Q Q3 Q4 Q1 Q Q3 Source: IDC, compiled from SARB data Gross Domestic Product (GDP) Q4 Q1 Q Q3 Q4 Q1 Q Q3 Q4 Q1 Q Q3 Q4 Q1 Q Q3 Q4 Q1 4

5 Presentation outline 1. Economic Environment 2. Operational performance 3. Development impact 4. Performance against predetermined objectives 5. Financial performance 6. Properties 7. Challenges /17 focus areas 5

6 Performance highlights R1.1bn Funding approvals Jobs facilitated R1.2bn Total loan disbursement to SMMEs & Co-operatives R275 m Disbursed to youth owned businesses Number of businesses financed R474 m Disbursed to womenowned businesses R923 m Disbursed to black owned businesses R739 m Approved to the productive sector of the economy 6

7 Funding activities Approvals Disbursements R million sefa has increased funding approvals, playing its counter cyclical role in the economy Approvals increased 9.9% year on year to a record level of R1.1 billion in 2015/16. Disbursements declined by 9.7% year on year to R1.16 billion. Since inception sefa disbursed R3,4 billion into the economy 7

8 Funding activities Approvals per Distribution Channel (R'm) Direct SME Lending SME Wholesale Co-operatives Agri-Business Informal sector (micro) KCG sefa makes use of a variety of distribution channels During 2016 Direct Lending represented 36% of the overall approvals. The approval value declined due to tough economic environment as well as an deliberate tightening of credit following the high impairment levels. SME Wholesale is reflective of new innovative approaches being followed Approvals to co-operatives increased by 45% from the previous year. Support to the informal sector also increased by 120% during the current reporting year. 8

9 Funding activities Increased support to co-operatives Disbursements to co-operatives increased from R2 million (2014/15) to R37 million (2015/16) in replicable projects (funding approvals = R58 million) During the year under review, sefa laid the foundation for growth of local communities by increasing the co-operatives loan book. sefa developed financing package programmes in partnership with municipalities and/ or with other strategic partners to support cooperatives. sefa focusses on sectors such as agriculture and waste recycling in its cooperative development efforts. However, in the financial year we funded cooperatives in clothing manufacturing as well as the provision of municipal services. A few case studies are discussed in the next slides. 9

10 Funding activities Increased support to co-operatives Chris Hani Co-operative Development Centre sefa approved R9.6 million loans for 2 incubation sites involved in cash crop production (Indalo & Lukhanji Secondary Co-operatives to cover operational and capital expenditure 13 Primary Co-operatives are members of the 2 Secondary Co-operatives Incucop is a Technical Partner that facilitates market access for the Secondary Co-operatives and will be responsible for the repayment of sefa loans from the proceeds of the produce An incubation entity called Incucop (Pty) Ltd (Incucop) is a CDC together with Dicla strategic partnership that facilitates the establishment of Agro Clustering Incubation Models in the CHDM area in the Eastern Cape. Key information Location: Chris Hani District Municipality (CHDM) Jobs created: 32 Funding amount: R9.6 million Key Partners: Chris Hani Co-operative Development Centre; Incucop (technical support), 2 Secondary Co-operatives (Incubators) supporting 13 Primary Cooperatives, off-take by Pick n Pay and Spar CDC plays an oversight role for implementation of the project and other similar projects in CHDM.

11 Funding activities Increased support to co-operatives Super Grand Supports Co-operatives A group of co-operatives in Mpumalanga and Limpopo provinces are participating in broiler production activities for commercial purposes. The Department of Agriculture provided a R3.5 million grant in 2010 to build broiler production houses on the land reform farms that the Co-operatives were leasing. These projects experienced challenges due to lack of technical experience, high input costs and a lack of markets. Super Grand (Pty) Ltd, a 100% black-owned investment holding company that manages and operates agricultural assets, partnered with these co-operatives in It provided technical support and inputs to run these projects successfully and create market access. These projects have proved to be very successful. The cooperatives approached sefa for funding to expand their operations. During the past financial year, sefa approved R20 million in funding of four Primary co-operatives. sefa has entered into a partnership agreement with Super Grand to serve as a technical partner in the project. Key information Location: Mpumalanga and Limpopo Primary Co-operatives supported: 4 Jobs created: 27 created Funding amount approved: R20 million 11

12 Funding activities Increased support to co-operatives KWE Cooperative The co-operative was established in 2010 and has been operating for over 5 years in Thaba Nchu. The business was appointed by SASSA in partnership with Department of Social Development for production of school uniform for orphaned & vulnerable children in Free State & Northern Cape. Key information Location: Thaba Nchu, Free State Job creation: 65 new jobs Funding amount: R Sector: School clothing The co-operative was referred to sefa by the Free State Development Corporation. sefa funding was used to buy material of school uniform hampers to be supplied to various schools within the Free State and for labour and transportation costs. The co-operative is 100% black owned, 80% women and 20% youth owned. The business was able to successfully deliver on their contracts with all the SASSA offices in various towns across Free State, and has potential to secure more orders. 12

13 Funding activities New approaches to fund the informal economy Funding approvals to the informal micro-enterprises increased from R48 million (2014/15) to R106 million (2015/16) Direct Lending to fruit traders sefa developed a direct lending channel for traders at the Durban and Mangaung Fresh Produce Markets and approved micro-enterprise partnerships with corporates in the retail sector and an international organisation. An IT-based lending platform has been developed to provide quick and affordable credit to informal business buyers at the markets. Provincial expansion - Inroads into previously unsupported provinces such as Northern Cape, Western Cape and Eastern Cape were made through relationships with Northern Cape SMME Trust, Siza Capital (Pty) Ltd, Y2K10 (Pty) Ltd and AJ Containers. Value chain linkages - sefa s partnership with Siza Capital (Pty) Ltd enabled the institution to reach a small and almost forgotten town of Pofadder in the Northern Cape. There are hopes of catalysing strong and sustainable economic activity in conjunction with the huge solar projects of Abengoa/Kaxu Solar One. Additional support was provided to the two largest sefa micro finance intermediaries (MFI) partners, the Small Enterprise Foundation and Phakamani Foundation. 13

14 Funding activities New approaches to fund the informal economy Durban/Mangaung Fresh Produce Market Pilot Project Project Description sefa approved a R24.5m pilot project for the provision of affordable credit to the informal traders of the Fresh Produce Markets (FPM) of Durban and Mangaung. The management of the two pilot markets agreed to assist sefa with the implementation and facilitation of this project. The project in essence entails the provision of affordable credit to the informal traders. Weekly loans between R500 and R will be made available to successful applicants. As long as the client repays the loan on the set date, that same amount will be made available again on a revolving basis, for a six-month period. Traders/successful applicants will only be able to purchase fresh produce with the loan from sefa, because the money will be disbursed directly to the buyer s market card. If repayments are not being made, the buyer s card will be blocked immediately, thus minimising the risk of non-payments. After a successful pilot, informal sector operators will be enabled access over R3 billion worth of turnover from the Fresh Produce Markets around South Africa Key information Location: Durban and Mangaung Jobs maintained: over 3 years Funding amount: R20m for loans and R4.5m for establishment costs Key Partners: Durban & Mangaung Fresh Produce Markets, Traders Associations, Freshmark Systems 14

15 Funding activities New approaches to fund the informal economy Siza Capital The facility provides aspiring entrepreneurs with shortterm business start -up credit in form of production equipment, tools, raw materials and trading stock thereby giving them an opportunity to experience entrepreneurship first hand and to horn and sharpen essential business skills. Siza Capital will link the micro-entrepreneurs to business skills training and mentorship opportunities and support in developing viable business plans Micro entrepreneurs will be linked to appropriate financial and communication technology to bridge the information gap and to reduce business transactional costs. 12, 430 informal businesses owners and their families will benefit directly from the credit programme in 5 years. Key information Location: Soweto focusing on Freedom Park, Orange Farm and the Orlando Jobs maintained: 12,430 enterprises by 2020 Funding amount: R11m for loans All the above beneficiaries will be in Soweto townships. Equipment loans attract very low interest rates of not more than 10% per annum Mr Nkhwashu obtained a loan from Siza Capital to support his wooden pallets manufacturing business in Soweto 15

16 Funding activities The Credit Indemnity Scheme New applications of the Khula Credit Guarantee KCG has created appetite of the scheme with non-banking financial institutions and these included micro-enterprise funding companies and private corporates. The following guarantees were approved during the year under review: Portfolio Guarantees - R20 million was approved for Real People microenterprise Funding; Supplier Credit Guarantee - R30 million was approved for Macsteel and this was piloted at R10 million. The approved credit guarantees approved during the year were R12 million and a total of R10.2 million was taken up. 16

17 Presentation outline 1. Economic Environment 2. Operational performance 3. Development impact 4. Performance against predetermined objectives 5. Financial performance 6. Properties 7. Challenges /17 focus areas 17

18 Development impact Enterprises Funded Jobs created sefa facilitated an increasing number of jobs since inception. An acceleration in jobs recorded in the year under review is an indication that at least most jobs are being maintained despite the economic headwinds being experienced. The number of enterprises funded have also been increasing, however, the impact of the economic slump is evident in recent times. 18

19 Development impact (Spatial) (% of 2015/16 disbursements) sefa investments are situated across 15% South Africa, providing local jobs and supporting local economies. 7% 31% 12% 47% of disbursements went to SMMEs & co-operatives in targeted 2% 5% 11% provinces. Of the priority provinces, the Limpopo and Mpumalanga are the largest beneficiaries. 10% 6% sefa is implementing a co-location geographic expansion plan to improve its accessibility. 19

20 Development impact (Targeted Groups) (% of disbursements) Youth-owned enterprises Women-owned businesses 16% 21% 23% 24% R275m 39% 49% 37% 41% R474m Black-owned businesses 78% 81% 74% 79% R923m Facilities less than R250K 45% 34% 21% 24% R281m Enterprises owned by People Living with Disabilities Not measured 0% 1% R8.5m 20

21 Development impact Support to black industrialists (National Gazelle) Ordained Trading (Pty) Ltd Ordained Trading (Pty) Ltd is a 100% youth and black owned business by Mr Bhekenkosini Mkhondo. The client is part of the National Gazelle programme, an initiative of the Dept. of Small Business Development. Ordained Trading was awarded a contract of R27,497,842 over a 3 year period. by Arcelor Mittal South Africa to design, construct and commission an abatement plant for VOC (volatile organic compound) emissions. This reduces the plant emissions to an acceptable environmental level. This project took place at the Vanderbijl Park plant, under the Works, Coke and Chemicals Department. KEY INFORMATION Location: Gauteng, Centurion Jobs: 20 Funding amount:: R4, 8 million Sector: Engineering A sefa funding of R4, 8 million was utilised to purchase electrical equipment, material and payment of salaries. To date the project has been successfully completed with the assistance of sefa funding. 20 jobs were created and maintained. 21

22 Development impact Support to entrepreneurs living with disabilities Sihlalo Trading cc Entrepreneurs living with disabilities need support to ensure enterprise sustainability and growth. Sihlalo Trading CC, which trades as Webster Butcher y, is a start-up business founded by Mr Webster Cele. The entrepreneur registered the company in 2001, but it had been inactive due to an incident that led to permanent damage to Mr Cele s spinal cord. Key information Location: Glencoe KwaZulu Natal Job creation: 3 jobs Funding amount: R Sector: Wholesale Trade The business supplies a large retail group with beef and lamb carcasses. Mr Cele approached sefa after battling to obtain funding from other financial institutions. sefa assisted him with a term loan facility of R to fund star t-up operating costs and working capital requirements. A specialist mentor was appointed to assist Mr Cele in meeting his objectives. The sefa loan enabled Mr Cele to create three jobs, and he is hoping to increase this when he realises his plan to open up a meat-processing facility to vertically integrate his business. 22

23 Development impact Backing women entrepreneurs Proactive Milling Solutions cc Proact mining solutions cc herein referred to as Proact is a 100% female owned company that was registered in Proact 100% owned by Mashudu Caroline Mulaudzi who holds a degree in Bachelor of earth science in mining and environmental Geology (BESMEG) as well as BSc (Hons) Geology degree from University of Witwatersrand. Key information Location: Gauteng Job creation: 17 jobs Funding amount: R Sector: Clothing The company specialises in manufacturing and supplying respective industries with women protective clothing (PPE) and hygiene products. Sectors targeted includes women in mining, women in construction, women in energy sectors, women in defence force, women in policing forces as well as women that work for public works across South Africa. With sefa s help she managed to create 17 new jobs. The funds were utilized to purchase few office equipment s, small sewing machines, inventory for samples and business overheads. 23

24 Development impact Investing with youth Mokete Farming Co-operative Limited Mokete Farming Co-operative Limited was registered with CIPC in 2013 by five (5) siblings of Mokete family and is 100% youth owned. The co operative was established for the purposes of agriculture and farming related activities. Business Description:Agriculture. The co-operative learnt about sefa through LEDA. A loan amounting to R was approved for the purchase of production inputs and the provision of working capital in order to plant white maize on a 40 hectare in Veeplaas. The co-operative is 100% owned by youth and is operating at Veeplaas situated at Makhudu thamaga local Municipality in the greater Sekhukhune District. The project created 15 permanent jobs. Key information Location: Limpopo, Veeplas Job creation: 15 jobs Funding amount: R Sector: Agriculture 24

25 Development impact Support inclusive models for the new economy Dr Kenneth Kaunda District Municipality Waste Recycling Project sefa and the Dr Kenneth Kaunda District Municipality entered into a waste recycling joint venture to benefit eight recycling cooperatives operating in four local municipalities in the district. The eight Primary co-operatives have established a Secondary cooperative which, will own and operate the bailing plant. Fifty- six Primary co-operatives will collect and sort the waste from different wards and supply the eight Primary co-operatives for bailing. The project will create 320 jobs. The project is 100% black owned, and shareholders include women and the youth. Key information Location: Dr Kenneth Kaunda District Municipality, North West Primary Co-operatives supported: 64 Jobs created: 320 created Funding amount approved: R25 million sefa approved R25 million in business loans to establish a waste recycling plant in the municipality. The municipality committed R6.2 million in funding to finance the building renovation costs. The project demonstrates that municipalities and government agencies can successfully work together to empower local communities and improve their livelihoods by creating jobs. 25

26 Presentation outline 1. Economic Environment 2. Operational performance 3. Development impact 4. Performance against predetermined objectives 5. Financial performance 6. Properties 7. Challenges /17 focus areas 26

27 Performance Against Predetermined Objectives (1) Objective 1: Access to finance by SMMEs and developmental impact KPI Target Actual Achieved Total Approvals through Wholesale and Direct Lending portfolios R R No Total Approvals via Direct Lending R R No Total Approvals via Wholesale Lending R R No Total Disbursements to SMMEs via all loan product channels R R Yes Under achievement in approvals due to tough economic environment, lack of bankable quality applications and slow down in the Direct Lending loan book. The pilot Credit Guarantee scheme took longer than anticipated. Approvals in terms of productive to industrial sectors identified in IPAP and NGP 20% Number of SMMEs financed Number of Jobs facilitated R R Yes Yes Yes Overachievement is linked to targeted marketing and outreach campaigns particularly to our targeted groups. 27

28 Performance Against Predetermined Objectives (2) Objective 1: Access to finance by SMMEs and developmental impact (continue) KPI Target Actual Achieved Facilities disbursed must be youth-owned years old R R Yes Facilities disbursed to enterprises in rural and periurban areas Facilities disbursed must be women-owned businesses Facilities disbursed must be black-owned businesses Facilities less than R250K disbursed to end-users Facilities to People Living with Disabilities R R Yes R R Yes R R Yes R R Yes R R No Level of Customer Satisfaction 60% 77% Yes Overachievement is linked to targeted marketing and outreach campaigns particularly to our targeted groups. Furthermore, most SMMEs and Co-operatives supported are in the informal and microenterprise sector where the cost of job creation is lower and the loan amount averages R4 500 per SMME/ Co-operative. Under-achievement is due to a lack of application from entrepreneurs living with disability. Over-achievement is due to the strengthening of the customer management processes (policy, processes and systems 28

29 Performance Against Predetermined Objectives (3) Objective 2: Building sefa's financial sustainability KPI Target Actual Achieved Cost to income ratio (excluding Impairments & finance charges and the effects of the grant subsidy) 157% 130% Yes Over-achievement is due to cost containment programme and increase collection on the sefa property portfolio. Accumulated Impairment provision as a percentage of total loans and advances Wholesale SME Accumulated Impairments provision as a percentage of total loans and advances Wholesale Microfinance Accumulated Impairments provision as a percentage of total loans and advances Direct Lending Growth in interest and admin fees generated from loans 17.50% 23% No 10.90% 24% No 39% 67% No 76% 41% No Under-achievement in this area underpinned by tough operating economic conditions. Most start-ups face high failure rate of +/- 70%. Collections book too faced non or delayed payments, thus negatively impacting on the cash-flow and overall business performance of the sefa funded clients. Three Intermediaries also had impaired loan books. Under-achieved is due to the reversal of interest income on impaired loans. 29

30 Performance Against Predetermined Objectives (4) Objective 3: Improve turnaround time KPI Target Actual Achieved Number of days bridging loans Number of days for terms loans No No Low quality of applications received by sefa. The figures include waiting time for clients to respond. Internal capacity constraints Number of days for wholesale application Uptime/availability of critical business information systems Yes 99.90% 99.9% Yes Overachievement as a result of stronger WL application and due diligence procedure. Enhancement to sefalas and the development of portfolio management system facilitate better reporting on the quality of the sefa loan book. 100% 100% Yes Proactive monitoring, effective & timely maintenance of all IT systems helped. 30

31 Performance Against Predetermined Objectives (5) Objective: 4: Alignment, Development and Motivation of Human Capital KPI Target Actual Achieved Labour Turn Over Rate (LTO) of critical/ strategic positions 80% of Staff have Individual Development Plans (IDPs) received and implemented Formal Performance management assessments of all staff conducted by 31 March % 5.5% Yes 80.0% 109.0% Yes 100.0% 100.0% Yes Achievement is linked to maturity of the organisational Human Capital policies and procedures, building and strengthening of the organisational culture and team cohesion and implementation of the performance management system. 31

32 Presentation outline 1. Economic Environment 2. Operational performance 3. Development impact 4. Performance against predetermined objectives 5. Financial performance 6. Properties 7. Challenges /17 focus areas 32

33 Corporate structure Joint Operations Subsidiaries Associates Joint Ventures sefa Botala Green Fund Identity Development Fund Partnership Small Business Growth Fund Business Partners Ltd Anglo American sefa Mining Fund (Pty) Ltd Khula Akwandze Fund (Pty) Ltd Khula Institutional Support Services NPC The Utho SME Infrastructure Fund Cytobix (Pty) Ltd trading as Godisa Supplier Development Fund Khula Business Premises (Pty) Ltd Khula Credit Guarantee (SOC) Ltd sefa Awethu Youth Fund (Pty) Ltd 33

34 Corporate structure (details) Name Objective Partners Current interest (%) Investment date Current Exposure Botala Green Facility To fund the SMMEs using short-term financing instruments in the Green Economy Sector DBSA Dept Environmental Affairs 50% 2016 R12 m Identity Development Fund Partnership IDF provides a combination of loan and equity funding targeted at black women and youth-owned business enterprises and focuses on start-up and early expansion. 100% 2007 R44.5 m Khula Akwandze Fund The purpose of the Fund is to finance small and medium scale sugar-cane growers in the Malelane and Nkomati areas in the Mpumalanga Province. Specific financing needs catered for small scale sugar-cane growers Akwandze Agricultural Finance 75% 2007 R35.8 m Khula Business Premises Investment Property Holding Company 100% 2003 R 45.5 m Khula Credit Guarantee Khula Credit Guarantee (KCG) was established with the purpose of providing commercial banks and other financial institutions with a Credit Indemnity Scheme (Scheme)/partial credit guarantee as additional collateral cover. 100% 1996 R55m Khula Institutional Support Services NPC To advance monies received by donors to entrepreneurs, and for capacity building and mentorship 100% 1997 R38m Small Business Growth Fund Vehicle to fund SMMEs directly Fabvest Investment Holdings Sisonke 81% 2009 R13m 34

35 Corporate structure (details) Name Objective Partners Current interest (%) Investment date Current Exposure Business Partners Legacy investment in SME financing Remgro Limited Old Mutual Barclays Others 21% Legacy R98,6m Utho Infrastructure Fund The fund provides support to BEE SMEs in infrastructure development, construction relatedindustries and property development. IDC Utho Capital 49% 2010 R19.7m Anglo American sefa Mining Fund The fund provides equity and/or debt instruments, with equity stakes taken not exceeding 49% of the issued share capital of investees. Anglo American 50% 2002 R70m Godisa Supplier Development Fund Supply chain financing to SMMEs Anglo American Zimele Transnet 50% 2012 R310k sefa Awethu Youth Fund The Fund is utilised as a vehicle to harness entrepreneurial talent in under-resourced communities with a main focus on youth in townships within the Gauteng Awethu Projects 50% 2014 R60 m 35

36 STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME GROUP R'000 R'000 R'000 R'000 Interest and dividend income 137, , ,364 91,090 Fee income from loans and indemnities 12,927 17,439 12,173 16,302 Interest expense on shareholder's loan (29,751) (22,455) (29,751) (22,455) Net interest and dividend income 120, , ,786 84,937 Movement on impairments and bad debt provisions (379,868) (220,326) (340,998) (225,902) Net interest and dividend income after impairments (259,216) (119,039) (237,212) (140,965) Investment property rental income 29,580 33,484 29,580 33,484 Investment property expenses (43,151) (47,962) (43,151) (47,962) Net fair value (loss)/gain on investment properties 39,842 (13,057) 39,842 (13,057) (232,945) (146,574) (210,941) (168,500) Other income 15,446 10,486 19,144 10,442 Personnel expenses (155,802) (122,303) (155,592) (122,300) Other operating expenses (95,185) (94,613) (78,036) (65,973) Operating loss (468,486) (353,004) (425,425) (346,331) Profit from equity accounted investments, net of tax 39,417 31, Profit/(loss) on disposal of investment 42, Loss before tax (386,189) (321,769) (425,425) (346,331) Income tax credit/(charge) 7,756 (29,662) - - Loss and total comprehensive loss for the year (378,433) (351,431) (425,425) (346,331) Loss and total comprehensive loss attributable to: Owners of the parent (378,433) (350,841) Non-controlling interest (I/S) - (590) Total comprehensive loss and loss for the year (378,433) (351,431) Government Grant 406, ,844 Profit/loss after government grant 27,964 (67,587) COMPANY 36

37 Sources of Revenue - R Interest received on cash and cash equivalents Interest received on loans and advances to clients Other interest earned Rental Income Fee income Indemnity premiums earned Bad debts recovered Management Other sundry fee - Related income parties Revenue from loans and receivables remain the primary driver of income and saw an increase of 55% from 2015 to Other key sources of income include Rental Income and Interest from cash and cash equivalents. 37

38 Sources of Cash Funding R m 800 Highest allocation of government grant in 2016., driven by ECSP grant which has come to an end in Government grant: MTEF Government grant: ECSP Collections: Loans, advances & investments Collections on: Properties 38

39 Sources of Cash Funding R m Collections on: Loans, advances and investments Collections on: Properties Government grant: MTEF Government grant: ECSP IDC Loan

40 Revenue Mix 3% 3% 6% 2% 15% 17% 54% Interest received on cash and cash equivalents Rental Income Interest received on loans and advances to clients Fee income Bad debts recovered Management fee - Related parties Other sundry income 40

41 Expenditure - R Impairments increased significantly year on year, mostly driven by Direct Lending operations Movement on impairments and bad debt provisions Investment property expenses Personnel expenses Other operating expenses Personnel costs increased in line with the Gearing for Growth strategy and was driven by filling up of vacancies and recovery of salaries for IDC staff Operating expenses remained stable over the last 3 years 41

42 ASSETS STATEMENTS OF FINANCIAL POSITION AS AT 31 March 2016 NOTE R'000 R'000 R'000 R'000 Cash and cash equivalents , , , ,180 Trade and other receivables 5. 36,657 34,586 32,304 30,579 Current tax asset Loans and advances , , , ,985 Investment properties held-for-sale ,621 17, ,806 17,420 Equipment, furniture and other tangible assets 15. 9,012 10,833 8,758 10,111 Intangible assets 16. 1, , Investment properties , , ,381 Investments 7. 7,799 7,350 7,799 7,350 Investments in subsidiaries , ,805 Investments in joint operations ,978 - Investments in associates , , , ,509 Investments in joint ventures , , , ,437 TOTAL ASSETS 2,301,110 2,262,010 1,581,869 1,564,841 EQUITY AND LIABILITIES Share capital , , , ,300 Shareholder Reserves ,092, ,154 1,092, ,154 Retained earnings 308, ,558 (368,005) 57,421 Equity attributable to owners of the parent 1,708,976 1,681,012 1,032,846 1,051,875 Non-controlling interest - 5, Total equity 1,708,976 1,686,674 1,032,846 1,051,875 Liabilities Trade and other payables , , , ,901 Tax payable Deferred tax liability ,427 29, Outstanding claims reserve 20. 6,686 6, Unearned risk reserve 20. 2,865 5, Post-retirement medical liability Shareholder's loans , , , ,628 Total liabilities 592, , , ,966 TOTAL EQUITY AND LIABILITIES 2,301,110 2,262,010 1,581,869 1,564,841 GROUP COMPANY 42

43 Notes on Financial Position Cash holdings of sefa remain stable in the short term, but forecast to deteriorate in the future if current challenges on collections of loans and advances prevail. Accumulated Impairments as a percentage of loans and receivables increased from 33% (2015) to 50% (2016), mostly driven by Direct Lending operations. sefa property portfolio value increased year-on-year. In 2016 financial year sefa forged strategic partnerships with the Gauteng Economic Development Department to revitalize industrial parks in Gauteng. In 2016, sefa received a significantly higher allocation from the MTEF budget amounting to R406 m compared to R283.8 million in previous years. The ECSP budget though came to an end in 2017, and budget allocation for the upcoming years will significantly decrease. 43

44 Presentation outline 1. Economic Environment 2. Operational performance 3. Development impact 4. Performance against predetermined objectives 5. Financial performance 6. Properties 7. Challenges /17 focus areas 44

45 Properties Refurbishments and other efforts resulted in an increase in a net fair value on properties of R39.8 million. The strategic objective of the sefa property portfolio is to preserve, maintain and strategically utilise the properties to provide affordable infrastructure to SMMEs. The Portfolio at year end was valued at R207 million and it consisted of 53 properties. sefa forged a strategic partnership with the Gauteng Economic Development Department to revitalise the industrial parks. The total value refurbishments done were valued at R37.1 million. sefa also aligned itself with the dti s Programme on Industrial Property Revitilisation and an application for grant funding of R165 million was submitted. The Gelvandale Shopping Centre (Nelson Mandela Bay, Port Elizabeth) suffered a fire damage during 2013 and was reinstated at a cost of R6.5 million. 45

46 Presentation outline 1. Economic Environment 2. Operational performance 3. Development impact 4. Performance against predetermined objectives 5. Financial performance 6. Properties 7. Challenges /17 focus areas 46

47 Main Challenges Maximise development impact (incl. people with disability) Reducing impairments & increasing collections Achieving financial sustainability Improve client orientation Optimise utilization of strategic intermediary partnerships Increase the uptake of Khula Credit Guarantee Improve returns on contract-based finance Turnaround of the property portfolio Developing internal human capacity 47

48 Presentation outline 1. Economic Environment 2. Operational performance 3. Development impact 4. Performance against predetermined objectives 5. Financial performance 6. Properties 7. Challenges /17 focus areas 48

49 Strategic Risks (key focus areas) 49

50 Corporate Plan - Strategic objectives Building and consolidating for growth Expand access to credit and finance to finance informal and micro-enterprise sector Build efficient and effective processes and systems. Adopt best practice governance.. Consolidate the Direct Lending activities, improve the portfolio quality and redirect investment activities to proactively support government policy initiatives Improve financial ratios. Build a high performance organisation. Facilitate a programme of Wholesale Lending through strategic partnerships Build a financially sustainable and viable sefa. Build one sefa culture. Increase the utilisation of guarantee indemnity scheme. Grow the customer base 50

51 Corporate Plan - Strategic Programmes 51

52 Thank you 52