1. Black Management Forum 19 May 2015 Morgan Le Breton Northern Cape: Regional office Lesedi Power SMME Workshop

2. 2 IDC - Corporate profile o Established: 1940 o Type of organisation: Development Finance Institution (DFI) o Ownership: State owned company, 100% owned by the SA government o Total assets: R122.3 billion (31 March 2015 - group) o Total liabilities: R32.4 billion (31 March 2015 - group) o Funding status: Self financing, pays dividends and income tax o Main business area: Providing funding for entrepreneurs and projects that are contributing to industrialisation and job creation o Geographic activities: South Africa and the rest of Africa o Products: Custom financial products to suit a project’s needs including debt, equity, guarantees or a combination of these o Stage of investment: Project identification and development, feasibility, commercialisation, expansion, modernisation o Number of employees: 840(March 2015) Partnerships, Professionalism & Passion IDC Head Office, Sandton, Johannesburg IDC Regional Office, Kimberley Northern Cape

3. 3 Deal origination, assessment and post-investment Regional presence IDC has offices in all provinces; Regional offices are fully fledged operational offices that form part of the SBU value chain; – Kimberley – Upington Responsibilities include: – Dealing with enquiries, applications, basic assessments and business support in the province – Improving IDC stakeholder relations and stakeholder perceptions and extending IDC’s reach and footprint. – Proactive sourcing of deals/projects – Engaging with provincial development plans Satellite offices do not have permanent staff and are manned at specific times by employees from the regional office. These offices are generally shared with other DFIs or agencies.

4. 4 Objectives and the outcomes aimed to achieve Facilitate sustainable direct and indirect employment Regional equity (including development of the rest of Africa) Growing the entrepreneur and SME sector (sefa) Expansionary and/or broad-based black economic empowerment (Community Trusts) Environmentally sustainable growth Grow sectoral diversity and increase localisation (SIPS) Facilitate sustainable direct and indirect employment Regional equity (including development of the rest of Africa) Growing the entrepreneur and SME sector (sefa) Expansionary and/or broad-based black economic empowerment (Community Trusts) Environmentally sustainable growth Grow sectoral diversity and increase localisation (SIPS) Support for industrial capacity development By focussing on... We will contribute to... The IDC is a catalyst in driving industrial development: We proactively identify and fund high-impact projects We lead the creation of viable new industries (Renewable Energy) Using our diverse industry expertise to drive growth in priority sectors Taking up higher-risk funding in early-stage and high-impact projects The IDC is a catalyst in driving industrial development: We proactively identify and fund high-impact projects We lead the creation of viable new industries (Renewable Energy) Using our diverse industry expertise to drive growth in priority sectors Taking up higher-risk funding in early-stage and high-impact projects We differentiate ourselves by...

5. 5 IDC’s Positioning Non-commercial focus Fiscal transfers and grants Development objectives (social) Government / NGOs High commercial focus Private sector capital Financial objectives Known risks Commercial Financiers Commercial and development focus Sharing risk Internally generated funds, government funds, loans DFIs Greater importance on financial objectives Greater importance on social and developmental objectives IDC does not directly compete with other institutions, but encourages cooperation with a variety of these institutions to achieve its goals Leverage Grant and Government Funding IDC does not directly compete with other institutions, but encourages cooperation with a variety of these institutions to achieve its goals Leverage Grant and Government Funding Industrial Development Corporation (IDC) Development Bank of Southern Africa (DBSA) sefa National Empowerment Fund (NEF) ABSA Standard Bank First National Bank Nedbank Etc.

6. 6 IDC Structure: Operational Divisions Machinery & Equipment Automotive & Transport Equipment Divisions Units Basic Metals and Mining CEO PIBC Regional Offices Business Support Clothing & Textiles Basic and Speciality Chemicals Chemical Products & Pharmaceuticals Media and Motion Pictures Agro-processing and Agriculture New Industries Light Manufacturing & Tourism Ops. Head Office Heavy Manufacturing Rest of Africa Support Metals Value Chain Agro-Processing Value Chain, Industrial Infrastructure & New Industries Chemicals Value Chain, Textiles High Impact & Regions NORTHERN CAPE REGIONAL OFFICE Industrial Infrastructure (including Green Industries) IDC Structure: Operational Divisions

7. New projects, expansions, rehabilitation of existing projects, acquisitions Projects must exhibit economic merit IDC finances fixed assets and working capital requirements Reasonable contribution expected from promoter/s R1 million minimum funding requirement Availability of Security Environmental compliance “NORMAL” IDC Finance Criteria

8. 8 Funding can be structured utilising a wide array of instruments including:Funding can be structured utilising a wide array of instruments including: Debt;Debt; Equity;Equity; Quasi-equity;Quasi-equity; Guarantees;Guarantees; Trade finance;Trade finance; Bridging finance;Bridging finance; Venture capital.Venture capital. The funding will be structured in a way that will suit the business’ needs most appropriately. Structuring options include:The funding will be structured in a way that will suit the business’ needs most appropriately. Structuring options include: Term of the funding : Short, medium and long-term loans are available; Term of the funding : Short, medium and long-term loans are available; Grace periods for repayment : Repayments can be structured to suit cashflows and allow for periods where no payments need to be made on either capital or interest; Grace periods for repayment : Repayments can be structured to suit cashflows and allow for periods where no payments need to be made on either capital or interest; Flexible security requirements: In most instances, very little security is required for small business applications Flexible security requirements: In most instances, very little security is required for small business applications Special funding schemes are available that offer more attractive terms and targets cross sectoral issues such as job creation or development of specific sectors. Also include funds managed on behalf of other organisations, largely the DTI ; Special funding schemes are available that offer more attractive terms and targets cross sectoral issues such as job creation or development of specific sectors. Also include funds managed on behalf of other organisations, largely the DTI ; IDC’s business support programme addresses non-financial support to entrepreneurs.IDC’s business support programme addresses non-financial support to entrepreneurs. IDC’s funding products Funding of R1 million and more

9. 9 Managing IDC: Deal origination, assessment and post-investment: Funding process Applications from existing/ prospective businesses Proactive identification and development of projects Pipeline Assessment and decision Detailed due-diligence/feasibility study assessing development impact and sustainability of opportunities: Development outcomes Market for products/services Technical viability and competitiveness Financial viability Management Legal Environmental impact Etc. Implementation and monitoring Structuring of funding depending on client’s needs Approval of viable transactions at appropriate committee Ongoing monitoring of client performance after funding is disbursed Interventions in businesses experiencing difficulties Business support Restructuring of facilities Etc. More emphasis being placed on early stage involvement and development of projects Legal agreements Meeting conditions Disbursement Screening Basic assessment Pre-feasibility

10. 10 Non-financial support Pro-active & reactive policy advice/support Risk identification & mitigation during due diligences Social Enterprise Fund Spatial Intervention Fund Business support (matching) grants Socio-economic advice to broad-based groupings External entrepreneurial training Support to & partnerships with other DFI’s

11. 11 Development Funds Department €50 m High Developments Ring Fenced Funds GROW-E YOUTH SCHEME PIPELINE DEVELOPMENT PROGRAMME EIB SME MIDCAP FUND R 50 m IDC Business Support Unit MANUFACTURING COMPETITIVENESS ENHANCEMENT PROGRAMME (MECP) MANUFACTURING COMPETITIVENESS ENHANCEMENT PROGRAMME (MECP) R 878 m R 93 m AGRO PROCESSING COMPETITIVENESS FUND (APCF) R 400 m IDC risk pricing less 0,3% Prime less 3% Fixed 4% 0% Prime less 2 % or Prime less 3%

12. 12 How the scheme works: Funding will be made available at prime less 3% to businesses that will create jobs with more than 50% youth ownership Funding will be made available at prime less 2% to businesses that will create jobs with more than 26% and less than 50% youth ownership Cost per job create should be less than R500 000 A minimum of R1-million with a maximum of R50-million per project will be allowed. The funding is available over five years or until the scheme is exhausted, whichever occurs first. The first draw must be within one year from approval of funding. If not, pricing reverts to normal IDC pricing. Reduced loan pricing will be available for five years, after which normal IDC pricing will apply. Finance required in excess of the scheme’s limit can be accessed through normal IDC funding. Pre- and post-investment support and mentorship will be provided where needed. Gro-E Youth Scheme

13. 13 Definition of a Black Industrialist A black entrepreneur who creates owns industrial capacity and provides long-term strategic and operational leadership to the business and is by definition not a portfolio purely financial investor. Characteristics of Black Industrialist: Provides strategic and operational leadership to the business; Has a high level of ownership (>50%) and/or exercises control over the business; Identifies opportunities and develops business to take advantage of these opportunities (entrepreneurial); Takes personal risk in the business; Does business in manufacturing and related sectors (particular IPAP focus); and Makes long-term commitment to the business (not short or medium term)

14. 14 Black Industrialists IDC Support measures include: Assist with start-ups of new businesses and expansions of existing ones Emphasis on business development and assistance Acquisitions of existing businesses by black industrialists Expansionary acquisitions: >50% of funding stays within business and/ or; Funding for strategic acquisitions >R75 million Addressing issues related to access of capital Low own contribution and more use of direct equity instruments Addressing issues related to access to markets Incubation strategies involving private partners or SOCs Addressing issues related to access to capacity and skills Strengthening of IDC’s business support programme Pricing of IDC funding: 1.5% discount (instead of normal discount on Development Score Card) 1.6% additional, if transaction also addresses other priority development outcomes (job creation, localisation, and regional development) __________ 3.1% Combined potential pricing benefit (in comparison, maximum pricing benefit for ordinary equity transactions is 2%)

15. 15 Case studies Description : The Kalagadi Manganese Project consists of the establishment of a 3 million tonnes per annum manganese ore mine and a 2,4 million tonnes per annum sinter plant, both at Hotazel in the Northern Cape. Total capital outlay of the project is R11,9 billion. R8,9 billion will be spent locally during the construction phase, followed by an estimated R7,6 billion during the first full year of production IDC investment R2.2 billion – total approved Development outcomes – Employment – 25 000 direct and indirect jobs during the construction phase Regional equity Expansionary and/or broad-based BEE Kalagadi Manganese

16. 16 Case studies Description: !Khi Solar One is a 50MW concentrated solar tower power station to be located about 20km south-west of Upington in the Northern Cape. The R3.9 billion project has been under development by Abengoa Solar of Spain and IDC since 2009. IDC’s current shareholding in the project is 29%, with the local community having a 20% share. Construction started in 2012. IDC investment - R1.4 billion – total approved Development outcomes – Employment - 1 000 construction jobs over the 24-month construction period, with 60 fulltime jobs expected during the operation phase. Community involvement - working closely with local communities to assist with development plans for socio-economic projects which will also benefit the region and support rural upliftment. !Khi Solar One

17. 17 Case studies Description: Urban Hotel is a 80-room limited service, three star graded hotel which is strategically located in Kathu, the iron ore capital in the Northern Cape. The hotel’s primary target is corporate travellers to Kathu involved project developments and mining activity in and around Kathu. IDC investment - R18.2 million – total approved Development outcomes – Employment –58 annualised jobs during construction and 30 permanent staff. Community involvement – The local community owns 51% shareholding via the SIOC CDT Investment Holdings. Urban Hotel - Kathu

18. 18 Case studies Description: Newgro Farming was formed in 2009 and is a subsidiary of Karsten SA Holdings (Pty) Ltd. A BBBEE women’s trust called Karsten Vroue Werkers Trust has 40% shareholding. The beneficiaries of the Trust consist of women (currently 56 in number) working at various subsidiaries in Karsten. It cultivates table grapes, raisins, watermelons and melons. The 400ha water rights from Government enabled BBBEE shareholding. IDC investment - R101.3m for 162 ha’s Development outcomes 162 ha table grape development 277 annualised jobs Newgro Farming

19. 19 Industrial Development Corporation 19 Fredman Drive, Sandown PO Box 784055, Sandton, 2146 South Africa Telephone (011) 269 3000 Facsimile (011) 269 2116 E-mail callcentre@idc.co.za Thank you Industrial Development Corporation 13 Bishops Avenue, Kimberley PO Box 808, Kimberley 8300 South Africa Telephone (053) 807 1050 Facsimile (053) 832 7395 E-mail kimberley@idc.co.za