1. IDFC PRESENTATION TO SMALL BUSINESS DEVELOPMENT PORTFOLIO COMMITTEE IDFC PRESENTATION TO SMALL BUSINESS DEVELOPMENT PORTFOLIO COMMITTEE

2. IDFC LEGISLATIVE Provincial Development Finance Institution; Established through an act of the KZN Provincial Legislature, i.e. Ithala Development Finance Corporation Act, Act No. 5 of 2013; Wholly owned by the KZN Provincial Government and reports to the Department of Economic Development, Tourism and Environmental Affairs; Been in existence for over 50 years having assumed various names; Headquartered in Umlazi, a township located South of Durban next to the old airport

3. MANDATE, MISSION & VISION Mission: “To drive economic development and empowerment, whilst remaining financially sustainable” Mandate: “Promote, support and facilitate social and economic growth in the province of Kwazulu- Natal” Vision: “To be the catalyst for growth, economic development and empowerment”

4. IDFC STRUCTURE IDFC SPECIALISED BUSINESS UNITS Business Finance PropertiesSUBSIDIARIES Ithala SOC Limited Ubuciko Twines & Fabrics

5. OBJECTIVE OF INSTITUTION Goal 1: Financial Sustainability and Viability Goal 2: Developmental Effectiveness Goal 3:Operational Excellence and Good Corporate Governance Goal 4: Forge Strategic PartnershipsGoal 5: Knowledge Management

6. REPOSITIONING STRATEGY – THE BACKGROUND IDFC REPOSITIONED THE ORGANISATION TO ADDRESS THE FOLLOWING: Financial sustainability A lack of funding to drive investments Limited number of Ithala-initiated economic development projects Weak business support services reflected in the high failure rates of funded SMME’s and Co-operatives Lack of alignment with government programmes, especially on rural economic development and agricultural revolution

7. REPOSITIONING STRATEGY – THE BACKGROUND OBJECTIVES OF THE REPOSITIONING STRATEGY ARE TO ENSURE THAT ITHALA: Delivers effectively and efficiently on its mandate in a dynamic and challenging environment Aligns its core business activities to the Provincial Growth and Development Strategy (PGDS) Reclaims its historical relevance and position itself as the premier development agency in the Province Becomes financially sustainable and less reliant on government funding to drive its investment programmes

8. REPOSITIONING STRATEGY - PHASES The overarching corporate strategy consists of 3-phases over a 5-year time horizon. Phase 1 seeks to remediate the business; Phase 2 builds on the revised business platform; Phase 3 extends Ithala’s focus and widens its set of activities.

9. IDFC STRUCTURE IDFC has three Strategic Business Units (SBU’s) Business Finance Business Finance – provides financial and non-financial support to SMME’s and Co- operatives Properties Properties – provides physical infrastructure to retail, light industrial, heavy industrial and SMME businesses Ithala Limited Ithala Limited – is a ‘ring- fenced’ institution, wholly owned by IDFC that provides financial services to the retail market.

10. BUSINESS FINANCE – MODEL OF OPERATION Financial support Non-financial support Financial support Non-financial support Value Proposition Delivery Model Business Centres located in 5 out of 11 districts in KZN Target Customers SMME’s Co-operatives SMME’s Co-operatives Partners Provincial Government Service providers Provincial Government Service providers Core Activities Origination Technical evaluation Post Investment Management Business support Origination Technical evaluation Post Investment Management Business support Cost Structure 65% - 55 employees 15% - professional services 20% - other 65% - 55 employees 15% - professional services 20% - other Funding Interest Income Service charges Government Grants

11. BUSINESS FINANCE – KEY INFORMATION Footprint: Business centres located in Umlazi, Durban, Pietermaritzburg, Richards Bay, Newcastle and Port Shepstone; Financing Products: Micro-Finance Procurement Finance Agri-Finance Asset Finance Franchise Finance Commercial Property Finance Structured/Project Finance Financial and Investment Performance Profitability: Turnaround from R76m loss in FY 2012/13 to R16m profit in 2013/14. Investment: Book size is +/- R900m and Non-Performing Loans have been reduced from 61% in 2012/13 to 20% in 2013/14.

12. PROPERTIES – MODEL OF OPERATION Premises Implementing Agent Premises Implementing Agent Value Proposition Delivery Model Property development Property portfolio (retail, industrial and SMME) Property development Property portfolio (retail, industrial and SMME) Target Customers Retailers Industrialists SMME’s Government Departments Retailers Industrialists SMME’s Government Departments Partners Eskom Municipalities Provincial Government Eskom Municipalities Provincial Government Core Activities Leasing Bulk services Project management Leasing Bulk services Project management Cost Structure 15% - 210 employees 40% - Bulk services, 20% - Rates & Taxes 10% - Maintenance 15% - 210 employees 40% - Bulk services, 20% - Rates & Taxes 10% - Maintenance Funding Rental Income Service recoveries Management Fees

13. PROPERTIES – KEY INFORMATION Footprint: Twenty one (21) shopping centres located in rural and peri-urban towns Three (3) industrial estates located in Mandeni (KZN-North), Ladysmith and Newcastle Eight (8) light industrial parks seven (7) located in Durban and one (1) in Richards Bay; Forty (40) SMME parks, eight (8) located in Midlands, thirteen (13) located in Northern region and nineteen (19) located in Southern and Central region Property Portfolio (Size – GLA): Total portfolio – 1,176,279 GLA Retail – 138,443k GLA Industrial Estates – 847,988 GLA Light Industrial Parks – 132,930 GLA SMME Parks – 56,918 GLA Financial: Profitability: Profit of R126m in 2013/14. Investment: The property portfolio is valued at approximately R1.8 billion and yields approximately 5% on average per annum

14. ITHALA SOC LIMITED – MODEL OF OPERATION Deposits Personal Loans Home Loans Insurance Deposits Personal Loans Home Loans Insurance Value Proposition Delivery Model Branch network Target Customers Retail market Partners Service providers Insurance Underwriters Service providers Insurance Underwriters Core Activities Deposit taking Lending Insurance Deposit taking Lending Insurance Cost Structure 50% - 444 employees 30% - 49 Branches 20% - Other 50% - 444 employees 30% - 49 Branches 20% - Other Funding Interest Income Service fees Deposits

15. ITHALA SOC LIMITED – KEY INFORMATION Footprint: Forty-nine branches spread across the length and breath of KZN and predominantly in rural and peri- urban towns; Financing Products: Deposits Personal Loans Home Loans Insurance – Short and Long term Vehicle and Taxi Finance Financial and Investment Performance Profitability: Loss of R68 million in FY 2013/14 Investment: Book size is +/- R2.15 billion Deposits: Customer size is +/- R1.98 billion

16. SMME & COOPERATIVES IMPACT ON SMME & COOPERATIVES

17. 2013-14 CLOSE-OUT SUMMARY Business TypeR'000GenderR'000AgeSectorR'000 SMME795,125Male587,373Adult614,251Manufacturing123,659 Co-operatives19,525Female141,926Youth200,400Agriculture112,867 Both85,261 Trade & Services183,712 Construction & Tourism374,887 Co-operatives19,525 Total814,650 Business TypeR'000GenderR'000AgeSectorR'000 SMME428,734Male258,900Adult302,061Manufacturing46,466 Co-operatives2,781Female129,455Youth129,454Agriculture109,328 Both43,152 Trade & Services95,407 Construction & Tourism176,095 Co-operative4,219 Total431,515 Approvals Advances Districts: Ethekwini, Ugu, Umgungundlovu, UThukela, UMzinyathi, Amajuba, Zululand, UMkhanyakude, UThungulu, ILembe, Sisonke

18. 2013-14 CLOSE-OUT SUMMARY Districts: Ethekwini, Ugu, Umgungundlovu, UThukela, UMzinyathi, Amajuba, Zululand, UMkhanyakude, UThungulu, ILembe, Sisonke Business Type Gender Age Sector SMME209Male115Adult147Manufacturing12 Co-operatives17Female80Youth79Agriculture31 Both34 Trade & Services21 Construction & Tourism65 Total226 128 Business Type Gender Age Sector SMME 4,339Male2,914Adult3,530Manufacturing144 Co-operatives73Female1,262Youth882Agriculture991 Both236 Trade & Services437 Construction & Tourism2,767 Co-operatives73 Total 4,412 No. of Business Financed No. of Jobs Facilitated No. of Jobs Facilitated

19. SMME PORTFOLIO – MIDLANDS REGION VACANCY %AGE TOTAL UNITS UNITS OCCUPIED UNITS VACANT Ezakheni Handicraft240.00 0.00 880 Ladysmith Handicraft290.00 0.00 880 Madadeni Handicraft515.01475.3739.647.7014131 Mondlo Handicraft 1 & 2749.50460.25289.2538.5921147 Mpumelelo Handicraft 1 & 23,099.542,689.21410.3313.2432284 Nqutu Handicraft PH 1 & 2656.21 0.00 10 0 Osizweni Factory Units A & B576.00432.00144.0025.0014104 Osizweni Handicraft A & B727.30556.50170.8023.4818144 TOTAL SMME MIDLANDS6,853.565,799.541,054.0215.3812510520

20. SMME PORTFOLIO – NORTHERN REGION VACANCY %AGE TOTAL UNITS UNITS OCCUPIED UNITS VACANT Esikhawini Factory Units 1 - 31,163.00937.00226.0019.4328235 Esikhawini Motor Trade1,000.00 0.00 770 Hlabisa Factory Units A & B756.00738.0018.002.3820191 Kwa Msane F/Unit & Motor Trade732.00 0.00 13 0 Mbazwana Factory Units PH 1&2600.00500.00100.0016.671091 Mkuze Factory Units1,056.85750.85306.0028.95362016 Ncotshane Factory Units A & B458.00333.00125.0027.291147 Ngwelezane F/Units 2 & 3542.00 0.00 660 Nkandla Factory Units324.00 0.00 14 0 Nseleni Factory Units PH 1294.00 0.00 660 Sundumbili Factory Units 1 & 2570.00529.0041.007.1912111 Sundumbili Motor Trade600.00 0.00 440 Ulundi Factory Units PH 1 & 22,052.001,779.50272.5013.2829263 TOTAL SMME NORTHERN10,147.859,059.351,088.5010.7319616234

21. SMME PORTFOLIO – SOUTHERN & CENTRAL REGION VACANCY %AGE TOTAL UNITS UNITS OCCUPIED UNITS VACANT Bhongweni Factory Units272.00262.0010.003.681091 Impendle Factory Units324.0027.00297.0091.67716 Kokstad Factory Units1,695.00814.00881.0051.98945 Kwadabeka Factory Units294.00269.0025.008.501091 KwaMashu Motor Park PH 1 - 44,059.003,073.00986.0024.29534310 Magabeni Factory Units268.0048.00220.0082.09725 Mpophomeni Handicraft190.0038.00152.0080.00514 Mpumalanga Factory75.00 0.00 110 Mpumalanga Factory Units F34706.00495.00211.0029.891376 Mpumalanga Motor Centre292.00 0.00 440 Ndwendwe Factory Units430.00 0.00 110 Plessislaer Factory Units 1&22,506.002,166.00340.0013.5721156 Seaford Industrial Park216.0027.00189.0087.50514 Umlazi Industrial Park PH 12,685.002,520.00165.006.1520182 Umlazi Industrial Park PH 22,010.001,775.00235.0011.6938335 Umlazi Industrial Park PH 33,048.002,520.00528.0017.32665412 Umnini Plaza North980.00784.00196.0020.00110 Umnini Plaza South980.00784.00196.0020.00110 Micro & Small Vacant Land0.00 211 TOTAL SMME SOUTH & CENTRAL REGION 21,030.0016,399.004,631.0022.0227420668

22. SMME PORTFOLIO – SUMMARY 473 of the 595 units were occupied as at the end of July 2014. VACANCY %AGE TOTAL UNITS UNITS OCCUPIED UNITS VACANT TOTAL SMME PORTFOLIO38,031.4131,257.896,773.5217.81595473122

23. Thank yo u