Organisational Performance Report PORTFOLIO PERFORMANCE PRESENTATION FOR OCTOBER TO DECEMBER 2017,3RD QUARTERLY REPORT Organisational Performance Report 26 JANUARY 2018

Presentation Outline Introduction Loan book performance Approvals Disbursements Development impact SMMEs financed and jobs facilitated Support to targeted groups Post-Investment Monitoring Portfolio at risk Collections Financial performance Recommendations

Introduction

INTRODUCTION An overview of the 3rd quarter organisational performance of the small enterprise finance agency (sefa) against its approved corporate plan for the financial year 2017/18. Sefa has performed below target approvals and has achieved 46% of the quarterly target. The total sefa loan approvals as at 31st December 2017 is R203 million against the annual target of R804 million. The total disbursements at 31st December 2017 was R654 million and represent 95% of the annual target. The low economic growth environment had a negative effect on SMMEs and Co-operatives sector and the performance of the sefa loan book. Sefa Marketing and communication unit was involved in increasing awareness of the sefa brand through regional initiatives and advertising through community radio stations thus improving visibility of sefa. The Internal audit unit conducted an assessment of the sefa corporate governance environment using the King III. It concluded that the Control Environment is generally, adequately designed to effectively mitigate the key risks which may hamper business processes and the achievement of sefa’s objectives. future assessments need to take into consideration the implications of the new Code (King IV) and sefa’s governance position with respect to the Code.

WHOLESALE LENDING (WL) LOAN BOOK APPROVALS Third quarter approvals was R30, 2 million, representing 23% of the quarterly target. The year to date approvals is R70 million against annual target and represents 12% of annual target. The lack of approvals for the 3rd quarter was influenced by deals in the pipeline which could not be finalised due to risk structure of the deals loan repaying ability of the application Weak capital base of the RFI.

Wholesale Lending Book Disbursements R146 million was disbursed in quarter 3 . The WL has to-date achieved 106% of their annual disbursement target. Contributing was the growth in the large microfinance institutions (approved revolving credit facilities) and the retail finance intermediaries that sefa has invested in.

Post investment monitoring: Total Portfolio At Risk (PAR) Loan Type Balance Balance At Risk Risk Percentage Term Loan 911 796 269.89 503 163 483.11 55.18% Bridging Loan 124 675 622.02 116 535 160.77 93.47% Instalment Sale 174 624 341.61 109 360 103.15 62.63% Revolving Credit 383 865 243.71 143 805 292.21 37.46% Overdraft 26 503 456.79 6 849 120.00 25.84% Totals: 1 621 464 934.02 879 713 159.24 54.25% The Portfolio At Risk represents outstanding loan balance account ( 60 days+ in arrears). The total sefa loan book is worth R1, 6 Billion comprising of WL- R1,3 billion & DL- R611 million). The Bridging Loan book risk percentage is at 93% worth about R116 million. Deeper analysis of the portfolio at risk reveals the following: 61-90 days: 3% 91-120 days: 7% 121-150 days: 2% 151-180 days: 2% 180+ days: 86%

Post investment monitoring: WL Portfolio at Risk Loan Type Balance Balance At Risk Risk Percentage   Term Loan 387 596 862.99 113 831 974.17 29.37% Revolving Credit 191 139 595.07 20 435 344.05 10.69% Overdraft 19 654 336.79 0.00 0.00% Instalment Sale 10 257 376.31 Totals: 608 648 171.16 134 267 318.22 22.06% The total portfolio risk for WL is 22% with the Term loan constituting 29% of the risk. The WL portfolio at risk has improved when compared to 28% in Q2. The percentage at risk for both Term Loan (32%) and Revolving credit (21%) where higher in Q2.

Post investment monitoring: DL Portfolio at Risk Loan Type Balance Balance At Risk Risk Percentage Term Loan 416 880 458.87 296 304 442.00 71.08% Bridging Loan 119 614 153.92 116 535 160.77 97.43% Instalment Sale 164 366 965.30 109 360 103.15 66.53% Revolving Credit 102 997 259.58 89 404 040.42 86.80% Totals: 803 858 837.67 611 603 746.34 76.08% The total DL portfolio at risk was at 76% as at 31 December 2017, this has slightly gone up when compared to data at end of 2nd quarter. The bridging loans have the highest risk at 97% followed by revolving credit at 86%.

Total sefa collections Q3 Month Expected During Period Receipts Monthly Rate 2017-10 R 26 280 317 R 36 294 809 138.11% 2017-11 R 28 083 006 R 24 007 493 85.63% 2017-12 R 37 258 634 R 30 782 892 84.51% Total R 91 621 957 R 91 085 193  99% Generally, collections shows an improvement and 99% of target was achieved for Quarter 3 amounting to R91 million. For October the collection ratio was at 138% and in November target was not achieved at 86% and 85% for December.

DL loan book collections Overall, the DL loan book managed to collect R47 million during the 3rd quarter which is 93% of target. The monthly collections rate target for DL were achieved in October at 141%. During the month of November only 80% of target could be achieved and 68% in December.

WL loan book collections The wholesale Lending loan book managed to collect R43 millions of its loans in Q3. Most collections were in October at 134% and the lowest was 95% for November. The quarterly collections target was achieved for Wholesale Lending loan book at 107% of target.

Conclusion The 3rd quarter performance for the organisation was poor and approval targets were not achieved. To improve performance in Q4 the organisation aims to: Dedicated teams to assist with the regions that are struggling to meet performance. The WL to work on the deal pipeline worth of R158 million focusing on intermediaries supporting Agriculture, high growth SMEs and Taxis.