Presentation to Portfolio Committee on Small Business Development
Presentation to Portfolio Committee on Small Business Development: Status of Isivande Women’s Fund (IWF) as at 31 March 2015
AGENDA n Introduction & Background n Objectives of the Fund n The Fund Criteria n Fund activity to date n Challenges and Lessons learnt n Conclusion
INTRODUCTION & BACKGROUND n Isivande Women’s Fund (IWF) is an initiative of the Department of Small Business Development (DSBD) having been migrated from the Department of Trade and Industry (the dti); n IWF was introduced as a response to challenges faced by women with regard to limited access to finance for women that inhibits the establishment, growth, sustainability and profitability of women’s enterprises; n IWF was launched in 2007, but due to delays in implementation could not get off the ground smoothly until 2010; n In May 2010, the dti entered into an Memorandum of Agreement (Mo. A) wherein the dti appointed the IDC to be the owner and facilitator of the Fund as well as to provide Technical Support for effective period of eight (8) years.
INTRODUCTION & BACKGROUND n IDC temporary took over the management ( trial phase) but IWF criteria was mostly below IDC mandate so it was decided to outsource the management of the fund (through the provision of the Mo. A) n A tender for IWF’s management was issued and won by IDF Managers who were appointed to manage IWF with an initial R 45 million with IDC’s supervision; Fund size and Management Fees n Initial R 45 million (A further R 20 million was approved in Dec 2013 and hence total funds under management is now R 65 million;
INTRODUCTION & BACKGROUND n IDC Management Fee of 2% on the aggregated sum of amounts standing to the credit of the IDC bank account in the relevant financial year; n The Fund Manager’s fee of 3% of the committed capital is paid annually, and so based on the tenor of this IWF partnership agreement being 8 years, it should be (3% x R 65 000 x 8=R 15 600 000). n IDF Managers was established in March 2008 and currently manages funds for sefa, Shell South Africa and Government (IWF) totalling R 149 m. n An 8 -year period comprising of 4 -year investment period and 4 -year divestment period was proposed for IWF;
FUND OBJECTIVES n Invest in businesses based in South Africa and owned and managed by women; n Build and develop women-owned businesses; n Promote and develop entrepreneurship in rural and peri-urban areas; and
FUND OBJECTIVES n Achieve the targeted portfolio returns of 0% nominal IRR to ensure long term sustainability of the Fund; (in other words a nominal return equal to inflation). i. e. the fund manager is expected to achieve a portfolio return of say, at least 6% if the average inflation for the 8 year period is 6%. In that case, the capital is not dwindled by inflation and anything above inflation is shared in the ratio of 35%: 65% between the Fund Manager and the investor respectively. This is an incentive for the Fund Manager to perform and partake in the upside of the fund. n
FUND CRITERIA n Invest only in portfolio/investee companies that qualify as SME’s; n Invest between R 30 k and R 2 m per transaction; n 50% plus 1 of the ordinary share capital must be held by women; n 30% or more of the management positions shall be held by women; n At least 80% of the funds to go to black women owned businesses; n Businesses must be commercially viable; n At least 30% of the fund to be invested in rural and peri-urban areas;
FUND PERFORMANCE IWF TOTAL PORTFOLIO Total Fund Size Management Fee budget Net Funds for Investment Funds Committed Uncommitted Funds Disbursements to Clients Undisbursed Funds Portfolio at Risk* Repayments Received *21% of Portfolio at Risk is impairments and the rest write offs. R 65 000 R 15 600 000 R 49 400 000 R 35 045 735 R 14 354 265 R 28 849 715 R 6 196 020 R 6 017 104 R 7 306 261
FUND PERFORMANCE
FUND PERFORMANCE Employment creation • The total number of funded companies sinception is 45 (including 3 follow-on transactions). This has resulted in the creation of 155 new jobs and sustained 394 existing jobs.
SECTORAL SPREAD
GEOGRAPHIC SPREAD
PERFORMANCE TARGETS/ACTUALS PERFORMANCE TARGETS / ACTUALS as at 31 March 2015 Quarter Target (no. of deals) Actual (No. of deals) Value of Actual Quarter 1 4 6 R 6 129 100 Quarter 2 6 4 R 2 340 000 Quarter 3 4 4 R 2 450 040 Quarter 4 2 0 R 0 16 14 R 10 919 140
PERFORMANCE PLAN PROJECTIONS MULTI –YEAR PERFORMANCE PROJECTIONS Strategic Goal/ Objective Outcome Strategic Objective Performance Targets Performanc Baseline e Indicator Informatio 2014/15 2015/16 2016/17 n Grow a Increase level Value of R 32. 98 m dynamic SME of investment approved sector in black women transactions owned businesses R 16. 35 m R 0
PERFORMANCE PLAN PROJECTIONS q. The figures demonstrate that the fund has disbursed most of the funds available for investment, excluding the fund management fees for an 8 year period. q. The budget also demonstrates that the additional capital commitment of R 20 million is likely to be fully committed within the first half of the 2015 calendar year.
LESSONS LEARNT n IWF must be willing to take higher risk in businesses; n Higher risk projects will subject the Fund to high levels of write off and impairment leading to lack of long term sustainability; n Simplify the application process – more away from private equity approach; n Simplify the qualifying criteria; n Business support critical to the success of nature of business funded;
LOOKING FORWARD § Simplified legal agreements – basic grant or loan agreements; § Quicker turnaround times; § Enhanced marketing strategy to attract deal flow; § The fund will be fully committed before the end of the next financial year 2015/16.
Thank you 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
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