Overview of sefa's Operations and Performance in Annual Report 2023

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This presentation outline explores sefa's performance highlights, loan portfolio performance, financial performance, human capital management, governance, key organizational priorities, and more. It details sefa's vision, mission, values, operating model, group structure, and various services. The lending channels target black entrepreneurs, women, youth, entrepreneurs with disabilities, rural communities, townships, and military veteran entrepreneurs. Credit risk management governs the lending portfolio, supported by post-investment and graduation services by Seda and business services.

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Presentation outline 1. sefa Overview 2. Performance Highlights FY2022/23 3. Loan Portfolio Performance 4. Financial Performance 5. Performance Against Pre-Determined Objectives 6. Human Capital Management 7. Governance 8. Key Organisational Priorities 9. Case Studies sefa Annual Report | 2023 2

sefa Overview sefa Annual Report | 2023 3

sefas Vision, Mission & Values sefa Annual Report | 2023 4

Our operations are governed by various Policies & Legislation.. sefa Annual Report | 2023 5

Our operating context sefa s sefa s Operating Model Operating Model s sefa efa Group Structure Group Structure sefa sefa services are delivered through various Channels services are delivered through various Channels: Direct Lending Direct Lending sefa sefa regional offices Joint Joint Operation Operation Associate Associate Subsidiaries Subsidiaries Joint Venture Joint Venture Wholesale Lending Wholesale Lending Financial and Partner Institutions (Intermediaries, Cooperatives and Micro-enterprises) Khula Credit Guarantee Khula Credit Guarantee (KCG) (100%) KCG) (100%) Sefa Botala efa Botala Green Fund Green Fund (50%) (50%) Business Partners Limited Business Partners Limited (22%) (22%) Anglo America sefa Anglo America sefa Mining Fund (Pty) Ltd Mining Fund (Pty) Ltd (50%) (50%) Credit Guarantee Credit Guarantee Financial Partner Institutions (wholesale credit guarantees, credit intermediaries) Khula Properties Fund Khula Properties Fund (KBP) (100%) (KBP) (100%) Utho SME Infrastructure Utho SME Infrastructure Fund (49%) Fund (49%) Cytobix (Pty) Ltd trading Cytobix (Pty) Ltd trading as Godisa (50%) as Godisa (50%) Khula Institutional Khula Institutional Services (100%) Services (100%) Fund Management and Ancillary Services Fund Management and Ancillary Services manage third party funds S Sefa Awethu Youth Fund efa Awethu Youth Fund (Pty) Ltd (50%) (Pty) Ltd (50%) Identity Development Identity Development Fund (Pty) Ltd (100%) Fund (Pty) Ltd (100%) Property Management Property Management national property portfolio Target Market Target Market The lending channel services are supported by the Post Investment and Graduation by Seda, Business Services and Post Investment Officers. sefa sefa s loan financing programmes primarily focus on black entrepreneurs, women, youth, entrepreneurs with disabilities, enterprises in rural communities and townships, and Military Veteran entrepreneurs. The credit risk management provide the overall guideline and governance to the lending portfolio. sefa Annual Report | 2023 6

Our operating contextsefa Footprint sefa Annual Report | 2023 7

Performance Highlights FY2022/23 sefa Annual Report | 2023 8

Performance Summary Highlights Total Loan Book Total Loan Book R4,2 billion* R4,2 billion* (including funds) (including funds) March 2022: R 3,4 billion March 2022: R 3,4 billion 104 547 104 547 Jobs facilitated Jobs facilitated 74 762 74 762 SMMES SMMES financed financed Approvals Approvals R1,7 billion R1,7 billion March 2022: R 2,5 billion March 2022: R 2,5 billion Disbursements Disbursements R2,4 billion R2,4 billion March 2022: R2,3billion March 2022: R2,3billion Township- based Rural-based Women- owned Youth- owned Black-owned R545 mn R2 bn R551 mn R928 mn R953 mn *65.5% Direct Lending *34.5% Wholesale Lending sefa Annual Report | 2023 9

Performance Highlights sefa Annual Report | 2023 10

Performance Highlights (cont.) sefa Annual Report | 2023 11

Performance Highlights (cont.) sefa Annual Report | 2023 12

Performance Highlights (cont.) 6% 100% 6% sefa Annual Report | 2023 13

Performance Highlights (cont.) sefa Annual Report | 2023 14

Total Collections For the year ended 31 Mar 2023, sefa organisation collected 74.3% of the overall instalments raised. sefa planned to collect 87% of all the instalments raised and the A combination of factors can be attributed to this performance, namely, the tough economic conditions, which have adversely impacted on demand, the ramifications of rolling electricity black-outs / loadshedding and the strong competition for the locally produced goods in the international markets. sefa Annual Report | 2023 15

Financial Performance Highlights sefa Annual Report | 2023 16

Financial Performance against prior year Cash Flow Cash Flow Statement Statement Cash from operations Financial Financial Position ( Position (R m Financial Financial Performance ( Performance (R m R m) ) R m) ) 346 346 26% 26% 1 066 1 066 41% 41% Total Assets 7 272 7 272 12% 12% Income Cash from investing activities 1 290 1 290 38% 38% 5 977 5 977 15% 15% 213 213 54% 54% Total Liabilities Expenses 1 300 1 300 15% 15% Net Asset Value Loss/Profit for the year Before tax Cash from financing activities 246 246 2% 2% (223) (223) 24% 24% 4125 4125 20% 20% Cash balance at year end sefa Annual Report | 2023 17

Financial Performance (cont.) Key Insights to performance Key Insights to performance Looking Ahead: Beyond FY 2022/23 Looking Ahead: Beyond FY 2022/23 Revenue: Revenue: Other interest earned increased by R87m in the current year showing improvement Grant income allocated in the current was higher than anticipated R280m increase (ring-fenced funds) Introduced initiatives to improve quality of loan book and collections to reduce impairments by: Capacitating Post Investment Monitoring Fully embedding pre-investment activities Leveraging on key strategic partnerships Expenses Expenses Expenses increased due to the increase in property expenses, personnel costs and SARS penalty reversals increased by R147m Cost containment measures resulted to 66% cost income ratio, an increase of 10% compared to prior year and improvement from 87% target Write off of the debt book that is classified as irrecoverable to align with sefa sefa policy and IFRS 9 Loans, advances and impairments Loans, advances and impairments The gross loans and advances increased by R677 million to R3.3 billion at year end as a result of the growth in disbursements in the loan portfolio. The impairments write-off and bad debt provisions on loans and advances have increased by a net amount of R594 million due to declining collection rates. Small businesses continue to find their cashflows under pressure due to rising inflation and operational costs. At year end, the impairment Consistently achieve budgeted cost to income ratio by implementing sustainable cost containment measures sefa Annual Report | 2023 provision was R1.68 billion (2022: R1.1 billion). 18

Human Capital Management sefa Annual Report | 2023 19

Human Capital Management Key milestones achieved on the HPO journey: Leaders of the Future: A second intake of the Management Development Programme has been completed and Junior Managers Development Programme commenced with 14 participants. Youth Empowerment: sefa Work Readiness & Entrepreneur Programme has been implemented with 27 interns on-boarded. Employee Engagement Index achieved at 65% One sefa sefa one Culture: Culture transformation sessions implemented with 70% coverage. sefa Annual Report | 2023 20

Governance sefa Annual Report | 2023 21

Governance Structure sefa Annual Report | 2023 22

Organisational Priorities sefa Annual Report | 2023 23

Key Organisational Priorities Medium Term Expenditure Framework The pandemic has drastically altered the status quo with subdued GDP growth, sluggish tax revenue collection, increase in business closures and unemployment. Over the medium-term expenditure framework (MTEF) period, sefa sefa will improve the organisation s performance and market position by focusing on the following phases: Phase 1 Phase 1 Building the Core: sefa Building the Core: sefa will focus on taking the organisation back to basics, placing the customer at the centre of what it does. Phase 2 Phase 2 Scaling up Capabilities: sefa Scaling up Capabilities: sefa will focus on cost and efficiency dimensions through digitisation of its channels and introducing market interface and engagement tools. This is vital in the current pandemic reality, which is likely to persist long into the MTEF period. Phase 3 Phase 3 Innovating the Delivery Model: Innovating the Delivery Model: As new, tech-driven platforms take shape in sefa s maintain the innovation momentum will be fundamental towards the tail end of the MTEF. sefa 4IR tools such as machine learning and artificial intelligence (AI), improving decision-making all along the operational value chain. sefa s operations, the need to sefa will intensify its usage of sefa Annual Report | 2023 24

Other key priorities to enhance and sustain performance Improvement of the Quality of Improvement of the Quality of the Loan Book the Loan Book Human Resource Capacity Human Resource Capacity Opportunity to optimize Opportunity to optimize performance performance Implement tailored strategies for struggling clients Tighten credit criteria Reposition Direct Lending Consideration to recruit additional resources in the PE office Establish co-location touchpoints with Seda in KZN, Limpopo and Free State Oversee the merger deliverables Oversee the merger deliverables Enhance Communication Enhance Communication and Visibility and Visibility sefa sefa capitalisation capitalisation sefa sefa has engaged National Treasury to secure further capital sefa sefa continues to engage strategic partners for on-lending capital Strengthen of communication and visibility through the integration in the DSBD portfolio sefa Annual Report | 2023 25

Case studies sefa Annual Report | 2023 26

Case study: Brightfire Pictures (Pty) Ltd sefa Annual Report | 2023 27

Case study: Madam and Sir (Pty) Ltd sefa Annual Report | 2023 28

Case study: Africa Star Products CC Location: Location: Western Cape Province Job Creation: Job Creation: 30 Funding Amount: Funding Amount: R2,000,000 Funder: Funder: Alternative Finance Solutions T/A Bizcash Sector: Sector: Manufacturing This business established in 2011 is 100% Indian owned and it manufactures and sells a variety of lower-end Tupperware and other plastic products. The products are sold both in retail and wholesale. The business is growing from strength-to strength taking advantage of certain main competitors closing. Bizcash has been able to assist the client with working capital to assist the client, meet the increased demand due to the lowered manufacturing costs because of the rand depreciation. The business has increased the number and designs of plastic moulds allowing the business to expand their current product range. The funding which Africa Star Products received from Bizcash for expansion was enabled by the guarantee cover from KCG. sefa Annual Report | 2023 29