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Disclaimer

This document has been prepared by Sizwe Mgcinaro (Pty) Ltd. The information furnished in our business proposal contains confidential and competitive information proprietary to the release of which will harm the competitive position of the company. The information shall not be disclosed, duplicated or used in whole or part for any purposes other than to evaluate the business plan. This confidentiality shall subsist indefinitely, irrespective of the intended purpose being achieved or not. Sizwe Mgcinaro (Pty) Ltd reserves the right to change the content and context of this report should Sizwe Mgcinaro (Pty) Ltd become aware of any new facts or information

Mobile 073 23 97019 • email [email protected] TABLE OF CONTENTS

EXECUTIVE SUMMARY PRINCIPAL CUSTOMERS PRINCIPAL COMPETITION SERVICES OWNERSHIP AND MANAGEMENT TEAM MARKET/INDUSTRY ANALYSIS AND SALES STRATEGY FINANCIAL DATA AND FORECASTS APPENDICES Annexure B. Copy of Key person CVs

Annexure C. Company registration Certificate

Annexure D: Detailed financials

Annexure E: BEE certificate

Annexure F: Tax clearance

Annexure G: Bank cancelled cheque

Annexure H: Local Map

Mobile 073 23 97019 • email [email protected] EXECUTIVE SUMMARY

Sizwe Mgcinaro Construction is a newly created company by Mgcini Nkala who has acquired extensive and valuable experience as well as the skills to operate in the industry, by working with the leading construction companies in South Africa until he decided to be on her own

The primarily focus on building, renovating, altering houses and office parks, commercial buildings and governmental structures, both for the private and the public sector in South Africa

The company is committed to the principles of employment equity, equal opportunity and empowerment, regardless of gender, race, colour or creed. Empowerment projects are based on meaningful participation and genuine advancement.

Sizwe Mgcinaro Construction recognizes the need for all employees to work in a safe and healthy environment .The aspiration is to make all a place of Zero Harm.

The purpose of the preparation of the business plan is to secure finance required of R100000 which will mainly be used for working capital (buying of material for the completion of current jobs).We have included the financial analysis indicated the affordability of the loan and future projection of the performance of the company.

PRINCIPAL CUSTOMERS

Sizwe Mgcinaro Construction have a customer base with very little bad debt, in the Public Sector these customers include Government, Municipalities, the South African National Roads Agency (SANRAL) together with Regional and Provincial Government entities. And, in the Private Sector, these customers are made up small clients. Currently 61% of Sizwe Mgcinaro Construction’s revenue Comes from the Public Sector. The balance of the revenue is generated through the Private Sector.

PRINCIPAL COMPETITORS

Sizwe Mgcinaro Construction is the small company in the region, concentrated in Kathu. This gives the company a distinct advantage over their larger listed competitors who suffer from large listed overheads and bureaucracy associated with being part of a listed Group.

The primary competition for Sizwe Mgcinaro Construction in their geographic region are the following;

• Much Asphalt (a former Murray & Roberts subsidiary that is now owned by Capital Works, a private equity fund) • National Asphalt (a Raubex subsidiary) • Roadmac (a Raubex subsidiary) • Roadspan (a WBHO subsidiary) • Randroads (an Aveng Grinaker LTA subsidiary)

BLACK ECONOMIC EMPOWERMENT

The landscape in the sector is such that the ultimate customer will inevitably be Government. Consequently, there is increasing pressure on suppliers and service providers in this sector to achieve certain prerequisite levels of BBBEE in order to become a preferred supplier and win Government contracts.

Mobile 073 23 97019 • email [email protected] Sizwe Mgcinaro Construction currently have a BBBEE rating of level 3.By expanding our operation we hoping to achieve A BBBEE rating of level 1 will give Sizwe Mgcinaro Construction a distinct additional competitive advantage in the market over their competition. The current funding structure involves the director’s contribution and utilisation of retained income from the income generated by the business. In regards to the expansion plan the primary goal is to introduce the debt into the business as we believe debt is a cheaper form of finance as interest is tax deductible

MISSION STATEMENT

We endeavour at all times to provide a comprehensive service to our clients. We strive to complete projects and within budget.

We promote strict adherence to quality, health and safety standards and we adhere to labour equity and encourage harmonious personnel relationships in order to promote team work among staff.

Specialist expertise will be applied in relevant areas to ensure that standards and values are achieved.

To become a significant services company, via partnership with significant industry players.

OBJECTIVES

 To deliver our clients the standards of quality specified in the contract within budget.  To create and maintain a culture of quality within the company.  To ensure that all our employees are trained in quality assurance and that this training is ongoing at all levels.  We adhere to labour equity and encourage harmonious personnel relationships in order to  promote team work among staff  To meet all legal requirements. We also promote strict adherence to quality, health and safety standards  To provide the resources necessary to achieve the required level of quality.  To ensure that quality control mechanisms are being sufficiently and effectively applied at all times.  To provide documentary evidence of all quality control measures.  To ensure that all consultants, suppliers, sub-contractors and others who are involved in our projects meet the required quality standards.  To continually review, improve and implement quality control and best practice procedures.  To seek feedback from our clients and consultants as to the level of quality delivered.

Mobile 073 23 97019 • email [email protected] CONSTRUCTION AND CONTRACTING SERVICES

We provide full contracting and construction service including:

 Brick work - face brick, stock brick, block brick and maxi bricks  Drainage - sewers, manholes etc.  Plumbing - bathrooms, toilets, gutters, geysers, irrigation  Plastering - Rhinolite, Plaster sand  Roofing - Trusses, Tiles, IBR, Corrugated, etc.  Painting - Oil & water based, inc spray application  Ceiling - Suspended and conventional  Foundations - Trenching, roofing and slabs  Electrical - COC, Maintenance, New installations  Glazing - All types  Carpentry - All types of wooden work e.g. Doors, Door frames and window frames.  Tiling -Wooden flooring, Ceramic and Vinyl  Wall Coating - Gamazene, Wall paper  Earth works  Steel Fixing,Renovations,Concrete work, Formwork  Civil works – roads, bridges, etc.

Mobile 073 23 97019 • email [email protected] QUALITY STATEMENT

We at Sizwe Mgcinaro Constructions make an endeavour to achieve sustained, profitable growth by providing services which consistently satisfy the needs and expectations of its clients/ customers.

The level of quality is achieved through adoption of a system of procedures that reflects the competency of the company to existing customers/clients and potential customers/client.

Achievement of Quality Policy involves all staff, who are individually responsible for the quality of their work, resulting in a continually improving working environment for all. To achieve and maintain this, we mobilize our management skills and use its resources in the most efficient and cost effective manner to produce projects of the required standard and quality.

The management ensures quality control by using the best construction practices within the core activities of the group

Mobile 073 23 97019 • email [email protected] OWNERSHIP AND MANAGEMENT

COMPANY INFORMATION

Name of the business Golf house Legal name and status of the Trading entity: business Sizwe Mgcinaro (Pty) Ltd (Registration number : 2013/164323/07)

Industry sector Construction Nature of business Upgrading, Maintenance of buildings and electrical maintenance Geographical location Kathu and Johannesburg Directors ID numbers and names: Managing Director Mgcini Nkala ID:8709156125088

Main business physical address Head Office 21 Sundhurst Flat CNR Wanderers/DE Villiers St Johannesburg 2001

The board of directors is currently made up of only executive directors necessitated by arrangement whereby the shareholders who are directors want to be operationally involved in turning around the company.

The management team members are Mgcini Nkala and Knowledge Nkala, with Mgcini Nkala ultimately being the leader. Knowledge is responsibilities will include co-ordination and marketing of the company, responding to e-mail inquiries, answering and routing phone calls and keeping the books of the company. The number one responsibility of our management team is to create a friendly atmosphere where our customers come first. They will always be courteously acknowledged with a friendly smile and a handshake.

Management has many years’ experience in the Industry and academically and are key to the success of the company. As the business grows, allowance will be made for the increase in staff to meet increased volumes and turnover.

Mobile 073 23 97019 • email [email protected] MANAGEMENT STYLE

Management of the company plan on utilising a participatory management style. Regular meetings will be held between management and staff and communication channels will be open and honest.

Management Resumes

Director Mgcini Nkala

Role Director

Education Matric

Years of 5 years experience

Profile Professional Experience

. Vast experience in the construction industry

Finance Manager Knowledge Nkala

Role Finance Manager

Education Honours in Accounting Science

Years of 12 years experience

Profile Professional Experience

. Worked 3years as a Trainee Accountant for Sizwe Ntsaluba

. Worked as a Business Analyst at Nedbank

Mobile 073 23 97019 • email [email protected] INDUSTRY ANALYSIS

INTRODUCTION

The construction industry plays a crucial role in the South African economy, providing more than one million jobs and generating annual revenue of approximately R267bn. However, although R827bn in government spend has been earmarked for infrastructure development over the next three years, the industry finds itself in a precarious position and is still reeling from the announcement in June 2013 that the Competition Commission had reached a settlement with 15 construction firms, for collusive tendering estimated to be in the region of R47bn.

DESCRIPTION OF THE INDUSTRY

The construction industry is of strategic importance, as it serves all sectors of the economy and is highly labour intensive. It is a complex and multi-faceted sector, which may be divided into the following subgroups:  General building construction;  Industrial construction;  Commercial building construction; and  Heavy civil construction.

In addition to new construction projects, the sector also includes additions and alterations to existing structures, as well as constructions of a temporary nature, prefabricated buildings and the erection and dismantling of scaffolding. Although six major players dominate local market-share, small and micro enterprises have mushroomed and are characteristic of the industry.

SIZE OF THE INDUSTRY

At the height of the South African construction boom in 2009, the sector generated R285bn in revenue. However, according to a recently released Statistics South Africa (Stats SA) report, industry revenue has since declined, falling to R267bn in 2011. The report also found that the contribution of the construction sector to South Africa’s gross domestic product (GDP) contracted from 4% in 2009 to 3.8% in 2011. Large companies accounted for 64% of the total annual revenue of the construction sector, while medium-sized enterprises and small and micro enterprises generated 21% and 15% respectively.

Since its zenith in 2009, when more than 1.1 million people were employed in the local construction sector, recessionary pressures have taken their toll on the industry and jobs have been shed. According to the Stats SA report, employment in the combined formal and informal construction sectors contracted to 1.054 million people in 2011, with the informal sector accounting for over half a million people, a significant number of whom were casual workers. The construction industry remains a male-dominated domain. In 2011, 89.3% of employees were male, while women held only 10.7% of construction jobs. The sector has recently recorded further job losses.

The Stats SA Quarterly Labour Force Survey reports that the construction sector shed a further 41 000 jobs in the first quarter of 2013, reducing the total labour force in the combined formal and informal sectors to 1 020 000. Statisticians estimate that 7.5% of South Africa’s total work force is employed in the country’s construction sector.

Although there has been a notable geographical distribution shift in the construction sector, most construction activity still takes place in Gauteng. In 2011, the province generated 40.4% of the total annual construction industry revenue, while the Western Cape, KwaZulu Natal, Mpumalanga and Limpopo accounted for 13.7%, 11.2%, 9.4% and 6.8% respectively.

The Construction Industry Indicators (CIIs) report, compiled by the CIDB, reports that more than 80% of public sector construction projects are awarded to contractors with a CIDB 7, 8 or 9 grading in the General Building and Civil Engineering classifications, while only 6% to 8% of construction contracts in the public sector are allocated to contractors with a CIDB 2 to 4 grading. While it is estimated that 95% of companies operating in the construction sector can be classified as small and

Mobile 073 23 97019 • email [email protected] micro enterprises (SMEs), six key players command the lion’s share of the market. South Africa’s construction giants include Murray & Roberts Holdings Ltd, Stefanutti Stocks Holdings Ltd, Aveng’s Grinaker-LTA, Group Five Ltd, WBHO Construction (Pty) Ltd, which is a subsidiary of Wilson Bayly Holmes-Ovcon Ltd, and Basil Read Holdings Ltd.

STATE OF THE INDUSTRY

During the past five years, the South African construction industry has been particularly hard hit by recessionary pressures. The fragile state of the sector has been further compounded by the capacity surplus created during the run-up to the 2010 Soccer World Cup. Although trading conditions remain challenging, the South African Federation of Civil Engineering Contractors’ (SAFCEC) State of the Industry Report, which was released at the end of June 2013, suggests that the industry may have turned the corner.

The CIDB–SME Business Conditions Survey for the 2nd Quarter of 2013, published by the Bureau for Economic Research (BER) at Stellenbosch University, indicates that trading conditions for CIDB registered Grade 3-8 contractors operating in the building and civil engineering industries are improving. The survey reveals that the business confidence of Grade 3 to 6 contractors improved but that of Grades 7 and 8 declined. The survey also shows that business confidence improved in the Eastern Cape, KwaZulu-Natal and Gauteng. Although an overall improvement in business confidence was recorded, the current confidence levels of 43 are still below the neutrality level of 50, an indication that the sector remains under pressure.

Confidence in the local construction sector has been boosted by Government’s commitment to spend R827bn on the development of infrastructure over the next three years. However, some respondents were not optimistic about Government spend in the sector, pointing out that allocations have simply been pushed forward and that a significant portion of the available funding has already been committed elsewhere or earmarked for projects that are already underway. According to analysts, real growth in infrastructure spending would actually decline by 1% if one allowed for a 7% to 8% increase in construction costs. During the 2013/14 fiscal year, it is predicted that real growth in the construction industry will increase to 3.2%, rallying further during the 2015/16 financial year to reach 4.0%

INFLENCING FACTORS

ECONOMIC ENVIRONMENT

The South African economy grew by only 2.3% in 2012, significantly less than the continental average of 4.9% for the same year. Factors contributing to the country’s poor growth rate include:

 Labour unrest, wild cat strikes and industrial action across various sectors, including the mining, transportation, energy and  Construction sectors;  Civil unrest and protests in response to poor service delivery;  The devaluation of the South African Rand, which plunged to a 4-year low against the US dollar in 2013;  The increasing trade deficit;  The growing current account deficit;  Poverty;  High debt levels among consumers;  High rate of joblessness, with only 13 million South Africans, or 41% of the country’s working- age population having regular

Mobile 073 23 97019 • email [email protected]  employment;  Rising consumer inflation, which averaged 5.7% for the first half of 2013 compared to an average of 5.4% during the first six  months of 2012; and  The spiralling cost of fuel and electricity.

The country’s 2013 GDP forecast has been downwardly revised by both the South African Reserve Bank (SARB) and the International Monetary Fund (IMF) and is now only expected to grow by between 2% and 2.4% in 2013. The weaker economic growth forecast is expected to impact negatively on the current account deficit and may result in further downgrading of the country’s sovereign debt rating. Recently released South African Reserve Bank (SARB) data on gross fixed- capital formation indicates that interest rates could rise before 2015

The slowdown in residential construction, caused by the sluggish economic environment, has impacted negatively on SMMEs, as many of these smaller enterprises lack the resources to sustain their businesses. Although construction indicators generally remained muted in the first six months of 2013, the number of plans approved for non-residential and residential buildings increased. Analysts predict that spending on affordable housing will increase and that private sector investment in residential buildings will continue to recover gradually during the course of 2013 through to 2014. Public sector spending on social housing projects is also expected to increase. However, funding shortfalls could result in delays in the implementation of departmental budgets. In Gauteng, a modest improvement in commercial property investments is forecast.

BARRIERS TO ENTRY

Barriers to entry into the construction industry range from low to very high. It is relatively easy for the smaller contractors, sometimes referred to as the “shovel, wheelbarrow and bakkie brigades,” to enter the market. However, it becomes progressively more difficult to gain access to more lucrative projects. According to stakeholders, capital requirements, equipment, BEE credentials and skills availability are the biggest barriers to entry on large projects. The six major players are a formidable force and their dominance in the industry also presents a significant barrier to entry for any new competitor. Newcomers in the scaffolding sector would require a major capital investment to start a scaffolding company and would also need to compete against well-established existing players who are the preferred providers of the larger construction companies.

Mobile 073 23 97019 • email [email protected] Appendix

Sizwe Mgcinaro Construction Index (Proprietary) Limited Page Annual Financial Statements for the year ended 28 February Statement of Comprehensive Income Actual Forecasts 2014 2015 2016 2017 2018

Revenue Revenue will grow by 14% based per the 300 000 342 000 389 880 444 463 506 688 expected contracts from Defence Cost of sales 35% of 105 000 119 700 136 458 155 562 177 341 the revenue Gross profit 195 000 222 300 253 422 288 901 329 347

Operating 14% of expense -27 300 -31 122 -35 479 -40 446 -46 109 revenue Operating profit 167 700 191 178 217 943 248 455 283 239

Investment revenue - - - - - Finance costs Assuming will obtain a -10 000 -11 500 -13 225 -15 209 -17 490 loan

Profit before taxation 157 700 179 678 204 718 233 246 265 749 Taxation -44 156 -50 310 -57 321 -65 309 -74 410 Profit for the year 113 544 129 368 147 397 167 937 191 339

PROFITABILIT 2014 2015 2016 2017 2018 Average Y RATIOS Revenue 0% 14% 14% 14% 14% 14% Growth Gross Profit 65% 65% 65% 65% 65% 65% Net Profit 38% 38% 38% 38% 38% 38% Percentage

Mobile 073 23 97019 • email [email protected] Sizwe Mgcinaro Construction Index (Proprietary) Limited page Annual Financial Statements for the year ended 28 February 2014 Statement of Financal Position Actual Forecast 2014 2015 2016 2017 2018 Assets

Non -Current Assets Property, plant Assuming will purchase equipment to and equipment 40 000 500 000 500 000 500 000 500 000 expand the business Building

40 000 500 000 500 000 500 000 500 000

Current Assets Inventories 20 000 150 000 171 000 194 940 222 232 Current tax receivable Trade and other receivables 100 000 114 000 129 960 148 154 168 896 Cash and cash equivalents - 50 000 75 000 112 500 168 750

120 000 314 000 375 960 455 594 559 878 Total Assets 160 000 814 000 875 960 955 594 1 059 878

Equity and Liabilities

Equity Share capital 100 100 100 100 100 Retained income 113 544 129 368 147 397 167 937

100 113 644 129 468 147 497 168 037

Liabilities

Non current liabilities Loans from shareholders 100 000 100 000 100 000 100 000 100 000 Loans from bank We expect to borrow money to 500 000 500 000 500 000 500 000 further expand the business

Mobile 073 23 97019 • email [email protected] Deferred tax -

100 000 600 000 600 000 600 000 600 000

Current Liabilities Current tax payable 5 000 5 500 6 050 6 655 7 321 Trade and other payables 45 000 47 250 49 613 52 093 54 698 Provisions 9 900 47 606 90 829 149 349 229 822 Dividend payable - -

59 900 100 356 146 492 208 097 291 840 Total Liabilities 159 900 700 356 746 492 808 097 891 840 Total Equity and Liabilities 160 000 814 000 875 960 955 594 1 059 878

LIQUIDITY 2010 2011 2012 2013 2014 RATIOS Current Ratio 2,00 3,13 2,57 2,19 1,92 Quick Ratio 1,67 1,63 1,40 1,25 1,16

NET ASSET VALUATION

Total Assets 1 160 814 875 955 059 000,00 000,00 960,00 594,40 877,62 Total Liabilities 159 700 746 808 891 900,00 356,00 491,50 097,13 840,28 NAV 100,00 113 129 147 168 644,00 468,50 497,28 037,33

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