The SAB Foundation… … igniting entrepreneurship!

“to contribute to the economic and social empowerment of historically disadvantaged communities through Community Development, primarily (but not necessarily exclusively)

by means of Entrepreneurship Development and with priority focus on benefiting women and youth in the rural areas, as well as persons with disabilities”.

The Trust Deed of the SAB Foundation, 2011

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SAB Foundation Mandate

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To ignite a culture of entrepreneurship in South Africa.

Theory of Change: Entrepreneurship is a source of economic growth, as well as a primary source of innovation and job creation, and in

addition builds the backbone of a healthy democracy.

Research into entrepreneurship in South Africa highlights 3 critical issues:

• lacks a critical mass of small and medium-size enterprises; • largely lacks entrepreneurial role models (barring a handful of high- profile names); • culture of innovation is largely untapped and un-commercialised.

The SAB Foundation therefore aims to contribute to the development of a culture of entrepreneurship by supporting the growth of a

critical mass of SME’s; developing entrepreneurial role models; and stimulating and rewarding innovation.

SAB Foundation’s long-term Vision

Our Programmes

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The SAB Foundation offers entrepreneurs two business support programmes designed to develop sustainable

businesses that are successful in the long term.

Since 2011, The SAB Foundation has supported over 207 businesses*.

Investment of approximately R31 Million Rand in grant funding to start-ups and enterprises.

Tholoana Enterprise Fund Social Innovation Awards

Start-ups, Businesses NPO’s, Entrepreneurs

Ongoing Quarterly Application periods Annual Prize Competition

*Created over 1500 jobs

Eco-system of Support

non-repayable grant funds: R100000 to R1000000non-repayable grant funds: R50000 to R250000

SAB Foundation Impact

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Mthatha, Jansenville, Grahamstown, Tambo Village (Queenstown), East London

Koppies, Meqheleng(Ficksburg),Bloemfontein

Emahlongwa(Scottburg),Kwa Dabeka(Pinetown),Verulam,Empendle (PMB)

Nhlazatshe (Badplaas), Thulamahashe (Bushbuckridge), Ekangala(Bronkhorstspruit)

Polokwane , Makhado, Lebowakgomo

Ga-rankuwa, Sebokeng, Kwa-XumaKagiso, Phiri,

Madikwe,Brits

Taung,Batlharos Village, Maruping, Seoding,(Kuruman),Galeshewe (Kimberley)

Phillipi, Somerset East, Saldanha, Khayelitsha Vredenburg, Piketberg, Hermanus, Gugulethu, Lindida(Stellenbosch)

85% of Investment: Black Individuals

Wide Rural Reach

Further trying to extend a culture of

social innovation

going forward by

developing a pipeline of innovators at a tertiary

level.

All Inclusive : Ages +18 – 63+

Entrepreneurs in all 9 provinces

Tholoana Enterprise Fund Entrepreneurs

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Mareka IT Solutions – a grant which was used for a camera, project management fees as well as working capital was awarded to this technology start-up with an e-Learning solution.

Liyema General Welding - a welding company that received grant funding to purchase a computer, a container and tools.

Keakgona Women Disability - is a home based fashion business and the grant was used to buy a sewing machine, stock, a computer and equipment.

WHEAT Trust : Bethel Projects Woman – the funding was used to purchase equipment for the job creation project for women in the textile industry.

The TEF provides small-scale grassroots support for black-owned small

enterprises, cooperatives, micro-businesses and other ventures which develop entrepreneurship and generate

income and employment.

Innovation Awards Innovators

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Shonaquip – a hybrid for-profit business in the disability and human rights sector which was given working capital as well as funding to pay for prototypes.

Pimp My Book Network - a trader of used textbooks was awarded a grant that has been used to buy a mobile trailer.

Achallenge prize for sustainable

social innovation that

addresses a challenge faced

by our beneficiary

groups

Handy Energy Range – was given working capital for project managing the implementation of a distribution strategy to sell the cost effective range of energy products.

Mthatha Airport Agricultural Services (MAAS) - was given money to purchase tractor implements for their agricultural projects.

Sizwe Nzima – Iyeza Express

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Iyeza Express - a courier company using bicycles to distribute chronic medication for patients at an affordable fee. Sizwe won a R100,000 seed grant at the 2012 Social Innovation Awards and currently employs 5

people.

The grant funding has been used to purchase bicycles, branding for clothing and banners, as well as computers and a laptop.

Small business funding entity – “widely accessible to all”

• A small funding entity is required to make funding “widely accessible to all small, medium and micro-sized enterprises”

• It is not clear what the term “widely accessible to all” connotes?

• Small funding entities like ourselves have a selection process in place to ensure that funding is made available to businesses which need the funds the most, that the businesses are sustainable, govern where funds go, what they are used for and to ensure that they are used appropriately

• Would the above criterion potentially violate “widely accessible to all” requirement? This seems very restrictive because we are merely ensuring funds are properly directed (much like a government grant)

• We recommend that the word “all” be excluded so that grant funding is accessible to the general public or a reasonable segment thereof

• This approach can also be supplemented by a Practice Note or Guide from the SARS

Business Idea/Innovation: Iyeza Express

Grant awarded: R100 000

Grant recipient: Sizwe – Khayelitsha, Western Cape

Small business funding entity – 25% distribution requirement

• A small business funding entity is required to distribute at least 25% of amounts received / accrued in any tax year

• It is unclear if the ‘distribution requirement’ applies to amounts which accrued in any tax year (including previous years) or whether it applies to amounts accrued solely in the tax year at issue

• We recommend that the wording be clarified and the ‘25% distribution requirement’ be limited to amounts accruing solely in the tax year at issue

• Our foundation provides grants (or incurs an obligation to grant) from most of its annual earnings but does not reduce the corpus (i.e. prior accumulated earnings)

Small business funding entity – holdings in non-listed entities

• As a restriction, a small funding entity cannot have shares or other interests in any business connected to persons who are part of the committee or board of management of the small funding entity

• Some trustees on the SAB Foundation Board have shares in SAB (Pty) Ltd – these shares are owned by the trustees as employees of SAB (Pty) Ltd and represent a small shareholding (< 1%)

• The SAB Foundation has a shareholding of 1.5% in SAB (Pty) Ltd – subsidiary of UK listed entity

• Therefore above rule / restriction will apply

• We request that a concession be granted vis a vis the above criterion if a non-listed entity is a controlled subsidiary of a listed entity

SABMiller plc UK

6 Intermediary companies

SAB (Pty) LtdSouth Africa

71% Indirect Ownership

SAB Foundatio

n

71% Indirect Ownership

1.5%

Lack of passive income exemption and capital gain tax

• Passive income is exempt from income tax only to the extent of the greater of 5% of total receipts and accruals or R200 000

• In addition, the proposed provisions do not provide a capital gains tax exemption for small business funding entities

• We cannot see why passive income is excluded unlike the relief for PBOs (exempt business income is more of a problem because exempt business income operates as unfair competition)

• We recommend the following:― Exempt all passive income (and capital gains); OR― Raise the 5% threshold to at least 10%; OR― Provide a special exemption for interest earned from bank deposits

SAB Foundation – anticipated share for share swap

• In 2020, SAB Foundation will exchange shares held in ‘SAB (Pty) Ltd’ for shares in ‘SAB Miller PLC’ (foreign shares)

• Without the capital gains tax exemption, the above ‘share for share swap’ would be subjected to capital gains taxation

• Therefore with respect to the anticipated transaction we recommend the following:

• Provide a capital gains tax exemption that is comparable or matches the capital gains tax exemption applicable to public benefit organizations; OR

• Extend the tax relief for share-for-share transactions (i.e. section 42) to cover small funding business entities, even if the shares received are foreign (as in this case)

SABMiller plc UK

6 Intermediary companies

SAB (Pty) LtdSouth Africa

71% Indirect Ownership

SAB Foundatio

n

71% Indirect Ownership

1.5%