POLITICS

NEF's approved R1,6bn in funding in past two years and a bit - Rob Davies

Minister says board has resolved to temporarily suspend allocations pending the recapitalisation of the fund

THE NATIONAL ASSEMBLY

QUESTION FOR WRITTEN REPLY

2262. Mrs J D Kilian (Cope) to ask the Minister of Trade and Industry:

(1) With reference to the mandate of the National Empowerment Fund (NEF) to promote broad-based black economic empowerment (BBBEE),

(a) What

(i) is the specific mandate of the NEF?

The NEF was established by the National Empowerment Fund Act No. 105 of 1998, to promote and facilitate the ownership of income generating assets by historically disadvantaged persons.

The NEF promotes and facilitates black economic participation through the provision of financial and non-financial support to black empowered businesses, as well as by promoting a culture of savings and investment among black people.

As such, the NEF advances and recovers funding to black empowered businesses across all sectors and stagesof business at a nominal real return in order to advance the implementation of sustainable Broad-Based Black Economic Empowerment (B-BBEE) as provided for in the B-BBEE Act.

(ii) measures have his department put in place to ensure the NEF gives effect to the Government's policies with regard to BBBEE and

The NEF is required to provide detailed Annual Performance Plans to the dti on an annual basis, which sets out the strategic objectives and key performance indicators of the organization. These are reviewed and approved by the dti, before being contracted into the Shareholder Compact, which is signed by the Minister of Trade & Industry and the Chairperson of the NEF. The NEF is required to report and present the achievements it has made against the targets set in the Annual Performance Plan, in quarterly Performance Reports. These Performance Reports allows the dti to track performance and implementation of policies.

The Deputy Director-General responsible for Broadening Participation also serves as the dti representative on the NEF Board.

(iii) amounts have been transferred from his department to NEF in the

(aa) 2011-12,

 (bb) 2012-13 and

(cc) for the 2013-14 financial years,

The NEF has not received any transfers from National Treasury during the periods listed.

(b) which specific project were financed by the NEF in the specified financial years and

(c) what were the specific amounts allocated to each of these project in the specified financial years;

The NEF provides funding to black businesses through various funding products housed in its uMnotho, iMbewu, Strategic Projects and Rural & Community Development Funds. Below is the achievement of each Fund during the periods 2011/12 and 2012/13.

In summary, for the years mentioned, the NEF approved the following number and value of deals:

Financial Year

Number approved

Value approved (R )

2011/12

68

736 715 548

2012/13

76

665 883 396

1 April 2013 - 31 July 2013

24

191 157 952

Total

168

1 593 756 896

The summary/ totals by sector are as follows:

Sector

Number approved

Value approved

Agro Processing

13

   145 285 973

Arts & Culture

1

    12 250 000

Chemicals & Pharmaceuticals

2

    20 700 000

Construction & Materials

24

   216 371 584

Distributors, dispatchers, processors

2

    15 800 000

Energy

25

   201 563 380

Engineering

8

   164 920 000

Financial Services

4

    19 400 000

Food & Beverage

9

    41 288 150

ICT

3

    7 215 130

Manufacturing

9

   129 770 000

Media

3

    70 644 000

Mining

2

    31 500 000

Motor

1

    2 186 080

Property

2

    7 300 000

Retail

24

   184 974 295

Services

26

   244 173 744

Textile

2

    11 500 000

Tourism & Entertainment

2

    23 271 460

Transportation

6

    43 643 100

Total

   168

  1 593 756 896

(2) whether any cap was placed on loan amounts to be granted by the NEF in order to specifically promote small, medium and micro enterprises (SMMEs); if not, why not; if so, what are the relevant details;

The NEF provides funding to black empowered businesses and entrepreneurs from R250 000 to R75 million across a range of sectors, for venture capital, start-up, expansion and business acquisition purposes. These limits were set based on work done by the NEF's Risk unit to establish the risk tolerance, risk bearing capacity and risk appetite of the NEF. However within the above funding range, SME sector normally occupies funding size of between R250,000 up to R15 million.

(3) whether the R34 million loan allocated to the owners of a certain fashion boutique (name furnished) complies with Government's policy of BBBEE and the mandate of the NEF; if not, what intervention does his department intends to make to rectify the situation; if so, how is it justified;

Ndalo Luxury Ventures / Luminance is a new South African fashion and lifestyle business venture, which is owned 100% by black women; KhanyiDhlomo (32.5%), Venetia Dhlomo (32.5%), NondunaInv (15%) and NEF (20% warehoused for Rural Women, Management & Staff Trusts).

The NEF has assessed the loan application in terms of the following criteria:

  • minimum percentage of black ownership or interest,
  • black women empowerment,
  • black managerial and operational involvement,
  • commercial viability of the business,
  • job creation,
  • specific product criteria,
  • geographic location of the business (rural/urban/disadvantaged areas),
  • community involvement,
  • compliance with all the relevant laws and regulations,
  • return on investment, and
  • the possibility of co-funding with another public or private sector institution.

The features of this transaction are in line with the NEF's objectives. In addition, the transaction supports the economic empowerment of black women as well as the economic empowerment of rural women. In addition, the transaction supports 51 direct jobs, over 100 jobs indirectly maintained and many more downstream.

Key features of the transaction include:

  • NEF Board IC approved the transaction in Aug 2012 & NEF advanced R34.1 million loan to NLV over a 5-year term;
  • 5 years shorter than 10 years period permitted under the NEF's New Ventures Finance product;
  • Fully secured by all business assets and shareholders including personal guarantees;
  • Final internal rate of return of 14.5%;
  • Loan repayments have already commenced.
  • The black-women shareholders contributed R15million equity into the transaction, which ranks as the highest ever contributed as owners' contribution.
  • Over 70% of the total investment has remained in South Africa to support the domestic economy
  • The Luminance collection is designed in South Africa to suit the specific needs of the South African market.
  • 71% of the Luminance collection is manufactured in South Africa by Karma Clothing, a women-owned factory located in Wynberg, Gauteng.
  • The factory employs over 100 local women from the Alexandra Township.
  • The balance of the collection is manufactured in Italy to enhance the quality of the local brand

The directive issued by the Minister of Trade and Industry is as follows:

  • Government funds may not be used to support the importation of finished goods and services. Where local suppliers do not exist, the agency must obtain the concurrence of the dti's Accounting Officer and Executive Authority to deviate from this instruction.
  • Agencies should make every effort to find local suppliers of finished, intermediate and capital goods.
  • Where agencies provide support directly to private enterprises, agencies should actively encourage these enterprises to procure locally. Enterprises may also be referred to the Industrial Procurement Unit at the dti for assistance in finding local suppliers.
  • Government funds are to be prioritised to supporting the productive sectors of the economy, namely Agriculture, Mining, Manufacturing and Value-added Services such as Tourism, Business Process Services and the Creative industries.

(4) whether the NEF is liquid enough to allocate funding to other projects; if not, what is the position in this regard; if so, what are the relevant details;

The NEF Board of Trustees has resolved to temporarily suspend the approval of new transactions at the end of May 2013, pending the successful recapitalisation of the NEF. This decision has been taken in response to the risk that the NEF may not have sufficient capital for expansion. The NEF has sufficient capital to cover operational expenditure, but has deemed it prudent to suspend the funding of new transactions

(5) whether his department

(a) has to recapitalise the NEF and

(b) does it require National Treasury's approval before the recapitalisation can take place; if not, why not; if so, what are the relevant details? NW2692E

(a)The NEF does indeed require recapitalization in order to continue/deliver in terms of its 3 year Annual Performance Plan.

(b)The NEF has applied for recapitalization through the MTEF process.

Issued by Parliament, September 4 2013

Click here to sign up to receive our free daily headline email newsletter