The National Empowerment Fund (NEF) is confident that it will soon secure much-needed capitalisation of R500m from the Industrial Development Corporation (IDC) as soon as the Cabinet grants its approval and the Treasury clears its application for limited borrowing rights under the Public Finance Management Act.
The government decided in 2017 that the NEF would be incorporated under the IDC as a subsidiary. The IDC board then approved a facility of R500m in March 2017 subject to Cabinet approval and Treasury clearance of its borrowing rights.
NEF CEO Philisiwe Mthethwa said in a statement on Tuesday said the NEF was confident it would soon obtain Cabinet approval. She said the NEF had now reached a critical point where its funding mandate required urgent recapitalisation for it to be able to respond to the "overwhelming demand" for funding by black entrepreneurs across the country.
"The recapitalisation of the NEF will also help propel the full commercialisation of all the 26 strategic and industrial projects that the NEF has developed in partnership with local and international partners. These are valued at R29bn, with the potential to support a further 85,000 jobs," Mthethwa said.
She noted that in the current financial year more than 1,400 black businesses had approached the NEF to seek funding of over R10.6bn for start-ups, expansion and acquisition of businesses. This was double the volume of transactions the NEF assessed in the prior year.
"Although more than 50% of the value was declined at screening, transactions worth about R5bn went further in the approval processes, and in most instances the NEF had to refer these entrepreneurs to other potential funders due to limited capital available for investment," Mthethwa said.
As at end March the NEF’s had cash of R1.1bn and uncommitted cash of R94m. Since the inception of operations in 2005 to date, the NEF has approved 927 transactions worth more than R9.3bn, supporting 95,798 jobs, of which 65,359 were new.
In 2004, the government undertook to capitalise the NEF by R10bn. It eventually received R2.47bn through transfers from Treasury, all of which was fully disbursed by 2010 as planned.
"Since then the NEF has been self-financed with proceeds from dividends and interest from its investments and R1bn proceeds from the sale in 2007 through the Asonge share scheme of a portion of the NEF’s holding in the MTN Group. Collections amounting to R2.8bn have been generated from loan repayments, which continues in the normal course," Mthethwa said.
"Having been capitalised by R2.47bn the NEF has been able to more than double the capital base to about R5bn. The NEF has been able to collect from the loans and re-invested this to allow a total of R6.3bn to be injected into the economy. This shows that if the NEF had received the full capital allocation of R10bn as announced, more could have been achieved in the transformation of the country".
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