Johannesburg - The plan to incorporate the National Empowerment Fund (NEF) into the Industrial Development Corporation (IDC) is far from ironed out.
The intention to go ahead with this merger was announced this week, but all the essential details will still be determined by a new task team.
This includes whether the NEF retains its board and executive as it is, what funding it will get from the IDC and – crucially – who will call the shots.
NEF CEO Philisiwe Mthethwa has been a controversial figure, but has long enjoyed the outspoken support of black business organisations.
She was an early populariser of the “black industrialist” concept and is the main proponent of the heavily contested claim that black people control “only 3%” of the JSE.
Her defence of a R34 million loan to Khanyi Dhlomo’s Luminance boutique and assertions that funding should be provided to black businesspeople rather than to fund “KFCs and spaza shops” also stirred up controversy about what the role of state funders should be.
The NEF coincidentally appeared in Parliament this week for a committee briefing on its 2016 annual report.
Financial projections presented in Parliament show that the NEF will have about R208 million in cash by March 31, compared with R1.4 billion a year earlier.
It expects to receive repayments in the region of R460 million this financial year, but is budgeting to spend R1.24 billion.
This means someone has to give it, at the very least, R516 million, according to the presentation.
The NEF is, however, aiming higher.
Its chair, Rakesh Garach, said that the NEF was looking for a R1 billion “bridging” facility from the IDC before the end of its financial year – March 31.
Into the future, the NEF wants funding of R2 billion a year.
NEF spokesperson Moemise Motsepe told City Press that these figures were “still to be determined”.
“There will be a need to recapitalise by April 1, but the extent will be discussed,” he said.
“The proposed technical team will determine the actual nature of the relationship between the IDC and the NEF, including the NEF’s capital requirements.
“What has changed this week is that there is now certainty that there indeed will be a relationship with the IDC,” said Motsepe.
The nature of its incorporation into the IDC is going to preserve as much of the NEF’s autonomy as possible, Garach suggested.
Instead of becoming a mere division or “closely managed subsidiary” of the IDC, the plan is to make the NEF a so-called arm’s-length subsidiary.
“With the interim funding it is asking for, the NEF can continue to operate under our existing methodologies,” said Garach.
IDC CEO Geoffrey Qhena said in an emailed response to questions that “the IDC will be the holding company of the NEF and, as a holding company, the IDC will need to provide oversight”.
“A lot of groundwork has been done in preparation for the incorporation,” he added.
The NEF is not the first state-owned funder to get absorbed into the IDC. The Small Enterprise Finance Agency became an IDC subsidiary in 2012.
Motsepe said that the integration of the agency into the IDC “perhaps provides a model”.
At the same time, the NEF is much larger than the Small Enterprise Finance Agency. The NEF balance sheet recorded assets of R5.3 billion last year, compared with the agency’s R2.3 billion.
Talks to somehow merge the NEF with the IDC started in 2014 and were nicknamed Project Kopano.
This followed the NEF’s unsuccessful lobbying of Treasury to be given limited debt-raising powers so that it could issue bonds.
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