Economic Development Minister Ebrahim Patel (left) and Trade and Industry Minister Rob Davies. Picture: TREVOR SAMSON
Economic Development Minister Ebrahim Patel (left) and Trade and Industry Minister Rob Davies. Picture: TREVOR SAMSON

The National Empowerment Fund (NEF) will become a wholly owned subsidiary of the Industrial Development Corporation (IDC), so it can meet the demand for funding by black entrepreneurs.

On Wednesday, ministers of trade and industry and economic development, Rob Davies and Ebrahim Patel, jointly called the merger of the two state-mandated entities a "landmark breakthrough" in SA’s quest for inclusive growth and radical economic transformation, in line with President Jacob Zuma’s state of the nation address.

Zuma said last Thursday that radical economic transformation must seek fundamental change in the structure, systems, institutions and patterns of ownership, management and control of the economy in favour of all South Africans, especially the poor, the majority of whom are African and female.

In the most recent financial results announcement for the period ending March 2016, the IDC reported R14.5bn in approvals including R11.4bn in disbursements for the financial year. This included R4.9bn for black-empowered companies, R2.9bn of which was for black industrialists.

The NEF was capitalised in 2005 by the government to the value of R2.4bn. This was fully disbursed by 2010. Since then, the NEF has been self-financed from loan repayments, dividends and interest from its investments, and also the proceeds from the 2007 sale of its stake in mobile telecoms group MTN.

To date, the NEF has approved more than R8.5bn worth of transactions to 839 black companies countrywide, supporting about 90,000 jobs.

Patel said in late 2015 that the IDC would channel R23bn to black industrialists; this meant its funding for black industrialists would account for about 22% of its overall budgeted investment over the next five years. But the IDC has not nearly met its targets in recent years. However, government said in late 2015 that empowerment had been central to the IDC’s mandate for the past 21 years. Over this period, it provided R28bn to black-owned businesses, and more than R53bn for broad-based black economic empowerment.

© Business Day

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