Of the NEF’s R1.1bn in cash at end-March, only R94m was available to fund black businesses
Despite repeated promises from the government, the National Empowerment Fund has still not been recapitalised
The National Empowerment Fund (NEF) has still not been recapitalised despite repeated promises by the government, which has rendered it unable to respond to the huge demand for financial assistance by black businesses.
NEF CEO Philisiwe Mthethwa noted in the NEF annual report for 2017-2018 tabled in parliament on Monday that during the year, more than 1,400 black businesses had approached the NEF for more than R10.6bn to fund start-ups, expansions and the acquisition of untransformed businesses. This was double the volume of transactions that the fund had to assess a year earlier.
"Although over 50% of the value was declined at screening stage, 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.
The NEF had cash of R1.1bn at the end of March but only R94m of that was uncommitted and available for new transactions. Mthethwa noted that if the NEF were to be able to discharge its 2018-2019 strategy, at least R680m would be required as a cash injection.
She said the NEF — which is in the process of becoming a subsidiary of the Industrial Development Corporation (IDC) — urgently needed recapitalisation. It had been under discussion with the government since July 2014.
The board of the IDC approved a facility of R500m in March 2017 but the conditions precedent for this have not yet been met. These are that the cabinet approve the facility and that the NEF be accorded limited borrowing rights under the Public Finance Management Act.
Trade and industry minister Rob Davies said in his foreward to the annual report that the government "remains committed to resolving the protracted challenges of recapitalising the NEF speedily and sustainably".
Since inception the NEF has approved 927 transactions worth more than R9.3bn for black-owned and managed businesses. Of that, R3.4bn has been approved for businesses owned and managed by black women entrepreneurs. A total of 76% of all NEF-funded transactions are still active and operational in the economy.
During the year under review, the NEF approved 75 transactions worth R634m. Its impairment stood at 15.4% at year-end against the targeted 18% and the return on investment at 8,3%. Net asset value at year end was R5bn.