Loan tied up as fund awaits ministers’ approval

Preapproval requirements and preconditions are preventing the National Empowerment Fund (NEF) from drawing down on a R500m Industrial Development Corporation (IDC) facility.

This is while the organisation, which provides funds for blackowned businesses, says it needs more funds to fulfil its mandate.

NEF CEO Philisiwe Mthethwa told Parliament’s trade and industry committee on Tuesday the fund required a cash injection of at least R540m for it to implement its 2018-19 strategy.

A 2016 decision for the fund to become an IDC subsidiary is yet to be executed.

Trade and Industry Minister Rob Davies, who has oversight of the fund, and Economic Development Minister Ebrahim Patel, who has oversight of the IDC, still have to approve these transitional arrangements.

Mthethwa told MPs the R500m facility secured from the IDC for the 2017-18 financial year remained undrawn due to the outstanding conditions. These included obtaining a cabinet endorsement for the fund and the IDC to be combined; obtaining approval from the Treasury under the Public Finance Management Act for the fund to have limited borrowing powers; and the fund ceding MTN shares to IDC as security for the loan.

The fund was unable to pledge the MTN shares to the IDC as security for the loan as they were allocated to the fund by the government to promote black economic empowerment.

“The IDC undertook to consider allowing the NEF to draw down a portion of the facility before Cabinet approval is obtained and the balance to be drawn down only once approval is obtained,” she said.

Regarding the condition that the fund has borrowing rights, Mthethwa said it had submitted a request for limited borrowing rights to the Department of Trade and Industry and the Treasury in December 2016 and April 2017. The IDC could not advance any money to the fund without these borrowing rights.

Competition authorities would furthermore have to approve the incorporation.