IDC, NEF EYE AMAL­GA­MA­TION

CityPress - - Business - DE­WALD VAN RENS­BURG de­wald.vrens­burg@city­press.co.za

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’slength 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 deb­trais­ing pow­ers so that it could is­sue bonds.

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