NEF lifts moratorium on funding

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IOL br NEF lifts moratorium on funding Independent Newspapers NEF chief executive Philisiwe Mthethwa. photo: Simphiwe Mbokazi

Johannesburg - State-backed development funder the National Empowerment Fund (NEF) had lifted its year-long moratorium on new funding for black entrepreneurs, with R950 million now available from existing reserves, it said on Wednesday.

Philisiwe Mthethwa, the chief executive, said new capital was also anticipated following consultations with the Department of Trade and Industry (dti) and the Treasury.

She said the reopened financial support was for start-ups, and for expansion and equity transformation purposes.

Rakesh Garach, the acting chairman of the board of directors of the NEF, said in May last year that the development finance institution (DFI) was forced by declining resources and unrealised recapitalisation initiatives to declare a moratorium on new applications, while deliberations with the dti and the National Treasury were under way.

He said: “This, we believe, was a prudent decision because it was aimed at curtailing the erosion of available resources in light of uncertainty at the time regarding the prospects of recapitalisation. Now that we are confident and certain that new capital is on the horizon, the NEF is comfortable to reopen funding for new transactions in order to meet the huge demand for development finance by black business.”

The NEF was capitalised by the government in 2005 to the value of R2.4 billion, all of which was fully disbursed by 2010, as planned.

Since then, it has been self-financed with proceeds from dividends and interests from its investments, and proceeds from the sale in 2007 through the Asonge share scheme of a portion of the NEF’s holding in the MTN group.

She said that since recapitalisation talks with the government began in 2009, the NEF had presented various funding scenarios “which have not materialised because the global economic contagion that began in 2008 confronted the country with a range of competing priorities on the social front”.

Funding scenarios were:

n Financial recapitalisation through the annual medium-term expenditure framework application to the value of R2.3bn submitted to the Treasury through the dti;

n A loan facility to the value of R1bn from the DFI sector, which is now imminent following discussions with the dti, the Treasury and the Department of Economic Development;

n The possibility, from recent discussions, of equity allocations of the government’s holding in non-strategic entities;

n The reclassification of the NEF’s current classification under the Public Finance Management Act to remove restrictions on its raising additional capital outside the fiscus; and

n As a long-term initiative, an intergovernmental process is under way to explore structural DFI integration.

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