NEF piles up clothing sector empowerment

The National Empowerment Fund (NEF) has unveiled another fresh transaction where it is funding a clothing manufacturing venture to the tune of R35m and enables broad based black economic empowerment (BBBEE) in Northern Cape, Kimberly.

In this transaction the NEF funded a takeover by management and workers of an 82 years old corporate clothing firm, Delswa Group. The state owned development finance institution emphasised that the transaction, approved in April, will facilitate black economic empowerment (BEE) in an industry that has been slow to transform.

The announcement may come to dilute attacks against the NEF for funding an upmarket clothing retail operation, Ndalo Luxury Ventures, owned by high profiled businesswoman Khanyi Dhlomo. The NEF funded the establishment of a high end retail shop in Hyde Park, Luminance, to the tune of R34m. This has attracted criticism that the NEF is funding the already empowered while other voices question the choice of putting money in the retail sector as opposed to productive sectors.

The NEF has countered that its mandate is to facilitate BEE, empowerment of black people, in all sectors of the economy and the retail sector deserved attention as it was lagging behind in empowerment trends. NEF CEO Philisiwe Mthethwa has been forceful in rebutting the attacks saying the attack of the Luminance deal originate from enemies of empowerment. She has received support from the Black Business Council and some high profiled politicians in the ANC.

Commenting about the Delswa transaction Mthethwa said “With almost 500 staff members the Delswa Group is one of the biggest employers in Kimberley, and previously had over 95% ownership by white shareholders. With NEF funding, the Delswa Group is now 81% black owned and controlled”. The deal lives Delswa Group owned 42.3% by management, 9.1% by staff and 25.1% by the NEHAWU’s Investment Holdings Enterprises.

The NEF said it maintains 23.5% shareholding in the business in order ensure that its required rate of return. At the end of the loan term, the NEF will give staff and management first preference to purchase the shares.

The NEF said the Delswa investment would assist trade union, Nehawu, managers and staff of the company to acquire and expand the business.

Delswa Group, a niche corporate clothing manufacturing company, is changing hands from the Jaff family.  Delswa boasts private and public clients including Standard Bank, DHL, South African Airways, Airports Company South Africa and Clinix Holdings.

Delswa Group’s new CEO Preggy Govender said “The NEF’s funding for our management and staff buyout gives a new lease of life to at least one business in the strugglin local clothing industry, which for the most part has been resistant to transformation.”

Mthethwa said “The transaction means the workers can now benefit from the hard work that has seen the group earn its reputation over the eight decades of being one of the longest-standing and biggest clothing manufacturers. It is fitting that the workers who have contributed to Delswa’s weathering the storm, even with the influx of imports from China, get the first chance to own and ensure the Group’s continued existence and success”.

Mthethwa added that the Delswa transaction fits within a group of other transactions concluded by the NEF. These include Linen Tech and Ndalo Luxury Ventures. She said this group of transactions demonstrate the NEF’s determination to make key interventions in different sections of the clothing and textile value chain.

“There is a need to grow black participation, and to sustain manufacturing capacity in the troubled clothing and textiles industry. This is critical to achieve across the value chain, from manufacturing, value-addition to retail, and for true and significant transformation to happen, the investments must be meaningful”.

These transactions are all expansionary in their nature. They are meant to introduce, grow and foster B-BBEE in their own different developmental ways at different stages of investment and development of the businesses,” says Ms Mthethwa.

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