The progress registered by the National Empowerment Fund (NEF) over the past few years makes Philisiwe Buthelezi, NEF CEO since 2005, a figure to watch within the evolution of South Africa’s corridors of corporate power.
A statement issued by the NEF recently suggested that the development finance institution (DFI) has shaken off its lethargic past and ready for the next stage of growth. The NEF has approved over R4.4 billion in its black economic empowerment (BEE) funding mandate since establishment in 1998.
Sharp observers will note that this is a small figure in the bigger scheme of things and against the number years (12 years) since NEF’s establishment. It also stands against the general feeling that South Africa’s DFI’s are yet to find a meaningful role. However a look into the past of NEF and understanding the entity within its real constraints will suggest otherwise. Buthelezi found the NEF in a bit of a mess.
Some indicators in the 2011/12 financial report are particularly impressive despite the fact that the economic environment has been harsh. The NEF approved funding in excess of R1bn in the 2011/12 year representing 55% growth compared to the previous year. The NEF approved 98 transactions compared to 62 in the previous year. 73 transactions worth R630m reached disbursement stage compared to 49 (R552m) in the previous year.
Having stabilised operational systems, Buthelezi seems to be positioning the NEF to become a major player in the agenda of developing black industrialists. “The NEF can conﬁdently declare that its systems, processes and balance sheet have gained such traction as to make it ready to grow black industrialists through partnerships,” says Buthelezi. It is an aspiration that is informed by the knowledge that there are many entrepreneurs, black and white, who are ready to tackle our country’s huge industrial backlog by pursuing opportunities in the economic value chain in critical infrastructure and industries, through existing and new enterprises.
Reading through the annual report one gets the sense that the NEF is closer to reaching the limit of its growth prospects due to constraining legalities. Extracts from the chief financial officer, Andrew Wright, give this sense. “Capital is available to meet projected disbursements and hence the mandate for the next two years to the year ending March 2015. Thereafter, in the absence of the introduction of additional capital, sufﬁcient capital is available to maintain portfolio management activity but not to meet additional new mandated disbursements”.
Adds Wright, “The Board and management of the NEF are clearly aware of the need to raise additional capital for the purpose of continuing to meet its mandate through the disbursement of new investments beyond the two year projection expressed above”. He says various alternatives are being considered. They entail:
- Re-applying to National Treasury to be re-classiﬁed under Schedule 2 of the PFMA so as to allow the NEF to present a capital raising plan on the strength of the NEF’s own Statement of Financial Position.
- Establishing a special purpose vehicle to raise capital to follow through on any equity rights that materialise in the Strategic Projects Fund
“In lieu of the first two alternative, reapplying to the National Treasury for funding via the Medium Term Expenditure Framework process,” said Wright. There stands a challenge for Buthelezi.
Those who know Buthelezi describe her as a highly skilled professional, a dynamic leader, politically astute and highly passionate about black economic empowerment (BEE). Her background somehow agrees.
Buthelezi came to the NEF in 2005 after serving the Department of Trade and Industry (DTI) as chief director of BEE. Before the DTI she was around and about, gathering enviable experience on the financial markets. A fluent French speaker, she has worked for a French investment bank in London, the South African Reserve Bank, National Treasury, Standard Corporate and Merchant Bank. She has also served the DTI in the role of promoting South Africa as an investment destination in Europe.
Buthelezi was appointed non-executive chairperson of Group Five, one of South Africa’s largest construction firms in 2007. She also serves on the boards of SANLAM and the Industrial Development Corporation.
OIn a recent statement Buthelezi said as an agency of the Department of Trade and Industry, the NEF is mandated to promote and facilitate black economic participation through the provision of financial and non-financial support to black empowered businesses, on the one hand, and by promoting a culture of savings and investment among black people, on the other.
The NEF has developed finance products ranging from R250 000 up to R75 million for black entrepreneurs, and these range from financing start-ups, franchising, procurement funding, project finance, expansion capital, acquisition finance, rural and community development finance and capital markets, to the provision of loan capital for feasibility studies in industrial projects. To date, NEF funding has contributed to the creation and support of over 31 000 decent jobs.
Over 60% of NEF funding has gone to SMEs because research has shown that over 90% of formal business entities in South Africa are SME’s and that these SME’s contribute between 52% and 57% to the GDP and provide about 61% to employment.
She said the NEF has experienced an increase in enquiries and applications, which is testimony to the growing recognition of the NEF as a financier of choice for black entrepreneurs, and the growing resolve by more and more black people to participate operationally in the economy.
“In response to the constraints facing some black entrepreneurs, such as the challenge in producing top-quality business plans and the lack of accurate and reliable financial information from applicants, the NEF offers a comprehensive online Business Plan tool, which is available for free to the public on its NEF’s website”.
She adds that the tool is designed to assist applicants in initiating, improving and refining the quality of their business plans, including completion of financial projections through an interactive, step-by-step question-and-answer process.
Through its Post-Investment Unit the NEF monitors the performance of its growing number of investees for risk, and provides on-going business support, which includes free mentorship and business-coaching to its existing clients. “The business mentors are deployed across the country and possess a wide spectrum of business expertise, which proved invaluable to NEF investees at the height of the global economic downturn”.
“The NEF is committed to providing both the financial and non-financial business support necessary to growing black participation in the economy. One of the NEF’s strategic objectives is to help black SMEs graduate into industrialists,” she explains.
Through the Strategic Projects Fund the NEF continues to seek competitive opportunities for inclusion of black participation in opportunities at the early stages of large industrial projects as opposed to doing so at financial closure, or late stages of the developments. The total size of these projects is over R33 billion with projects crosscutting various sectors such as infrastructure, green economy and mineral beneficiation. These projects have a potential to create between 150 000 to 200 000 decent jobs.