National Empowerment Fund on its Annual Performance Plan

Meeting report

The delegation comprised of Ms Philisiwe Mthethwa, Chief Executive Officer (CEO), Mr Nhlanhla Nembe Fund Manager, Ms Hlengiwe Makhathini , Divisional Executive and Mr Moemise Motsepe, Head of Marketing and Communications. The Department of Trade and Industry (DTI) was represented by Ms Jodi Scholtz, Group Chief Operations Officer and Mr Sipho Zikode, Deputy Director General: Special Economic Zones and Economic Transformation.

Briefing by the National Empowerment Fund (NEF) on its Strategy and Annual Performance Plan (APP) 2017/18

Ms Mthethwa undertook the briefing. The Committee was provided with insight into some of the challenges/market failures faced by entrepreneurs, these included limited own capital and lack of access to local and international markets. NEF solutions to these challenges was to provide funding of between R250 000 and R75m for start up, expansion and equity transformation purposes as well as the use of concessionary facilities. The NEF was also non descriptive on the percentage of own contribution. On lack of access the NEF had linkages with off-takers and had relationships with franchisors and corporates for access to markets. The NEF also invested across all provinces. Members were provided with a geographic spread of such investment. As at 31 March 2017 the investments per province was Gauteng-44%, Kwa-Zulu Natal-16%, Western Cape-13%, Eastern Cape-8%, Limpopo-6%, Mpumalanga-5%, North West-4%, Free State-2% and the Northern Cape-2%. The NEF wished for its percentage investment in provinces to exceed the percentage Gross Domestic Product (GDP) contribution by provinces. Members were also given an overview of the different types of investments into provinces.

The briefing continued with the actual 2017/18 APP of the NEF.

Strategic Objective 1: Provide finance to business ventures established and managed by black people

On approvals and disbursements the targets for 2017/18 was to have 950 approvals, 745 commitments and 660 disbursements.

Strategic Objective 2: Invest in black empowered businesses that have high employment creating opportunities

On the number of jobs expected to be created or supported for 2017/18 the target was to support 4064 new or existing job opportunities.

Strategic Objective 3: Support the participation of black women in the economy

On targeting women ownership the percentage planned disbursement to women was 40%.

Strategic Objective 4: Facilitate investment across all provinces in SA

For 2017/18 the targeted disbursement in under-represented provinces ie Northern Cape, North West, Free State, Limpopo, Mpumalanga and the Eastern Cape was 25%.

Strategic Objective 5: Encourage and promote savings, investment and meaningful economic participation by black people

For 2017/18 the targeted number of investor education seminars to be held across SA was 32.

Strategic Objective 6: Black economic empowerment advanced through commercially sustainable enterprises

The targets for 2017/18 were to have 18 Business Today training sessions, 15 entrepreneurs who successfully completed business incubation and 18 Social Facilitation sessions for NEF investees.

Strategic Objective 7: Establish the NEF in the South African economy as a credible and meaningful Development Finance Institution (DFI)

On brand awareness levels for 2017/18 there was no target set as a biennial survey would be done.

Strategic Objective 8: Establish the NEF as a sustainable DFI

For 2017/18 the targets were to keep its portfolio impairment below 18%, to have return on investment between 9%-10% and to have collections ratios at 80%.

Since its inception the NEF had approved 852 transactions worth more than R8.6bn across SA. It was also able to secure unqualified external audit opinions for 11 years running. To date the NEF had supported in excess of 92 189 jobs. In total R5.8bn had been disbursed and invested whilst R2.3bn had been repaid by investees. Members were also provided with lists of funding initiatives that the NEF had undertaken and also listed some of its milestones.

Discussion

The Chairperson commented that the presentation was of a difficult type. He noted that when the Department of Economic Development had appeared before the Committee members were informed that the NEF would probably be moving to the Industrial Development Corporation (IDC). The presentation had now shed light on the work that the NEF was doing. On 10 August 2017, the Department of Trade and Industry (DTI) would be appearing before the Committee and he would engage with them on their plans for the NEF. It was about how best Parliament could take the matter forward.

Mr J Londt (DA, Western Cape) stated that he had a sense of déjà vu when he went through the briefing document as it looked familiar to him. He felt that the same information had been presented to the Committee at the end of 2016 or at the beginning of 2017. He noted that his gut feel was that there was some sort of duplication. He would be comparing the present presentation to the one that the Committee had previously received from the NEF. He was concerned about the NEF planning and rolling out projects costing millions of rands and then halting the projects. Now the NEF wished to receive additional funding. He asked whether the NEF could be trusted on small things to get the big things. He totally agreed with the principle behind what the NEF aimed to achieve. His concern was however about the effectiveness of the NEF. Was the return on investment justifying the investment that had been made? He asked could things perhaps not be more effective under another entity.

Ms Mthethwa emphasised that the NEF took its work very seriously. It was an entity run by black professionals. The NEF had achieved a certain level of maturity. It was an efficient and effective organ of state. She felt that the Committee should be proud of the NEF. The NEF was a world class organisation run by world class professionals. As such the NEF expected to be treated with a certain level of respect. On the comments by members that it felt like the presentation was a repeat of a previous one she felt discouraged by such comments. On why the NEF had spent so much on Mabele Fuels and whether there was bad planning she explained that when a project was developed one had to align the project with the broader objectives of the country. The NEF had taken on the Mabele Fuels Project because it dealt with renewable energy. The only reason why the NEF had canned the Project was because government took a decision to stop efforts on biofuels energy. She emphasised that the NEF did not need funding from government. It had reached institutional maturity. It also received additional funding from international markets. On the effectiveness of the NEF she had provided the Committee with a report card on all its good efforts. She did not comprehend what Mr Londt’s issue was. The NEF had received R2bn from government but had made investments in the economy to the value of R5.8bn.

Mr L Magwebu (DA, Eastern Cape) said that he was proudly black and was all for redress of the past. It was about the how that was concerning. On the narrative attached to radical economic transformation he asked who the beneficiaries were. Was it the rich or the poor? Page 53 of the briefing document spoke about farms being purchased but the questioned remained as to who the beneficiaries of these farms were. Was it the granny who had worked on the farm all her life or was it someone who was a friend of someone in a position of power. Were the beneficiaries authentic? Even on the purchase of franchises like Nandos and KFC that the NEF was involved in who were the beneficiaries. Was it the black elite in SA? He asked why the beneficiaries could not be Nandos or KFC employees themselves who had worked for the franchises for many years. Why should beneficiaries only be the elitist Motsepes and Ramaphosas of SA? He asked how one individual could own all the MacDonalds franchises. He noted that all he was saying was that if black economic empowerment was being done right then he wished to see evidence of it.

Ms Mthethwa, on the issue of who the beneficiaries were, said that the Committee had been previously invited to do site visits. The Committee was more than welcome to do site visits to firsthand see who the beneficiaries were. The Portfolio Committee on Trade and Industry had done site visits. She noted that she had provided details on names and colours of beneficiaries. The NEF did have a list of beneficiaries that it had provided to the Portfolio Committee on Trade and Industry. The list could also be provided to the Committee.

The Chairperson said that important points were being raised by members. It was however the Committee’s responsibility to do oversight and to check on projects in the provinces.

Mr W Faber (DA, Northern Cape) agreed that job creation was important. The NEF had said that 90% of SA was black but only owned 10% of SA’s resources. He disagreed and said that he had statistics from StatsSA which said something else. Where did the NEF get its statistics from? He asked when the IDC and NEF amalgamation was to take place. He noted that the IDC had over the past 75 years been implementing SA’s industrial policies. The NEF seemed however to be plagued by funding shortages. Yet the NEF had lucrative accommodations. Why was the Committee not provided with a breakdown of the NEF’s salaries and bonuses as other entities usually did? He asked why nothing had been said about R12.2bn deal involving Mercantile Bank.

Ms Mthethwa said that the NEF did not see anything wrong with the merger with the IDC. It had taken Parliament four years to make the decision. She was not sure when the matter was to be finalised. The uncertainty was not good.

The Chairperson said that pages 124 and 125 of the briefing document dealt with the finances of the NEF. He reiterated that he would be asking the DTI what was happening on the NEF and the IDC issue.

Mr S Mthimunye (ANC, Mpumalanga) said that the Committee needed to go to provinces on oversight visits and do inspections on things that departments and entities had presented on in meetings and on what was contained in reports. He had a problem with Mr Londt’s comments about the NEF’s briefing document. He asked what necessitated the merger of the NEF with the IDC. What was the reason for it? He pointed out that the rules of Parliament allowed for a hearing to take place if members so wished. The Committee could when the DTI appeared before it ask what was the need for the merger. What were the reasons why the Mabele Project was stopped?

Ms Mthethwa pointed out that the Mabele Project was started five years ago. It started as a concept, went on to pre-feasibility then to bankable feasibility and eventually it was now at financial close.

Mr M Chabangu (EFF, Free State) asked who the beneficiaries were of rural farms that the NEF was negotiating on. He asked why the NEF was involved in the building of a new hotel in Mpumalanga Province when they could be assisting existing black hotel owners. He added that there were also industrial areas that were going down.

Ms Mthethwa pointed out that the NEF had in 2016 started working with the Department of Rural Development and Land Reform. The NEF was in the process of implementing the projects. The Minister of Trade and Industry had now given the NEF its next set of projects.

The Chairperson stated that the names of beneficiaries were statistics that the NEF could provide at a later stage. It was not fair to expect them to have the statistics at hand. He stated that there were no black persons who owned hotels under apartheid. He pointed out that the DTI dealt with Industrial Development Zones (IDZs) and with Special Economic Zones (SEZs). The DTI could update the Committee on them; it was not a NEF competency.

Mr Chabangu responded that in Mpumalanga the owner of the Bundu Inn was a black person and he had owned it since apartheid times. The Inn was however experiencing difficulties at present. There needed to be fairness when beneficiaries were chosen.

Mr M Rayi (ANC, Eastern Cape), given Mr Londt’s comments, said that he had looked at his notes when the NEF had presented its Annual Report and had compared the information with what was presented at present. He concluded that some of the things presented in the Annual Report were part of the current presentation but the figures were different from what they had been. Given that some time had passed since the Annual Report presentation the figures had increased and it showed that there was improvement. He was a bit concerned that given the NEF’s lack of resources it would seem that its solutions to market failures would be limited. What were the solutions that the NEF had come up with? He could perhaps bring them up at the upcoming ANC Policy Conference. He noted that minibus taxi owners paid 28% interest when they purchased their vans through finance institutions. Could the NEF not give black taxi owners loans? He suggested that there be a structured arrangement between the NEF and departments on the funding of projects. It would give direction on which department needed to come on board to fund specific projects. On the sectors that the NEF focussed on one was mining services. What was it? Was it services to mines? He asked what about the mines themselves. The NEF was asked what role it could play in assisting new participants in mining. He was a bit sceptical about the branding efforts of the NEF. He had not seen any NEF advertisement on television. People needed to know what the NEF had on offer.

Ms Mthethwa was glad that Mr Rayi had addressed the matter of duplication. She noted that in both presentations the strategic objectives, the policy framework and the NEF’s mandate amongst other things would remain the same. The Committee when receiving a briefing needed to be taken through the basics before highlighting challenges. Some of the slides may have been the same but the figures had changed. She noted that the market failures would always be the same. It was just a reminder.

The Chairperson in the interest of time asked the NEF to respond to the unanswered questions in writing and that it be submitted to the Committee within seven days.

Mr Londt pointed out that the Committee had taken a decision to cut down presentations to the crux of what was intended. Once again time ran out and members were frustrated by limited engagement.

The Chairperson said that the Committee tried its best to manage time.

Committee Minutes

Minutes dated 14 June 2017 was adopted unamended.

Joint Study Tour Report of Select Committee on Economic and Business Development and Select Committee on Trade and International Relations to Singapore and Malaysia

The Chairperson asked members to submit their comments to the respective Committee Secretaries.

The meeting was adjourned.