The storm that has erupted around the R34.1 million loan from the National Empowerment Fund (NEF) to the founders of exclusive clothing boutique Luminance may lead to an “amendment” of the fund’s mandate.
This could close the door to similar transactions, the department of trade and industry (the dti) suggested this week.
This comes as the dti, the sole shareholder in the NEF, was already pushing for a new approach that would probably exclude deals like the one with businesswoman Khanyi Dhlomo’s consortium.
Talks between the NEF, the dti and Treasury around the recapitalisation of the fund have been ongoing for almost a year.
They have been drawn out to the extent that the NEF has had to declare a moratorium on new transactions in order to strictly protect its cash.
The dti’s director-general, Lionel October, in May this year told City Press the dti was reconsidering the NEF’s mandate.
“We want them in the SMME (small, medium and micro-sized enterprise) space and maybe to give up on the bigger deals,” said October.
The dti was also proposing a far lower recapitalisation than the one the NEF had requested.
Since 2003, the NEF has approved funding of R4.76 billion for 482 transactions – on average almost R10 million per deal.
The NEF asked Treasury for R2.7 billion between now and 2017, while it has also approached the IDC for a R1 billion loan.
At the beginning of the year, the NEF had roughly R1.8 billion in cash. Now it has R1.6 billion, of which about half is tied to approved deals.
The NEF hit out at critics of the Luminance deal and put out a lengthy statement this week describing the loan as “above reproach” as well as “progressive, prudent and far-sighted”.
But shortly afterwards, Minister of Trade and Industry Rob Davies put out his own statement announcing that he had “requested a report” from the NEF.
The report, he said, should clarify “whether the transaction has or has not been within the framework . . . on empowerment” and whether it supports “local productive activity”.
The report would determine “whether there is a need to amend the mandate for transactions by the NEF”.
That report had already been submitted to the dti, the NEF said on Friday.
“We do not believe that this deal will derail or delay the NEF’s recapitalisation, because the transaction is perfectly legitimate and praiseworthy,” said the NEF.
In response to questions, the NEF was able to provide a list of 19 transactions since 2010 involving similar or larger sums of money.
The fund can approve funding of between R250 000 and R75 million.
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