As our nation marks Women's Month to celebrate the dignity, the grace and epic heroism of women in our society, the National Empowerment Fund (NEF) is privileged to reassert its commitment to maximising the empowerment dividend for black women in business. True to its mandate, the NEF remains at the forefront of this important and historic revolution by facilitating economic transformation and quality. This it pursues through the provision of funds and non-financial solutions for startup, expansion or equity transformation to ensure meaningful participation by black women in small and medium enterprises, as well as in strategic industrial projects. Through exciting and innovative initiatives such as Asonge, which is valued at R1.3-billion and seeks to inculcate a culture of saving and investment by enabling participation in the stock market from the sale of blue-chip shares at a 20 percent discount to black people, the NEF further contributes to this revolution by ensuring that 50 percent of the shares for individuals are allocated to women. Since its capitalisation in 2005, to the end of March 2007. the NEF had approved 102 transactions worth R692-million, and 86 of these, worth far in excess of R500-million, had been disbursed. As our operations continue to gain maturity, the NEF will be close to reaching the target of 40 percent of companies owned by women among its portfolio of funded businesses.
Today, as guardians of an historic and noble cause, the NEF joins the nation in applauding the many women who continue to push the barriers in their resolve to join the economic mainstream, and the fund calls on more to enlist in the quest to make broad-based black economic empowerment a living reality The NEF celebrates women, her wisdom and her courage, her vitality and her glory, and to hergrace we bow
ABOUT NATIONAL
EMPOWERMENT FUND
The National Empowerment Fund (NEF) is a catalyst for broad-based black economic empowerment (B-BBEE) in South Africa. The NEF enables, develops, promotes
and implements innovative investment and transformation as a development finance institution (DFI) under the umbrella of the South African Department of Trade and Industry.
The NEF implements its mandate by: facilitating the B-BBEE Act's Codes of Good Practice through its Fund Management division by providing finance and financial
solutions; encouraging a culture of saving and investment in its Asset Management division; as a custodian of certain equity allocations in state allocated investments, the NEF will structure retail investment products accessible to black individuals and groupings. On a deal-specific basis, the NEF leverages its funding by setting up strategic alliances with other private sector financial institutions to further increase the amount available for funding black economic empowerment (BEE). The fund operates at different levels to provide finance for:
• black entrepreneurs starting or expanding their businesses (R250 000 to R10-million)
• businesses undergoing a process of equity transformation (R1-million to R20-million)
• delivery upon preferentially procured supply contracts (R250 000 to R20-million)
• rural, community and women's groups in the creation or support of economically sustainable initiatives (R250 000 to R20-million)
• black enterprises, by helping to raise additional capital through listing on the JSE (R1-million to R50-million)
• the sale of existing BEE equity to new BEE participants and the potential warehousing of such equity stakes (R1-million to R50-million)
• securing the participation by BEE parties in projects of national strategic importance (funding total depends on the size of the project).
The National Empowerment Fund was established by the National Empowerment Fund Act 105 of 1998 to promote and facilitate Black economic equality and transformation. Its mandate and mission is to be the catalyst of Broad-Based Black Economic Empowerment. The NEF enables, develops, promotes and implements investment and transformation solutions to advance sustainable black economic participation. The NEF fulfils its mandate in two ways; through the provision of finance and financial solutions to black entrepreneurs and by engendering a culture of savings and investment solutions among its beneficiaries, by structuring accessible retail savings products.
FUNDING AT THE NEF
The NEF operates through two funding divisions, namely the Fund Management division (FMD) and the Asset Management division. Funding applications are processed through FMD for start-up, expansion and equity acquisition; which is structured into two funding products, funding a minimum of R250 000 up to R100-million.
FUNDING CRITERIA
As a facilitator of the Codes of Good Practice,to support the pillars of black enterprise the NEF asses funding applications by ensuring that businesses demonstrate adherence to the code, that is. ownership by black people, management control - where there is participation by black people in executive management, employment equity, preferential procurement recognition of buying goods from SME's, black women owned enterprises or black owned enterprises, skills development, enterprise development and socio-economic development. Furthermore, the merits of an application are judged based on the commercial viability of the business/project, compliance with all relevant laws and
regulations, black managerial and operational involvement, percentage of black ownership and interest, return on investment, job creation, black women empowerment, community involvement, geographic location of business and possibility of co-funding.
PRODUCTS & SERVICES
Through the Fund Management Division, the NEF has a suite of products as follows;
• Entrepreneurship Fund, that aims to address the financing needs of small and medium sized black SME's
• Procurement Finance, that seeks to provide access to finance to black SME's that have been able to exploit opportunities available as a result of preferential procurement initiation
• Franchise Fund, which is geared towards enabling Black people to leverage the infrastructure available in the franchise industry
•Project Equity Finance, which addresses financing requirements of BEE parties seeking to participate in medium sized Greenfields projects
•Rural and Community Development Programme, which aims at empowering local communities, facilitates increasing he extent to which workers, cooperatives and other collective ventures, own and manage business enterprises
• Acquisition Finance, supports black entrepreneurs seeking to acquire equity stakes in existing businesses
•Capital Markets, targeted at companies that are seeking to list on the JSE or the AltX markets and
•Liquidity and Warehousing which assists BEE shareholders who need to sell a portion or all of their shares in a target company in order to create liquidity for the BEE group.
BEE FACILITATOR STATUS
Recently, the NEF was awarded Black Economic Empowerment (BEE) Facilitator status from the Department of Trade and
Industry (DTI) allowing it to position the deals it brokers as 100 percent black empowered. While the NEF is recognised as the catalyst for broad-based Black Economic Empowerment and the Codes of Good Practice in South Africa, it had not been gazetted as a BEE Facilitator, which meant that the NEF's shareholding in any deal or company was regarded as neutral rather than black. The BEE facilitator status is particularly important for the NEF's Corporate Fund (R5-million to R100- million), which provides funding in support of empowerment parties via special purpose vehicle; leveraging buy-out structures; or liquidity and warehousing. The NEF is increasingly in favour of leveraging buy-out structures with the proviso that empowerment groups be actively involved in the management of the business. This type of deal is where BEE Facilitator status plays an important role. In the event of NEF investing 25 percent in a deal, that 25 percent would now be regarded as black rather than neutral since achieving BEE Facilitator status, giving the empowerment deal more credibility. BEE Facilitator status also applies to the NEF's liquidity and warehousing product, which assists BEE shareholders, who need to sell a portion or all of their shares In addition, the NEF acquires and temporarily warehouses these shares before on-selling them to new BEE shareholders and refinances BEE shareholdings where existing financing structures are costly or inefficient. Today any shares that NEF acquires and warehouses are regarded as 100 percent black.
To qualify as a BEE Facilitator, the NEF was required to show a 40 percent shareholding by black women and a 10 percent shareholding by black designated groups. In this respect the NEF enjoys a perfect ownership score. The BEE facilitator therefore achieves two things; firstly it reduces the level of gearing as the NEF can now structure its funding with a combination of debt and equity that does not detract from the empowerment status of the company. Secondly, it assists companies by warehousing shares that are fully regarded as black for later distribution.
GROWING THE EMPOWERMENT DIVIDEND
Following on the historic success of the National Empowerment Fund Asonge public share offer, which has since appreciated by over 50 percent value for more than 86 000 investors, the NEF has recorded yet another important milestone, having approved over R1-billion in funding to black entrepreneurs. The NEF has to date approved a total of 135 transactions by number since capitalization by government in 2004worth R1.12-billion, and disbursed over R740-million to black entrepreneurs in fulfilling its continuing mandate to champion economic transformation in South Africa. By number, 74 percent of the NEF's funds are invested in deals below R5-million. and 26 percent in deals above R5-million. As a direct result of NEF funding, 4 749 jobs have been created and more than 15 400 jobs sustained. More than thirty percent of the NEF's investment portfolio comprises businesses owned and managed by black women entrepreneurs The NEF measures and assess its impact not only on the basis of financial return, but in accordance with what is referred to as
the 'Empowerment Dividend', an investment methodology that enables the NEF to pursue national priorities such as B-BBEE, the dti's industrial policy objectives and the targeted government programmes such as the Accelerated and Shared Growth Initiative for South Africa (Asgi-SA). For more information on the fund and the specific products and services.