Report of the
Chairman of the Board
of Trustees

Mr Rakesh Garach

(Chairman: Board of Trustees),
National Empowerment Fund


REPORT OF THE CHAIRMAN OF THE BOARD
OF TRUSTEES

A beacon of hope for black entrepreneurs

A season of hope

The year 2015/16 was a momentous one for the National Empowerment Fund (NEF). Not only did it achieve its highest levels of approvals since it lifted the funding moratorium in May 2014, the Fund also achieved record levels in its collections and marked a decade of operational excellence during the period under review. The NEF also forged a ground breaking partnership with the Department of Rural Development and Land Reform (DRDLR) and collaborated with its shareholder the Department of Trade and Industry (the dti) to launch the Black Industrialist Programme. The fund also consolidated its national footprint by opening the last of its provincial of ces in the Northern Cape.

Despite the challenging economic times and its own testing circumstances, the NEF, continues to serve as a beacon of hope for black entrepreneurs of and plays a leading role in helping create opportunities for black, and especially female, entrepreneurs while joining other development  nance institutions in helping amass then channel resources to an area of important need: that of growing black entrepreneurs to create much needed employment in our economy.

Economic Outlook

Helping to develop black entrepreneurs

The South African economy continues to navigate its way through and recover from the effects of the 2008  nancial crisis. GDP growth for 2015 was recorded at 1, 3% while the economy contracted by 1, 2% during the  rst quarter of 2016.

The two key events that are set to shape the global economic outlook is the decision by the United Kingdom to vote in a June 23 referendum to leave the European Union in an unexpected, semi cataclysmic event that has now come to be known as Brexit. While the other is the outcome of the United States general election set for November with markets keenly watching the threats by one of the candidates to renegotiate key trade agreements. Foreign investor’s search for yield in the wake of Brexit, meant the rand strengthened by early August, following the conclusion of peaceful local government elections.

Despite the recovery in the rand, economists are still bearish on South Africa’s economic outlook with the International Monetary Fund and the July 2016 Beeld consensus forecast at 0.1% GDP growth for this year rising to just above 1% next year. Finance Minister Pravin Gordhan is more optimistic and expects South Africa to still achieve 1% growth this year.

The NEF commends the National Treasury and Government’s successful efforts in warding off a threat of a possible sovereign rating downgrade. The truth is that South Africa has a dynamic, well-managed middle-income economy that is in the throes of being modernised through infrastructure investment and industrialisation while being transformed to be inclusive.

The cumulative job losses in the private sector between the fourth quarter 2008 and the fourth quarter 2014 amounted to 338 500, whereas the public sector added 336 800 jobs over the same period. The net effect is that there were 1 700 fewer jobs in the fourth quarter 2014 than in the fourth quarter 2008. Over this period the working age population (15 to 64 years old) expanded by more than 4 million people.

 
Helping to develop black entrepreneurs

The NEF now enjoys institutional maturity and the credibility from its record of accomplishment to help create black entrepreneurs. The NEF monitors global trends to better understand the policy requirements and instruments to help support the creation and sustenance of entrepreneurs.

The Global Entrepreneurship Monitor, one of the most comprehensive studies on entrepreneurship, continues to  nd that South Africa has a low entrepreneurial participation rate among working age adults compared to other middle-income countries. This is especially surprising, and worrying, when one considers South Africa’s level of unemployment.

The NEF has grown to appreciate that entrepreneurship, beyond survivalist and informal mode, is rarely an immediate solution to escaping unemployment. Entrepreneurship requires skills, work experience and accumulated  nancial and professional capital as well as networks. This means that the long-term solution to improving entrepreneurship participation is improving skills and education, including introducing formal entrepreneurship education at the appropriate stage at school level.

The NEF can attest to the improving depth and quality of black entrepreneurs who have accumulated a wealth of experience and capital from long distinguished careers in the public and private sectors then branch out with a clear idea of the area of entrepreneurship they wish to break into.

Black Industrialists

The development and implementation of the Black Industrialists Programme is a rational response to the socio-economic development challenges that the country faces. A small base of white industrialists cannot be expected to create the amount and type of wealth that will ensure economic success and prosperity for the majority.

In the realm of economic life, this implies the inevitable need to transform the patterns of asset ownership in a manner that reinforces the national objective of building a society that truly belongs to all who live in it. This derives from the recognition that the bulk of industrial assets in South Africa have been racially concentrated among a few, thereby generating uneven social and economic relations that undermine this national objective.

The NEF is proud to have played a part, with the dti, in the launch of the Black Industrialists programme. The NEF pioneered the programme through the launch of the Strategic Projects Fund in 2007/2008. As at year end, SPF had 31 projects, worth R29 billion. The NEF is ready to share its lessons and expertise in this area.


B-BBEE and transformation

The NEF anticipates that, as economic conditions improve, the country is likely to see robust deal activity driven by Black Economic Empowerment and transformation will be a lived economic experience for millions of South Africans. It remains a strategic imperative whose needs remain in its nascent stages.

We look forward to intensified government support for the cause.

Decade of excellence 

During this financial year, the NEF also celebrated a decade of operational excellence, growth, investment and, of course, creating entrepreneurs. Since inception, the Fund has approved R7.6 billion worth of transactions through 770 transactions. In the process, the NEF has supported over 86 000 jobs nationwide, which in turn support an estimated 260 000 beneficiaries. In a reflection of the improved quality of its transactions as well as the maturity of its own systems and processes, the NEF investees have repaid R1.7 billion, including a record R541 million for this  financial year.

These accomplishments are set on a robust governance framework that has seen the NEF earn unqualifed audits for 11 consecutive years. We look forward to the decade ahead with enthusiasm.






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