The National Empowerment Fund launched an enterprise-development fund this month aimed at enticing large corporations into contributing money in return for black economic empowerment score card points, a strategy questioned by some analysts.
The new fund hopes to assist the private sector by delivering sustainable broad-based black economic empowerment solutions to black enterprises at an accelerated pace. The agency’s role is to support business enterprises owned and managed by black entrepreneurs, as well as to promote saving and investment schemes for black people.
The NEF currently has a net asset value of R5.3-billion and its total portfolio disbursement facilities exceed R2-billion. Private corporations are called on to contribute to the fund, which the NEF will use to co-finance its investments in enterprise development.
The minimum contribution a measured entity can make is R5-millionand the NEF will match contributions to the fund in a 60:40 ratio. It will contribute 60%, while the measured entity will contribute 40% of the funding for enterprise development-eligible transactions.
In return, companies will earn 15 points against Code 600 of the Codes of Good Practice, valid for five years. But the chief executive of Global business solutions, Johnny Goldberg, told the Mail & Guardian targeting large companies didn’t make sense.
“I don’t see why you wouldn’t look down your own supply chain,” he said. “It is a clever idea to set it up for those who don’t want to get involved, but it’s not strategic for a large company to give a cheque to someone else just to tick a box.” Companies would gain far more political and marketing benefit by doing enterprise development themselves, he said.
Goldberg said the fund was “a bit unimaginative” as the top 100 companies in South Africa mostly had those 15 score card points already. He said if the fund had been set up instead to collect from smaller businesses that were not involved it would make more sense.
Ajay Lalu, managing director of Black Lite Consulting, agreed with Goldberg, saying that if the minimum contribution to the fund were R5-million, a company would need to earn a net profit of R167-million.
“It is focusing on the wrong end of the Âmarket,” Lalu said. But the NEF argues that large corporates can’t run such a fund independently because they lack the necessary operational and legislative skills.
Lalu disapproves of the fact that private companies will gain automatic BEE points when contributing to the fund. “They should at least wait until the money is invested with one of the beneficiaries before they gain those points.”
He said there were private-sector investment companies that ran their own enterprise-development funds and charged a management fee. “The NEF charges no management fee as taxpayers’ money pays for its overheads, so this may be considered anti-competitive.”
In spite of these criticisms, corporate communications manager at the NEF, Emmanuel Mohlamme, said nine multinationals had shown interest in the first phase of the fund.