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On the threshold of a new trajectory

Mr Rakesh Garach

(Chairman: Board of Trustees),
National Empowerment Fund

Economic overview

The reporting period 2017/18 saw a tale of two economies, one bleak and tentative following the debilitating downgrades of South Africa’s sovereign rating during the early half of the year, and the other, the promise of hope and recovery in the latter part of the financial year.

The economy grew by 1.3% in 2017, with confidence peaking following the inauguration of President Cyril Ramaphosa, heralding a new dawn in business
and consumer confidence and heightened market appetite for South African

South Africa’s growth is expected to accelerate, with the Reserve Bank’s 11th edition Economic Update predicting growth of 1.4% in 2018 and 1.8% in 2019, higher than previous estimates of 1.1% and 1.7% respectively.

This is important to drive job creation and accelerated consumer spending, and portends an optimistic outlook for the reduction of South Africa’s unacceptably high levels of inequality.

For the National Empowerment Fund (NEF), whose raison d’être is to grow black economic participation in South Africa, the principal preoccupation is how to harness this expected growth for the benefit of black entrepreneurs and communities at large, and indeed how to locate them at the center of this recovery and growth.

In this regard we draw inspiration from Government’s commitment to stimulate manufacturing through the localisation programme and in particular through products such as textile, clothing, furniture, rail rolling stock and water meters designated for local procurement, among others. These and more are among the many transactions the NEF has supported, as outlined in this Integrated Report 2018, in order to help develop black entrepreneurs into industrialists.

BEE landscape

Government’s historic and intrepid determination to resolve South Africa’s legacy of landlessness for the majority of citizens, provides the policy certainty that is necessary to ensure radical economic transformation, inclusivity and growth. Decisive efforts to restore the credibility and efficacy of State Owned Enterprises and the tenacity to fight corruption in the economy, are two among many critical factors that will underpin investor, business and consumer confidence, that will boost economic growth significantly.

The two most important tests that lie ahead for our nascent democracy, and which will influence sentiments greatly, are the resolution of the Mining Charter and the historic matter of land expropriation without compensation. Since the dawn of freedom 24 years ago, socio-economic transformation has continued to unfold at a snail’s pace, constituting a risk that stability and growth can ill afford.

As the custodian of the implementation of Broad-Based Black Economic Empowerment (B-BBEE) in South Africa, the NEF took a principled stand as a  friend of the court on the legal dispute between the Department of Mineral Resources and the Chamber of Mines regarding the implementation of the mining  charter in order to safeguard and uphold the legitimate aspirations of inclusive  growth.

At the heart of the dispute is the principle of “once empowered always empowered”, according to which some in the private sector want to score BEE points from old equity deals irrespective of whether these have delivered value or not. In our view this makes a mockery of the entire transformation imperative because as a tool to transform the economy into reflecting the demographics of the country, B-BBEE must be a lived experience and not just an accounting feature. When a transformation transaction has taken place, manifest through its consequence must be the tangible economic benefits for black communities, employees and shareholders. As a vital sector of the economy the face of mining has to transform in order to set the pace, form and shape of overall transformation.

This dispute, therefore, points to the continued imperative to see consensus on the essence and methodology of transformation in order to safeguard South Africa’s constitutional democracy.

B-BBEE is not simply a means to redress the wrongs of the past, but is a pragmatic growth strategy aimed at realising the country’s full economic potential.  Therefore embracing B-BBEE is not only the right thing to do, but is also important for  sustainable economic growth.

Cabinet to enable funding of the NEF

With regard to the momentous imperative for the recapitalisation of the NEF, we believe that we stand on the threshold of a new trajectory because for the first time since multi-lateral consultations began in earnest in 2014 between National Treasury, the dti, the Department of Economic Development , the NEF and the Industrial Development Corporation (IDC), the recapitalisation of the NEF is expected to be considered by Cabinet soon, and we are confident that Cabinet will assent for the recapitalisation of the NEF by the IDC.

This is important in order to pursue the objectives of the NEF Act No 105 of 1998 which enjoins the development financier to drive the implementation of B-BBEE through the provision of financial and non-financial support to black-empowered businesses, as well as to promote a culture of savings and investment among black people in South Africa.

Having achieved a wide spectrum of significant milestones since 2005, notably approvals in excess of R9.3 billion to date, the time has now come for the NEF to do more. There is no shortage of applications or viable ideas from black entrepreneurs who wish to contribute to the country’s economic growth. Also in place are robust systems, processes and dedicated professionals ready to intensify their patriotic duty in the furtherance of what is easily one of the noblest mandates in the country today.

Corporate governance

In recent times, the sceptre of state capture and breaches of corporate governance in the private sector, notably exemplified by the Steinhoff debacle, have rightly brought corporate governance and the centrality of ethical leadership under sharper focus.

Much like public representatives, members of boards are custodians of institutional trust. They are the ultimate guarantee, the last layer in the architecture of corporate leadership who are charged with the solemn responsibility to ensure that the public interest, and indeed the national interest, reign supreme in the conduct of commerce.

Appointed by the President on the advice of the Minister of Trade and Industry, the Trustees of the NEF are required by law to act with “care, diligence and skill” in order to “acquire, administer and control the assets of the Trust” and to exercise oversight over management.

In this regard I must commend and congratulate the past Trustees of the NEF for having presided over one of the most sterling entities across the public sector, one that has secured clean external audit opinions for 13 years running, attesting to sound controls, financial management acumen and commitment to good corporate governance. The recently-appointed members of the board will find that as they settle in to steer the NEF into its next growth trajectory, they will be building upon a robust foundation, one that must endure and flourish for time to come.

Central to the implementation of the mandate of the NEF is the consciousness to conduct our work with integrity, diligence and foresight, and in this regard the NEF Investment Governance Framework is guided by the Delegation of Authority (DOA) of the various committees with clear and distinct thresholds and policy parameters. In this regard the Board and its committees are guided inter alia by the NEF Act, the principles contained in King III and now King IV, the Public Finance Management Act 1 of 1999, Treasury Regulations issued under the Public Finance Management Act No. 1 of 1999, as amended, and the Protocol on Corporate Governance for the Public Sector of 2002, all as updated or amended from time to time.

In the discharge of its duties and obligations, the Board is assisted by the following subcommittees:

  • Board Investment Committee, whose principal task is to approve and where required refer for consideration to the Board such transactions forfunding delegated to it by the Board in terms of the DOA.
  • Audit Committee, tasked with assisting the Board in discharging its responsibilities relating to the safeguarding of assets, the operation of adequate and effective systems and control processes, the preparation of fairly presented financial statements in compliance with all applicable legal and regulatory requirements and accounting standards, and the oversight of the external and internal audit appointments and functions.
  • Risk and Portfolio Management Committee, which oversees the periodic facilitation of risk assessments in order to determine the material risks to which the organisation may be exposed, and to evaluate the strategy for managing those risks.
  • Human Capital and Remuneration Committee, responsible for reviewing and recommending changes to Board on the human capital policies and procedures applicable to all staff members, as well as to oversee and review principles governing remuneration packages and policies, existing and proposed fringe benefits and any incentive/ performance bonus schemes applicable to staff members.
  • Social and Ethics Committee, whose purpose as the conscience of the organisation encompasses the oversight of social and ethical matters relating to the NEF, including eradication of corruption, good corporate citizenship, promotion of equality, prevention of unfair discrimination, contribution to the development of the communities in which its activities are predominantly conducted or within which its products or services are predominantly marketed, ethical procurement of goods and services as well as care for the environment, health and public safety.

The Board is proud of the men and women of merit and mettle who have served in the various subcommittees over the years, the unsung catalysts who work tirelessly in the background in the quest for inclusivity and excellence. They are the custodians of the NEF’s institutional trust. The management of the public funds and the mandate entrusted in the care of the NEF demands no less.


The NEF is both a product of South Africa’s past and an important instrument in healing that very past by bringing greater numbers of black entrepreneurs and communities into the economic mainstream. The continued existence of an efficient, adequately resourced, responsive and clean NEF, one that does its work with empathy and fairness, is fundamental to growing jobs, deepening entrepreneurship and contributing to the fortunes of South Africa’s national economy.

The employees and management of the NEF have earned their commendation for being true to its values and mission. Government, Parliament, civil society, entrepreneurs, the NEF’s enterprise development partners and co-funders also deserve our highest praise and profound appreciation for backing the quest for empowerment and growth.

As we look to the future, certain of riding the crest of the next developmental trajectory, we thank Cabinet in advance for giving black entrepreneurs not only a lifeline, but for affirming the economic citizenship of future generations of black industrialists

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