South Africa invites international partnerships to implement plans for economic growth
Unique gateway into Africa
South Africa has a range of dynamic developmental plans to realise economic growth, which offer potentially lucrative value and opportunities for international investors willing to become partners in a country that is uniquely positioned as the gateway into Africa.
Before the arrival of democracy in 1994 when Dr Nelson Mandela became South Africa’s first democratically elected president, social engineering under apartheid resulted in a gross imbalance in socio-economic status between black and white people. As a result, black people were systematically and effectively excluded from the economic mainstream.
Accordingly, in 1998 Dr Mandela’s government passed legislation establishing the National Empowerment Fund (NEF), an agency of the Department of Trade and Industry mandated to promote and facilitate black economic participation through the provision of financial and non-financial support to black empowered businesses, on the one hand, and by promoting a culture of savings and investment among black people, on the other.
As a driver of the Codes of Good Practice for Broad- Based Black Economic Empowerment, and as directed by the priorities identified in the Industrial Policy Action Plan and the New Growth Path, the NEF has developed finance products that are ideal for black entrepreneurs who would typically not be successful in raising funds from commercial funders.
Research conducted by Who Owns Whom, reveals that BEE equity ownership on the JSE’s average market cap of approximately R7.3 trillion, stands at about 3%, or approximately R219 billion, which is directly and indirectly owned by black South Africans. To reach 25% of black ownership it requires an additional 22% worth R1.6 trillion at current estimated market cap. These statistics are correct as at 20 February 2012. Clearly, the journey towards meaningful black economic participation is far from over.
This mandate has met with many significant achievements and has seen the NEF approve over R3 billion for funding black entrepreneurs across virtually all spheres and sectors of the economy. To pursue its mandate the NEF provides finance for black empowered start-up, expansion and equity transformation purposes.
Growing value, creating jobs
In order to give effect to President Jacob Zuma’s injunction regarding the need for the country to maximise job creation, very solid work has gained momentum in the NEF’s Strategic Projects Fund (SPF), a unit of the NEF established with a mandate to increase the participation of black people in early-stage projects that are aligned to national government policy. The SPF has been created to seek competitive opportunity for the South African economy and the inclusion of black participation in opportunities at the outset of projects, as opposed to doing so during equity closure. In this area of work, which holds out lucrative opportunities for foreign direct investors, the NEF has approved 27 transactions for feasibility studies, with a further 15 projects in the pipeline.
The total portfolio size is approximately ZAR 30 billion with projects from infrastructure, Green Economy and Mineral beneficiation. The NEF is in the process of exploring potential co-financing or syndication arrangements with international and local strategic equity partners, and this will include both international and local Development Finance Institutions. Should the NEF take up its rights to invest in those projects, the NEF investment required will be ZAR 4,3 billion. The time required until full closure of the projects is between 1 to 3 years, and will create between 150 000 to 200 000 new decent jobs. This is a clear demonstration of the NEF’s commitment to the President’s action plan around job creation.
Taking the lead in targeted sectors
SPF’s sector focus is informed by the government’s strategies on industrial development through the dti’s National Industrial Policy Framework, the corresponding Industrial Policy Action Plans [IPAP] as well as the current government economic growth strategy, the New Growth Path. The sectors identified based on the IPAP and the New Growth Path and are listed as follows:
- Business Process Outsourcing [Call centres, data storage centres and termination centres];
- Mining, Mineral Processing and Mineral Beneficiation;
- Renewable Energy and Biofuels [solar, biomass, hydro, co-gen and wind];
- Pharmaceuticals and Chemicals
- Forestry, Pulp and Paper;
- Infrastructure [telcoms, healthcare, roads, rail airports, dams and water];
- Tourism [hotels, resorts, tourism attractions and leisure];
The list above is a guideline, and SPF will evaluate each project based on its economic merit and ability to deliver on the Development Mandate.
A successful implementation of the fund will see the NEF take the lead in the following:
- Expansion and creation of new industrial and manufacturing capacity; Investment in economically depressed areas or poverty nodes;
- Warehousing equity for the future benefit of BB-BEE in national strategic projects and increasing the participation of the BB-BEE in these projects;
- Increasing South Africa’s export earning potential;
- Reducing South African dependency on imports.