New deal for small business

2219

Small and medium businesses will receive aid following the launch of the National Empowerment Fund (NEF) yesterday. NEF Board of Trustees chairman, Ronnie Ntuli, said the launch of the fund provides a solution to the private sector to speed up BB-BEE solutions to black enterprises.

Private entities will make their enterprise development (ED) contributions to the NEF’s Enterprise Development Fund, which in turn will be used to co-finance the NEF’s investments in enterprise development beneficiaries, the state BuaNews agency said. “The objective is to facilitate the development, sustainability and financial and operational independence of the beneficiaries,” NEF CEO, Philisiwe Buthelezi, said.

As per Code 600 of the Codes of Good Practice, Broad-Based Black Economic Empowerment companies should contribute three percent of its net profit after tax (NPAT) in order to collect the maximum 15 points on ED. For those companies that contribute less than three percent, the points will be calculated on a pro-rata basis to the contributions. However, the minimum contribution a company may make to the Fund’s ED Fund is R5 million.
“Looking exclusively at the three percent NPAT of the top 40 JSE-listed companies collectively, the potential resources available for ED exceed R5.3 billion. Enterprise development has considerable potential as a catalyst for economic transformation,” said the Buthelezi. “South Africa has the greatest opportunity to position itself for unprecedented growth through delivery in the real economy. The massive dual economic opportunity for South Africa lies in our nation’s industrial development backlog, and the under-developed South African and African markets,” she added.

Through the new fund, SMEs can tap into an additional source of funding and most importantly, the ED Fund would be able to make more investments designed to enable meaningful black participation in the country’s economy. “For every transaction that qualifies for ED funding, the NEF will co-invest on a 60:40 basis, with the ED fund carrying up to a maximum of 40 percent of the risk. Therefore, any success or failure of beneficiary entities will be reflected on the NEF ED Fund and the NEF, since the investment would have been made up of 60 percent NEF funds and 40 percent fund contribution from the measured entity,” she explained.

According to the NEF, five years from the time of contribution, companies will enjoy their newly improved scorecard ratings after the initial contribution. The benefits will fall away on year six, after which companies have to contribute again in order to maintain the ED points on the scorecard. The NEF is an agency of the Department of Trade and Industry mandated to grow black economic empowerment.