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Johannesburg - The controversial R34.1m loan by the National Empowerment Fund (NEF) to fund Luminance, Khanyi Dhlomo’s luxury store in Hyde Park, was not exactly paid back, as announced recently.
In fact, the loan was refinanced by an unknown funder. This was not confirmed by Dhlomo, who did not respond to questions posed by City Press.
Philisiwe Mthethwa, CEO of the NEF, announced last week that Ndalo Luxury Ventures (NLV), which trades as Luminance, had “settled its loan obligations in full”. This was only partly true and it implied that Luminance had done so well it was able to repay the loan. The loan came to light last year, shortly before the NEF placed a moratorium on new loan applications.
Last week Mthethwa said: “NLV began repaying the NEF loan in June 2013, in essence because it is a viable business and has now settled its loan obligations in full.”
She said last week that the loan had indeed settled with NEF, but refinanced by another funder. She said this was not uncommon.
“It happens all the time.”
White business
She continued to defend the Luminance loan.
“For us, we still believe it was a legitimate investment, especially if you look at the retail sector which is dominated by the big retailers.”
She said the sector was untransformed and dominated by white business. But the driving force behind sales was the black middle class, she said.
While designer shops in South Africa are all foreign owned, it was “black diamonds” who were driving the sales, she said. Foreign retailers locate here but the proceeds leave the country, whereas with this deal, “at least they are ploughing back proceeds into the local economy”.
In its decade of existence, the NEF has approved R5.5bn financing for 549 black companies – of which R3.8bn has been disbursed to 422 companies and R1bn has been repaid.
It has also partnered with investors on “strategic” projects worth R30bn.
It has not been plain sailing, though. Its recently released 2014 annual report reflects a difficult year. It had to place a moratorium on applications for new loans, was the subject of an investigation following allegations against its CEO and others and continued to call for refinancing.
At the end of the financial year, the moratorium was lifted after the NEF pulled up R950m from reserves.
Direct alignment
Mthethwa said the NEF was “misunderstood when we applied for the moratorium – it does not mean we are bankrupt; it was just a liquidity issue”.
Yet the NEF is in need of recapitalisation, for which it has been asking government for some time.
Options include getting R2.3bn from the fiscus, a R1bn loan facility from the development finance sector, being given a stake in state-owned enterprises and being reclassified under the Public Finance Management Act so it can raise capital outside the fiscus.
Mthethwa said she believed government was committed to the NEF, which was not a cost centre and which made strategic investments in job creation and empowerment of companies. Its work was in direct alignment with the Industrial Policy Action Plan and the National Development Plan.
Mthethwa said she was happy the investigation – which followed numerous serious allegations, including about the Luminance loan – had cleared her and the NEF.
“There are conspiracies I am seeing … to render black professionals as incompetent and corrupt – especially women.”
Mthethwa’s salary is high for a civil servant. The annual report showed that despite the difficulties of the past year, her salary was increased by 15% to R5.2m (including a substantial performance bonus) from R4.5m the previous year.
» One of the reasons the NEF approved the loan was Luminance’s focus on local products. But local brands were scarce when City Press visited the store on Thursday.
There were Zulu Ukhamba pots on display, but little evidence of the local brands advertised on its website – apart from one small sales rack and a modest section for Luminance Private Label.
