IDC, NEF & DTIC on funding application and adjudication processes as well as aftercare services, with Deputy Minister

Meeting report

Opening Remarks
The Chairperson noted that all Committee Members were in attendance, but that poor connectivity and load shedding might impact those participating in the meeting.

The Chairperson stated that the Committee would be receiving a briefing from the Department of Trade, Industry and Competition (dtic), the Industrial Development Corporation (IDC) and the National Empowerment Fund (NEF) on their funding application processes. The purpose was for Members to understand the full process related to funding applications and the mechanisms available to applicants when their applications were unsuccessful. In addition, it would also allow the Committee to ascertain the level of aftercare support provided by the dtic, the IDC and the NEF for successful applicants. It was critical that the processes were clear and transparent to the public, as they could create a barrier, especially for a new business to access funding effectively. Furthermore, aftercare support was often essential to assist businesses to become and maintain financial sustainability, as the Committee had witnessed during its oversight visit in April where beneficiaries, through no fault of their own, were unable to service their loans.

Presentation by dtic, IDC and NEF
The delegation from the dtic and its funding entities was led by the Deputy Minister of Trade, Industry, and Competition, Deputy Minister Nomalungelo Gina. She introduced the executives from the three organisations.

Opening remarks by the Deputy Minister
Deputy Minister Gina provided a background on the processes that the Department and the two entities followed in fulfilling their mandates to support investment and to provide industrial financing. The work done on Industrial Financing is informed by both the country’s imperatives to address high unemployment, poverty, and inequality; and the urgent need to improve economic performance, inclusive growth, and capabilities of the state. The dtic and its entities take into account a number of the SONA priorities including focusing on sector support, climate change, youth employment; promoting small businesses, and spatial equity through the District Development Model. A key function was to promote the ease of doing business and to support the African Continental Free Trade Area. Ultimately, they aimed to support the building of a capable, ethical and developmental state and the call for deeper partnerships with investors.

Transformation, Investment, and Job Creation - Dtic
Ms Malebo Mabitje-Thompson, DDG: Industrial Financing, dtic, stated that the intention of the briefing was to inform Members of what the entities did and how each entity managed its processes so that Members would have a full understanding of the systems and could advise their constituents. Importantly, the three organisations had learnt significant lessons over the years and implemented the lessons. These included:
-Adaptation of processes to ensure quick turnaround time.
-Swift decision-making.
-Daily feedback in daily team meetings.
-Live pipeline tracking daily to maintain focus.
-A problem-solving mindset.
-Centralised coordination of initiatives.
-Efficient deal-structuring to enable disbursement and post-approval monitoring.
-Online system for industrial financing and collective reporting.

She provided background information and statistics showing the work done by the Department and the two entities that supported its work in promoting industrial financing. Disbursements across the three organisations totalled R16.8 billion. A key function of the three was to administer funds, including the IDC’s Manufacturing Competitiveness Enhancement Programme (MCEP), the Economic Distress Fund and the Economic Recovery Fund which had collectively approved R4.3 billion from inception to date. The NEF administered the Women Empowerment Fund and the Black Business Manufacturing Fund. The Transformation Funds had approved R192 million for black-owned businesses and women-owned businesses. Applications for funds were numerous. From April 2022 to July 2022, the dtic had received about 304 applications for key incentive programmes, averaging 76 per month; the IDC had received 340 applications over the last 5 months, with an average of 68 per month; and the NEF had received 873 applications over the last 5 months with an average of 175.

Ms Mabitje-Thompson provided specific details of industrial financing by the dtic.

IDC
Ms Joanne Bate, Chief Operations Officer, IDC, briefed the Committee on the IDC processes relating to investments and funding. She provided a very detailed and specific description of processes and the support offered to applicants, as well as approval processes and committees and investment decision-making.

NEF
Mr Mziwabantu Dayimani, General Counsel, NEF, admitted that there had initially been problems in rolling out in certain rural provinces, but the NEF had worked hard to resolve those issues and frequently sent head office staff to the provinces to assist. He briefed the Committee on how the NEF operated and how it managed the adjudication of transactions, details of its Credit Risk Department, and how it managed the credit risk assessment.

(See Presentation)

Discussion
Mr C Malematja (ANC) said that in many cases, people who complained of not being funded were people who did not necessarily qualify. The programmes had to be given a thumbs up. It was a job well done. It was a solution to the problems that had long been there. The entire presentation was very detailed and self-explanatory. One could see the government was hard at work trying to transform the economy. He suggested that in the future it would be very much appreciated if the Minister of Small Businesses Development were to touch base with the Committee so that at the end of the day, the Members ensured that their people benefitted.

Mr S Mbuyane (ANC) noted that back in 2018, the NEF had funded a hospital in the Western Cape. How many had it funded since then in other provinces? And if not, why? Concerning youth manufacturing, which had been impacted by COVID and other factors, what could the IDC do to assist?  The figures quoted by the IDC and the NEF were huge, and the reference was to blacks being funded but the Committee needed details of women, youth, and the disabled also who had been funded so that Members could see that transformation was being supported. He noted that on the transformation sector poll, the figures were huge, but, regarding the road shows and education outreach, he asked whether the entities felt they were satisfied with their approach. And if not, how were they going to deal with it? It was also important to get an understanding of how many people were funded over the past three years. How did the entities fund a takeover bid from a company previously owned by someone else? How did they fund improvements in such cases?

Mr Mbuyane asked about the 45 days of due diligence. Some companies waited for more than six, or seven months for due diligence. What were the challenges there? He raised the issues of double dipping and also funding because the Committee might celebrate transformation when it was not transformation. What about women, youth, and so forth? How did the NEF relate to the Competition Commission in terms of funding and also checking whether a company was black or white or just a front? He had not heard of a programme for student accommodation, although there were challenges in that respect in South Africa. How were the entities funding the programmes moving forward? He noted the finances and also the budget. If one combined the industrial financing and the NEF, it did not equate to the 23.2 billion of the IDC, and even if one combined that with the transformational fund of R192 million, it did not reach that amount.  How was the NEF going to be able to transform society, and the economy as well, while there was a minimal budget for transformation?

Dr M Tshwaku (EFF) said that he, like Mr Mbuyane, wanted a breakdown of companies that had been assisted by race, and the amount per race. He sought detailed information as that would be very interesting. It would show the objectives of the Department in terms of transformation. It was a very long presentation and very detailed. He had gotten a little lost because there were so many funds and so many schemes. He did not like to praise a fish for swimming, but the officials had very helpfully supplied information to his questions as a Member of Parliament. Was it possible to have a summary of all the schemes and funds because it was quite confusing? It was a detailed presentation but he needed a summary to get a proper grasp of it.

He asked how a person was assisted when the person had a good business idea but was listed because of past sins. The majority of people were in that situation. Was there a way that they could be assisted so that they were able to get a business going? What was the difference between the funding models? And what was the difference between those institutions and a bank? One of the slides attempted to explain it in terms of the interest, the lower interest, and or the prime minus two and all of that but perhaps they could emphasise the difference between the entities and a bank?

Dr Tshwaku asked if the entities had an assistant assigned to first-time applicants to help with developing the applicant’s idea or need to expand, and write a business plan, etc. Was there non-cash support because black people did not have generational wealth but had ideas and yet the business plan cost R20 000 or R50 000 to get started? Were there facilities to assist young entrepreneurs?

He asked how many small-scale farmers they had assisted because small-scale farmers were able to create jobs and, ultimately, the intention was to create jobs. He had seen the numbers of the SMMEs. The entities must continue to support those SMMEs as SMMEs could create jobs. SMMEs also had a multiplier effect. Those billions had to be spread into smaller chunks. Another interesting fund was the industrial financial support and they now had systems of online incentives and capability advisory services.

 Addressing Deputy Minister Gina and Ms Mabitje-Thompson, Dr Tshwaku said that the presentation contained a lot of information and he asked for a simple system to give clarity to stakeholders on some of the issues. Some funds were more technical and difficult to understand. He asked if, amongst all the loans, there was anything, especially for manufacturing. If someone had an existing manufacturing plant and wanted to grow it and bring in more people to fill newly created jobs and was there a system of in-service training for those who had acquired technical qualifications so that they did not sit at home after qualifying? Would the funds help all those kids at technical colleges and tvet colleges who did not have any incentive training - perhaps a company could absorb them and give them incentive training so that they would be marketable. Would the IDT or the NEF or ITC look into providing grants?

Mr D Macpherson (DA) said he did not generally pay tribute to presentations given but the IDC had given a really good presentation that was very helpful. He got the feeling that the IDC was embarking on a turnaround or better form of governance than had been seen because everyone knew that the IDC had played a role or had a hand in supporting state capture by providing funding to people that should never have received funding, the Guptas being one of them, and there had been many other questionable deals. Those concerns had been ventilated in public. He had the sense that there was a view in the IDC that it needed to get back to its core business, which was funding bankable ideas and bankable businesses and bankable expansions, that might not necessarily qualify in traditional banking institutions. And that was what the IDC should be focused on, i.e. bringing to market businesses that might not necessarily qualify for traditional funding and financing. But what that did not mean was that the IDC could act as a piggy bank to fund the politically connected, or to fund people who could and should be going to other markets. That lending money should be reserved for those that could not find funding in the traditional market.

Mr Macpherson was encouraged that the IDC was focusing on start-ups, which had not been a traditional focus of the IDC. He was really encouraged by the presentation as the Committee was taken through how the IDC assisted with market financing and assisted start-ups to get to a position where they could then bring a more bankable application to the IDC. That was really important and he hoped that was going to become a bigger and greater focus of the IDC: funding new start-ups, tech start-ups, and innovation. That was where the IDC should be focusing its attention. It seemed like there was some acknowledgement of that. That was where the opportunity for growth is. Getting behind tech and innovation start-ups, traditionally too risky for many traditional financing institutions, was where the IDC could play a really important role.

He noted that the IDC model of self-sustainability only worked if it was generating value on its investments and that was where the IDC’s problems had existed for some time as many of the investments had been questionable and the ability to generate revenue and generate value in their investments had been severely undermined by some of the investment decisions taken. There had been some opaqueness and lack of transparency and accountability at the IDC regarding its investment decisions, and how those investment decisions were taken. That was something the Committee had not been particularly focused on previously, but it was important to assess the sustainability of the IDC, for the many reasons that he had spoken about previously. There should be a firming up of governance and more focused attention towards start-ups by the IDC. 

As he understood it, there continued to be bad creditors within the IDC and the Committee needed to understand what that looked like. He requested a presentation from the IDC about where the bad loans existed, who had the bad loans, and what the prospects were of recovering some of that as creditors.  It was important to get to the bottom of that and to understand where their book was going and what the impairments for the IDC looked like. Mr Cuthbert (who was struggling with connectivity) had asked him to ask how much money the IDC had made available to Scaw Metals. What were the terms of that particular deal? Was it compliant with the usual requirements of the IDC?

Once the Committee had the bad book from IDC, Mr Macpherson wanted the Committee to have another meeting, and then IDC could take Members through the reasons for some of those impairments, and which would continue to be impairments. What were the IDCs prospects of recovering some of that money owed to them? And then importantly, what decisions or what accountability had been taken on those deals that had been granted in a questionable fashion? The IDC might be an entity that the dtic and the Committee really needed to pay a lot more attention to. The Committee should be a support mechanism for the IDC because there was immense potential for the IDC in South Africa, in the market, and in how they operated. The IDC had gone down the road that they had done previously because there just was not enough oversight and if the Committee played its oversight role, the IDC could only get stronger and be a bigger asset to development, job creation, and economic growth with a bigger focus on new start-ups, new businesses, and ensuring the bankability and the viability of those businesses was sustained, and with no questionable loans were offered, particularly to the politically connected. Loans had been granted for R60 million to the politically connected and they had never been repaid and had just been written off. Every rand that was written off by the IDC, could have gone to a business that could become a multi-billion rand business generating revenue, creating jobs, and driving economic growth.

The Chairperson asked the officials about the recourse for stakeholders whose applications were rejected if the grounds for the rejection were not satisfactory to that applicant. A particular applicant had been communicating with all Portfolio Committee Members on that matter. And then any enterprises that might have taken legal action against any of the entities as a result of rejected applications and what legal actions were being taken? And what were the outcomes? What were the communication strategies for reaching communities so that black entrepreneurs were aware of the products and offerings? Approaching one of those institutions for funding could be quite intimidating, so what upfront support did the institutions give entrepreneurs who were looking for access to funding?

Responses
The Deputy Minister requested the entities to begin with the responses.

NEF Response
Mr Dayimani noted that the first question was about the hospital group that the NEF had funded. A few years previously, the NEF had launched a hospital in the Western Cape, a cardiac facility. That hospital group had bought hospitals in other provinces as well. They had two in the Free State, one in Mpumalanga, one in Gauteng, and two in KwaZulu-Natal. The one in Gauteng was called Busamed and was in Modderfontein. It was one of those groups that was growing and had actually made inroads in the private healthcare sector and were providing affordable healthcare services. The NEF had funded them and they had since also received funding from other entities, including the banks. They now had a R2.5 billion net asset value entity and continued to grow.

He informed Mr Mbuyane that the NEF welcomed opportunities to assist the youth and would be happy to assist any Member who knew of youth needing assistance. 

Mr Joel Mphela, Fund Manager, NEF, responded to the question on double dipping. He explained that the NEF conducted extended diligence, just to check that applicants were not applying at other institutions for the same scheme and so was able to detect if there was any potential double dipping. One or two that had been identified, had been stopped and had to give an undertaking in a letter signed under oath to confirm that they were not engaging in such a practice. So through that process, the NEF was able to manage and then avoid double dipping.

Mr Mphela said that in terms of student accommodation, the NEF was very active in the sector. It had engagements with the universities to understand their requirements in terms of the student population. The NEF also identified opportunities through that process. Through its regional offices, the NEF made sure that the market was aware of its involvement in the sector. To date, the NEF had invested a portfolio of over R400 million in the sector in various provinces across the country. It was a sector in which the IDC saw a lot of developmental impacts. The NEF was excited to see, through new projects, where it was also helping black businesses and black individuals to participate in the value chain of building student accommodation. So, for the NEF, it went far beyond just providing; it gave the NEF an opportunity to unlock other upstream and downstream opportunities for black people, and they encouraged black professionals, such as quantity surveyors, engineers and others. That was the NEF approach to student accommodation. It was able to play a meaningful role going forward and the NEF would continue investing in the sector. 
Ms Karishma Maharaj, Manager: Turnarounds, Workouts and Restructuring, NEF, stated in response to the
issue of blacklisting, that the NEF did consider the fact that clients that it engaged with sometimes had issues with previous sales businesses or certain judgments that had been taken against them. Generally, the NEF assessed the situation and assisted the client to enter into some sort of settlement arrangement with a creditor so that the judgment did not get pursued in terms of warrants of execution and also ensured that they did the responsible thing and settled historical debts. The NEF could consider that client for funding on the condition that they had dealt with the pay judgements in a responsible way.

IDC Response
Ms Bate said that the IDC was continuing to support the gas sector both by supporting early exploration, and the unlocking of new gas resources both in South Africa and the region, to ensure that the country had adequate gas as a transition fuel to support industry. With the closure of many refineries, the main source of supply of gas was obviously the import of LPG. The IDC was involved across the gas value chain, covered by the chemical team, and that included a focus on cylinder manufacturing. One business had unfortunately been unsuccessful, but it was an area of focus considering gas as a transition fuel. On the support of non-empowered businesses or white businesses, the IDC continued to support all industrial capacity to ensure the growth of the economy and to grow exports and jobs. The IDC was happy to share the detailed statistics of support across demographics with the Committee.

Ms Bates addressed the 45 days’ approval. This, as she had mentioned, was focused on the new industrial capacity and start-ups and was very much to ensure that the IDC had addressed all of the key risks around markets, technical jobs skills, and licenses to ensure that once the business received the funding, it was able to meet a project timeline and conclude the project on time and on budget. And that is the reason for the duration of that due diligence. In many instances, the due diligence period was shorter than 45 days, and in certain instances, it was longer depending on the complexity of the business. The long wait time clients often talked about could be addressed by explaining the process better to clients up front so the bid was not held up by the information required to perform the due diligence and then to provide support, the IDC offered applicants an opportunity to discuss the matter with their Pre-Investment Support officials. The IDC was increasing the capability within the industry and within the project development team to ensure that it could provide both physical support and grant support to clients in the early stage when it came to new project development. That would be on the large-scale industrial project site. The IDC already had a focus in that area but it assured Committee Members that the capability that it was building would meet the gap in the market and would not duplicate existing capability.

Regarding small-scale farmers, the IDC had historically had schemes in place to support small-scale farmers. The entity was engaging both intermediaries as well as large partners to look at how it could do more in the small-scale farmer space. During the unrest and the floods, the IDC supported hundreds of small-scale farmers which had had an impact on tens of thousands of jobs in the sugar value chain to ensure that those small-scale farmers could recover first from the unrest and then more recently from the floods. On the internship, Ms Bate confirmed that the IDC did take interns, which the entity utilised, both in the Due Diligence Team and in the Technical Services Team, which provided some good work experience to those qualified individuals. The IDC had been working with the YES program to look at how it could ensure that we leverage that capability so that our clients can also benefit from interns, and that the interns can benefit from the work experience. Just moving quickly, so from an IDC perspective, the entity was very much focused on ensuring that the IDC was true to its industrial development mandate and that it built both new projects, new capabilities, and new industries. The IDC believed that in the world of decarbonisation, it could offer extensive support in decarbonizing, ensuring long-term sustainability and retention of existing jobs, as well as supporting new industrial capacity in the technology and innovation and space, recognizing that a lot of technology and innovation was about making SA’s industries more competitive. It was not necessarily only about the tech companies that currently had a number of angel investors looking to support them as the IDC wanted to redevelop the local innovation on the IDC’s investments of the past.

Ms Bates agreed that it was important to highlight that the IDC had some impairments on its books that were above the level that it was targeting and that was largely a result of the extensive support provided by the IDC to the economy in 2008 and 2009, following the financial crisis, which was brought on by the banks and which resulted in the banks not having money to support businesses. Unfortunately, the following decade of state capture did not allow the South African economy to recover to the same extent as its partners and a number of companies supported by the IDC in 2008 and 2009 were unable to trade out of their distress as a result of the economic circumstances in SA. It was important to note that the Gupta-linked assets that IDC had supported were also supported by the commercial banks before there was any wrongdoing. The IDC did comply fully with the Financial Intelligence Centre Act requirements and only engaged with business partners that were credible or not sanctioned and were not involved in criminal activity. The minute any criminal activity became known, along with the banks, the IDC ceased all operations with those parties.

She said the IDC published all approved companies on its website; the intention was to ensure that there was a high level of transparency, and it would continue to ensure that its decision-making and governance were transparent.

Ms Lucretia Khumalo, Divisional Executive: Client Support and Growth, IDC, said that the IDC focused on two issues. When it invested in companies, it focused on financial sustainability. And then it focused on development effectiveness. Financial sustainability meant that a company needed to be able to succeed, it needed to be able to be financially sustainable, and generate the requisite cash flows. And why was that important, because for the IDC to be involved in job creation, and transformation, those companies had to be successful. In the last few years, the IDC had really been focused on the current book, to make sure that it assists companies, fixes them and where we have reached our investment threshold, it had been exiting some of those to have an IDC, that was sustainable. Importantly, it had really been focused on collections, because it was only through collections, that it could do more investments. Those had been the focus areas. The results would come out in the following week but it had been able to reduce its non-performing loans quite significantly, particularly in the last year. There had been improvements in the impairments as well and that had really assisted to really progress things forward, and also to improve its collections. The results were only coming out in the following week, but it had been able to improve in the last year. In the next week, the IDC could inform the Committee of the audited figures.

Ms Khumalo stated that the IDC had overseen a restructuring of the Scaw Metals business it had acquired and the IDC now had three separate businesses, which were Scaw, Grinding Media South Africa, and Cast Products. Grinding Media and Scaw were both performing very, very well. The details would be provided at a later stage. The IDC was seeing some green shoots of a turn-around in Cast Products as well. She would provide information on what funding had been provided to those businesses. But again, as Ms Bate had said in the briefing, the intention was to support industrialisation in that sector. The IDC was pleased with the results that it was seeing on Scaw and Grinding Media, although, one business was a challenge.

Ms Khumalo added that the pre-business support, which was to assist companies with business plans when they applied. The IDC leaned on SEDA a lot. The frontline team in IDC also assisted with such applications. For the post-business support, the IDC had a team called Capability Advisory Sourcing, and that team really focussed on assisting businesses with whatever business support they needed, whether it was technical, financial or human resources, to ensure that they were successful in the businesses that they were in and could manage the post-investment phase. Post-investment business support was really with clients to whom the IDC had already provided funding to ensure that they were successful in meeting their goals.

Ms Bate added a response to Mr Mbuyane regarding take-overs. The IDC's core mandate was to focus on new industrial capacity but to support transformation in the industry, the IDC would support black businesses in the acquisition of businesses and takeovers. The preference was a takeover with an opportunity for growth because then the black industrialist could repay the IDC funding and gain real equity in the business. The IDC had been supporting transformation in that way since the 1990s and it was largely in cases where the white owner was seeking to retire or to bring in partners. There was a focus on there not being overpayment and that the transaction was bedded down by making payments over a number of years. The white industrialist was encouraged to help grow the business during the transition period and the IDC provided additional support where extra capacity, including technical capacity, was required.

Ms Mabitje-Thompson stated that most questions had been covered by the two entities. But a question had been asked about the state and the scope and the scale of funding that was provided. Ordinarily, the dtic would provide a report to the Committee, where it indicated the statistics for all the funds that dtic and its entities had provided but the dtic preferred to do that only once the data had been audited so that the dtic was sure that the information before the committee was not only quality information, but had also been subject to an independent review. Did the Committee want to deal with that in the dtic annual report as was normally done or was there another way the Committee wanted to deal with it?

She noted that Dr Tshwaku had asked how different the model of funding that they provided was from that which the banks would provide. To some extent, Ms Bate had dealt with it and the NEF had also, in its presentation, highlighted the ways in which that funding was different from funding by a bank. When an entrepreneur went to a bank, there was a set of requirements that the bank would put before them for that investment to be supported. A real sore point was the requirement of being able to assure the bank that if the business did not succeed, then there would be capital, in one way or another, that could be recovered from the borrower. Because the dtic, IDC and NEF were dealing with enterprises that did not have deep historical wealth, that could be used as guarantees, they were still allowed to come in and invest, but then they were investing using government loans and government grants to take the investment forward. Without some of the assurances that the banks require, those investments would not go ahead as there was a level at which the transaction became too risky for the banks.  If it were left to the banks, the country would miss out, particularly on the type of investment that Mr Macpherson was talking about, i.e. the ones that require venture capital and a level of risk appetite that the banks do not have. The banks also cannot support new entrants, where there was no trading and transacting history. The dtic provided grants, and had schemes that it ran with the IDC and the NEF, which was a concessional loan type funding by the NEF and the IDC.

She added that, in addition, there were categories of support in the stable of the dtic. When the dtic provided a grant, a person could approach any financier with that approval letter. It even reduced the cost of funding that they could get. The IDC had to go to the capital markets and raise funds at the same cost, even higher cost in most instances, than the banks, so the person would use that grant and blend it into the product to bring down the cost of financing. The intention was to bring down the cost of financing to increase the amount of finance that went into the manufacturing sector and into the innovation sector, and the various other sectors where it is important that South Africa also has a footprint in order not to remain consumers of imported products. That was the big value proposition that the three institutions bring into the financing space as it related to investment.

DTIC Response
Ms Mabitje-Thompson responded to the question on communication: were the institutions satisfied with their communication? The answer was that they were not and continued to look at mechanisms and portals of every kind to be able to communicate with the public. If there was no take-up, it should not be a problem of people not knowing that that type of support was available. They took up any platform provided to be able to spread the message. In response to the question of how people got to interact with the products, she explained that in all the three institutions, they had client care services, where a person was able to ask the very basic questions based on your idea and you will be able to be directed to the IDC, the NEF or to the dtic. She informed Dr Tshwaku that she could provide a summary of all the schemes as all three organisations had a summary and provided details of where people could get it, as well as the contact details of the client care services. It was also on the website.

She thanked the Members for challenging the Department and pointing it to various issues.

Mr Macpherson asked that the IDC provide an answer to his question on scoring in writing. He had another question for which he requested a response in writing. The NEF should give an update on the CEO's latest salary and bonus and what metrics were used to justify her salary, which was two or three times that of the President’s salary.

The Chairperson noted that Dr Tshwaku had written a question in the Zoom chat box on the difference between grants and loans.

Mr Mbuyane said he had posed a question to the NEF about the hospital. If the entity in the Western Cape was the sole entity establishing medical businesses, that was not assisting transformation. The NEF should not support only one organisation in a field. He also asked about the NEF’s funding of printing and publishing.

NEF additional response
Mr Dayimani agreed to provide a written response to Mr Macpherson’s question. He had responded to the question about funding a cardiac hospital in the Western Cape but he had, incorrectly, assumed that Mr Mbuyane knew of the assistance given by the NEF to a range of health care businesses and was asking only about that specific business. The NEF supported a range of medical businesses, including sub-acute day care hospitals and pharmaceutical businesses.

It took about five to six years to get to the point where it could actually build the hospital in the Western Cape because the process started with a hospital licence and so on. The NEF was supporting other businesses in the healthcare space, but they were at various levels. Some of them were at a stage where they had licences and were going through feasibility processes and some of them were actually in different sectors in the healthcare space. The NEF supported sub-acute hospitals or daycare hospitals which were not traditional hospitals, but hospitals where one would go in the morning, get the treatment, stay for a day or two or leave that same evening. The NEF also supported entities in the pharmaceutical space and would continue to support healthcare businesses in various aspects of healthcare.

The Deputy Minister recognised that the dtic had responded on the grants versus loans question but it appeared that Dr Tshwaku needed further explanation.

DTIC additional response
Ms Mabitje-Thompson provided further explanations as to the difference between grants and loans. She explained that, largely, the support offered to enterprises, was in the form of grants. With those grants, an enterprise received an approval letter with which a business could approach a bank or a development fund institution, in that instance, IDC or the NEF for additional funding. The dtic never supported a business 100% with grants because that would really expose the state to undue risk and any entrepreneur should be able to put skin in the game through a loan from the NEF or the IDC which would then ensure that the project was fully funded and could be taken forward. The IDC provided loans and where the dtic partnered with the IDC, the IDC managed funds on behalf of dtic.  The IDC took those grant funds and blended them with their loans to provide additional funding to what they would be provided as a concessional loan: the terms for a concessional loan were more generous than market loans. Because the entrepreneurs had funds, they were able to bring the cost of borrowing down, but they were unable to do so on their own because they would have to raise the funds in the capital markets. Similarly, in the NEF itself, a large part of what the NEF would offer investors would be in the form of loans, and where dtic partnered with the NEF, it was able to provide concessional loans and it would be concessional based on the cost of capital and concessional based on the terms of repayment, which was also equally important when an investor was looking at the funding model for a business because if the term was too short, one often had to repay out of one's working capital and that could strangle the ability of that enterprise to grow, or slow down the ability of that enterprise to grow. In the main, the dtic provided grant funding but then the person could go to any accredited financier, not only IDC or NEF.

Closing remarks by the Deputy Minister
Deputy Minister Gina thanked the Portfolio Committee Members for their contributions and the questions that they had asked as they always presented so many ideas and shaped her team’s thinking and the way that they worked. She promised to supply the Committee with the flyer on which all the schemes were summarised, so that Members could understand the schemes. It would also help the team to let the public know what it was doing so that people could apply. The intention was to be more accessible to the public and to open up to provide more assistance to perform according to the Department’s mandate. She noted that Dr Tshwaku was asking for contact details but the DDG would communicate with him to find out what it was that he wanted.

Deputy Minister Gina stated that the Department and the two entities were open to further engagements. They would be going on road shows and also making sure that the regional offices responded to the needs of the communities. The Department relied on the Committee members to be its eyes and ears, even in the regions. If they saw challenges or there were things that they wanted the Department to improve, they should not hesitate to communicate so that matters could be rectified and the Department could learn from the things that Members had to say to it.

Committee Business
The Chairperson addressed the question of the training workshop. She noted that the Committee had an appetite for the policy workshop to be held in person. The matter would go to Mancom (Management Committee) but Members would have to be open to it being moved to the fourth term as there would be too many logistical arrangements to hold it in person in the third term

The Secretary informed the Committee that Dr Tshwaku had proposed names for facilitators.

Dr Tshwaku proposed Prof Patrick Bond who had conducted a Public Administration course for Parliament; and Associate Professor Christopher Malikane from the University of the Witwatersrand who was knowledgeable about industrial policy and, while left-leaning, looked at both sides.

The Chairperson stated that it would be discussed at Mancom but an in-person policy workshop, would provide an opportunity to have a longer workshop, and therefore, they would be able to go more in-depth or cover a greater spectrum of industrial policy.
           
Closing Remarks
The Committee Secretary informed Members that the next meeting would be on Tuesday, 13 September 2022: Briefing by the DTIC on the status of implementing the following legislation: Intellectual Property Laws Amendment Act, National Credit Amendment Act, Legal Metrology Act; Protection of Investment Act; Briefing by the DTIC on the status of the review process with regard to the following: Consumer Protection Act, National Gambling Act.

The meeting was adjourned.