NEF Funds R35m Delswa Buyout Zz Clothing Firm's Staff to Benefit

Cape Times (South Africa), August 12, 2013 | Go to article overview

NEF Funds R35m Delswa Buyout Zz Clothing Firm's Staff to Benefit


BYLINE: Wiseman Khuzwayo

Hot on the heels of a public furore caused by the revelation that the National Empowerment Fund (NEF) had financed a luxury retail boutique with R34 million, the government-funded lender said last week that it was increasing its exposure in the clothing and textile industry by funding the buyout of a niche corporate clothing manufacturer.

The R35m funding from the NEF will enable management of clothing company Delswa Group to buy a 42.3 percent stake in the business and staff to acquire 9.1 percent, while Nehawu Investment Holdings (NIH) will take a 25.1 percent stake.

The NEF said it did not fund the NIH equity stake, with the NIH paying R2.5m for its 25.1 percent interest. However, the fact that the funding structure required an equal split between debt and equity means that the union investment company indirectly benefited just like all other shareholders, from the NEF's debt funding injected into Delswa. The NIH's ultimate beneficiaries are an estimated 230 000 workers in the public education, health, civil service and social welfare sectors.

The NEF will keep a 23.5 percent stake, which the lender said was to facilitate its required rate of return from the transaction.

The NEF ruffled feathers when it funded Ndalo Luxury Ventures for R34m to set up a boutique and procure luxury clothing and accessories. Ndalo's main shareholder is Khanyi Dhlomo, a prominent businesswoman and magazine publisher.

Trade and Industry Minister Rob Davies has since the furore requested a detailed report from the NEF regarding the funding of Ndalo.

Eyebrows were raised because the decision to fund the Delswa buyout was taken on April 22, when the NEF was about to declare a moratorium on new loans because of cash problems. …

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