An Unpopular Merge

It is a sad fact that politicians love power, and they tend to gain more of it through amalgamating bureaucratic institutions. Usually, the amalgamation of institutions is seen as an unpopular merge, and this is because the intention behind it is to consolidate and amass political power, instead of improving these institutions.

Merges that are driven by politicians generally raise suspicion, especially when these merges are supported by hidden political agendas and not by solid business rationale. A recent unpopular merger between the state-owned funding agencies the Industrial Development Corporation (IDC) and the National Empowerment Fund (NEF), is said to potentially have a negative impact on black economic empowerment (BEE).

To understand why this merger was so unpopular, you will first need to know that the NEF is a financial institution that funds black entrepreneurs and business owners. However, like many financial institutions, the NEF has been plagued with bad debts. Because of this, the NEF has, for some time now, been under-capitalised and required an R1bn capital injection in order to continue fulfilling its mandate. After the NEF failed to get the required capital from the Department of Trade and Industry (DTI) and the National Treasury – both of which were NEF shareholders – other sources of funds were pursued with the IDC.

The IDC falls under the political supervision of the Economic Development Department (EDD). Thus the discussion of recapitalisation moved into full consolidation of the NEF into the IDC. The Black Management Forum (BMF), the Progressive Professionals Forum (PPF), the Black Business Council (BBC) and black business lobbyists all agree that the NEF should have been allowed to remain a stand-alone financial institution. These groups are vigorously opposed to the consolidation of the NEF into the IDC, as it perceives the merger as senseless and driven by politics. They have tried to persuade politicians not to go ahead with the merger, as they fear that the NEF’s mission will dissolve under the thumb of the IDC.

It is clear that there is a political turf war surrounding the NEF, and the merger will lead to an even more disjointed BEE policy. At this stage, it seems as though there is nothing that the BMF, PPF and BBC can do about the merger, as the decision has already been made. The only thing that can be done is to hope that Patel, a former trade unionist, will consider the interests of the black business community.