In replies to parliamentary questions from the DA, neither Minister of Finance Pravin Gordhan nor Minister of Small Business Development, Lindiwe Zulu, could provide substantive details on the mandate, composition, governance structures, funding, board of directors or launch date of the venture capital fund that President Zuma announced to much fanfare on 09 May, over two months ago.
This means that the job creation promised by this venture capital fund will be stalled because of government’s hollow commitment to placing job creation at the apex of its agenda.
The fund is one of three work streams set up under Minister Gordhan and BUSA President, Jabu Mabuza, aimed at kick-starting South Africa’s economy and avoiding a ratings downgrade. In the hastily arranged May 9th press conference, timed to get maximum attention from the ratings agencies, President Zuma and work stream leaders Discover’s Adrian Gore and Bidvest’s Brian Joffe acknowledged that supporting small and growing businesses is a key ingredient to growth and job creation.
While business claims to have stumped up R1.5 billion to inject into the fund, government has yet to show its hand so the fund is waning.
The DA understands that a big sticking point holding things back is the extent to which government will have the ultimate say over the fund’s mandate and investment strategy. This speaks to the composition of the board of directors and the fund’s articles of association, which will determine its level of independence.
Government already has the National Gazelles Programme and the Black Industrialists programme which are run through the Departments of Small Business Development and Trade and Industry. Details of the beneficiaries of these programmes are shrouded in secrecy. Minister Zulu has promised to release the names of the Gazelles competition winners but nothing is forthcoming.
It is important the new fund avoids accusations of political interference and is run according to industry norms for this investment class.
Delays over the venture capital fund launch suggest internal disagreements between National Treasury and other departments. The Treasury is under pressure to implement major structural economic reforms which will ease the cost of doing business and reduce uncertainty holding back investment desperately need to jump-start our economy and create jobs.
The Treasury and business are rightly wary of committing taxpayers’ and shareholders’ money into a fund which will end up as yet another piggy bank for connected insiders.
South Africa’s venture capital industry is embryonic and desperately needs a shot in the arm to fund thousands of worthy business ventures which we need to drive economic growth and job creation.
We cannot afford this new fund to be delayed further by internal disputes between government and the private sector, which give the lie to claims that the trust deficit between them has finally been overcome.