No cash? So get a R34m loan

It said the loan was a "prudent investment" and "perfectly legitimate and praiseworthy". Questions have been raised about the job-creation and entrepreneurial spin-offs of the investment relative to other possibilities, especially as the National Empowerment Fund has now run out of funds.

The mandate of the state-funded organisation is to promote black economic participation with financial and non-financial support. In May it placed a moratorium on the commitment of new funds and asked the government for recapitalisation.

The boutique department store - which stocks luxury brands such as Oscar de la Renta, Giorgio Armani, Balenciaga, Tom Ford and Alexander McQueen - is co-owned by magazine publisher Khanyi Dhlomo, her mother Venetia, wealthy businesswoman Judy Dlamini and the fund.

The fund's chief executive Philisiwe Mthethwa, accompanied by her husband Police Minister Nathi Mthethwa, attended the opening, as did Arts and Culture Minister Paul Mashatile and Gauteng Premier Nomvula Mokonyane.

Moemise Motsepe, fund spokesman, said the retail sector was primarily white or foreign-owned even though most consumers were black.

Black participation in luxury goods

"With the Ndalo Luxury Ventures transaction the NEF is laying the building-blocks of black participation in this sector. While the NEF has funded other black women entrepreneurs before, the Ndalo transaction is the biggest by the NEF in respect of black women entrepreneurs," Motsepe said.

Since inception more than 70% of National Empowerment Fund funding, or R5bn, had gone to businesses owned and managed by black men.

Motsepe said the investment was in line with the fund's mandate and policies in that it supported a company owned and managed by black women in an untransformed sector.

The money received from the fund was used by Ndalo to construct the store, buy stock and embark on the local manufacture of a clothing range under the Luminance brand.

More than 60% of the fund's beneficiaries have been small and medium-sized enterprises and it claims to have supported more than 40,000 jobs.

Motsepe said the Ndalo transaction was above reproach and that it had been evaluated exclusively on merit in accordance with approved policies. The fund's investment committee approved the funding in August last year after "rigorous interrogation".

"The deal met key criteria for funding such as direct operational involvement by investors in the day-to-day running of the business, which was wholly owned and managed by black women," Motsepe said. Black rural women own a 10% stake in Ndalo Luxury Ventures and staff and management have the same percentage.

"Another important factor in favour of granting the loan was that the company's shareholders collectively contributed more than R15m to the project. More than 58% of the total investment would remain in the country and the associated clothing factory was owned and managed by women," Motsepe said.

Source: Business Day via I-net Bridge