As the debate on narrow versus broadbased black economic empowerment (BEE) becomes increasingly ferocious, the State's Industrial Development Corporation (IDC) has confirmed that it will continue to support and fund those empowered companies that have already benefited from earlier equity transactions.

Speaking at the Mining Law 2004 conference in Johannesburg yesterday, chief operating officer Gert Gouws said South Africa needed large BEE entities not only as role models, but also to ensure black participation in some of the larger equity transactions, as well as the large-scale New Partnership for Africa's Development (Nepad) projects that are emerging.

“We are already starting to see the well-known successful BEE companies with high-profile leaders engaging in Africa and forming joint ventures in countries such as the Democratic Republic of Congo,” Gouws said.

He said that what differentiates the IDC from other financing institutions is that, if the IDC believes in the underlying merits of the business plan and recognises a competent management team to carry out the plan, it will finance a project, even if the security offered by the parties is low.

He said that the IDC has limited control over who applies for funding from the institution but it usually recommends the inclusion of broad-based BEE criteria in the proposal.

Since 2000, and up until the end of June this year, the IDC has financed R27,1-billion-worth of BEE transactions, which have a value of R53-billion, with R25-billion of that being in the resources sector.

Gouws said that the IDC's approvals to BEE companies have been increasing steadily, with the exception of the 2003 financial year.

However, he added that the institution has learnt a number of hard lessons.

Some of these include lack of proper financial structuring in an equity transaction, funding an unsustainable transaction, the BEE party not being fully committed to the deal, and no participation by the BEE group in the management of the new company.

He also said that the IDC has, in the past, made mistakes and paid too much for a stake in a company, on behalf of a BEE group.

“Sometimes existing entrepreneurs or white entrepreneurs try and cash in by selling out to black partners at excessive prices,” Gouws said.