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South Africa must rework Black Industrialist Policy

Business

Various groupings of society have criticised the South African government’s black industrialist programme aimed at creating 100 large-scale black industrialists by 2020 for its flawed approach. Some sentiment exists that the programme might be at risk of turning into a “pie in the sky” scheme.

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SUPPORT: K9 Pet Foods received funding to the tune of R20 million. Minister of Trade and
Industry Dr Rob Davies places petfood pouches on a conveyer belt. Picture: Tracey AdamsLET IT WORK: The president of the Black Business Council Dr
Danisa Baloyi. Picture: Nicholas Rama

“The reality of every known industrialist at the moment including those who are referred to as ‘white monopoly capital” is that you can’t create an industrialist. Politicians are good at policy formation but don’t understand how businesses actually work,” said Vuyisa Qabaka, a partner at Entrepreneur Traction.

The Department of Trade and Industry (dti) is championing the programme and describes a black industrialist as “black South Africans who own and, through significant shareholding, control an enterprise whose products are significantly used and have a considerable impact on decent employment and create broad-based economic opportunities”.

Basil Mabasa, a young philanthropist with more than 10 years’ experience in community development and entrepreneurship, is another critic of the policy.

“I disagree with the policy in its current form, and it looks like a redistribution scheme of some sort. If you take Limpopo for instance, I can’t see where its structure will suit entrepreneurs based there and the locals,” he says.

The policy reflects the many attempts the South African government has undertaken to transform the economy while at the same time trying to ease any tensions that may arise as a result.

Although BEE remains a central policy instrument to achieve economic transformation, it has evolved over the years through various phases from the pre-2000 narrow-based empowerment to the post-2007 Broad-Based BEE (B-BBEE).

However, the BEE policy did not bring about the economic transformation that the country needs. While there have been many success stories as a result of BEE, the majority of the transactions involved black people acquiring minority equity stakes, with little or no operational control or management input and little influence over the board.

“It did not have the desired effect of benefiting a broad section of the population. The second problem was that most of the investors became very passive in those businesses. There wasn’t a transfer of skills when it came to running those businesses,” says Sbu Gule, Norton Rose Fulbright chairman.

According to the dti, since its establishment, the Black Industrialists Programme has approved 52 projects for support; with an expected investment value of R4.5 billion and this has been co-funded with other financial institutions. However, enterprise and supplier-development funds alone will never be sufficient to drive black industrialism.

Another challenge with previous transformation initiatives is that even successfully developed black companies found it difficult to penetrate the markets of established sectors.

“What we see is that without capital it is tough to start. The programme aims to assist black entrepreneurs with access to funding and markets,” says Mohammed Mia, chief risk officer at the National Empowerment Fund (NEF).

“As the NEF we have been involved in funding so called black industrialists for some years and we have seen success. The key issue is that we can’t only rely on government and ultimately we need to get more private sector involvement, especially the banks,” adds Mia. What the programme is trying to achieve by deliberately and unapologetically using state levers to create globally competitive black business champions in the economy is seen as commendable but another flaw exists.

Earlier this year, global leaders at the World Economic Forum in Davos discussed “the Fourth Industrial Revolution”. It was about the knowledge economy which fuels the growth of modern economies, but South Africa’s black industrialist programme makes no mention of it.

The industrialist programme focuses on agro-processing, manufacturing, construction, clean technology, energy, ICT, mining and mineral beneficiation, creative arts, pharmaceutics, and automotive components.

The Black Business Council, a signatory to the dti’s programme, is aware of the criticism and questions.

“There are more questions than answers. We designed the whole idea; we came up with the concept of the black industrialist and it was embraced by the dti. If there are little wrinkles, let’s iron them out,” says Dr Danisa Baloyi, president of the Black Business Council.

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