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Can SA create an additional 100 black industrialists?

After the relative success of the first phase, there’s no doubt that government can empower more black entrepreneurs.
The DTI is now planning to support a further 100 industrialists over the next two years. Picture: Supplied.

Brian Naidoo is a black industrialist with big ambitions to take on the manufacturing giants of automotive components for Toyota and Volkswagen.

Naidoo is MD of Durban-based Microfinish, a manufacturer of automotive components such as valve guides and valve seat inserts, which are supplied to aerospace, marine, and heavy-duty vehicle industries in SA, Europe, and the US.

Established in 2012, Microfinish operates from a factory in Pinetown that directly employs more than 50 people. So competitive is the domestic automotive component manufacturing industry that Microfinish is the only 100% black-owned company in the sector, says Naidoo.

Microfinish is one of the many black-owned companies that received funding from the Department of Trade and Industry (Dti) under its black industrialist programme. In 2017, Microfinish was approved for grant funding of R13.5 million, which Naidoo says assisted in the purchase of factory equipment that would help the company become more productive.

At first glance, the concept of “black industrialists” may seem like more hyped jargon created by government to reboot the black economic empowerment (BEE) policy, which has been heavily criticised for creating wealth for a coterie of politically connected individuals.

Ardent supporters of the black industrialist programme argue that it’s about expanding SA’s industrial capacity while upscaling black entrepreneurs and reducing their barriers to market entry. It is also about changing the ownership patterns of SA’s economy, which, more than 20 years after apartheid, still benefits white people disproportionately.

The programme was introduced in 2015 under Jacob Zuma’s administration, which set aside R1 billion in the first year to fund 100 black industrialists over a three-year period. This seed money was expected to unlock up to R40 billion in additional funding from the Industrial Development Corporation (IDC), National Empowerment Fund, Public Investment Corporation and commercial banks.

These institutions top-up whatever funding that black industrialists receive from Dti.

After black industrialists received funding, the government, through state-owned enterprises and various state organs, would use its muscle to procure goods from industrialists in order to scale them up.

Dti spokesperson Sidwell Medupe says 102 black industrialists have been given financial support amounting to R2.2 billion (as at May 2018), with 48 companies receiving market access support. “This leveraged R8 billion in investment and jobs created and retained is projected to exceed 18 484 jobs,” he adds. The department is now planning to support a further 100 industrialists over the next two years.

Defining an industrialist

The big question is what is a black industrialist and who qualifies to participate?

A Dti policy document describes black industrialists as “black people directly involved in the origination, creation, significant ownership, management and operation of industrial enterprises that derive value from the manufacturing of goods and services at a large scale; acting to unlock the productive potential of our country’s capital-assets for massive employment locally.”

An industrialist must be part of an entity that is at least 50% owned by black people and actively involved in the management and operations of the business.

The emphasis on ownership and control sets the black industrialist programme apart from earlier empowerment models that led to incidents of BEE fronting, says Ajay Lalu, MD of Black Lite Consulting. Lalu has advised government on various BEE policies, including the black industrialist programme.

“We made sure that the definition of what constituted a black industrialist was very clear thus ensuring that real black industrialists would benefit,” he says. “It was a deliberate strategy to ensure that there were measures to reduce the potential for abuse.”

IDC CEO Geoffrey Qhena says measures to guard against the peddling of influence are in place. “We look at an entrepreneur as an individual and their business case,” he says in an interview with Moneyweb. “We need to be comfortable with the fact that their business has a chance of being sustainable and must have economic merit. If the jockey is lousy, the horse is never going to win any race.”

IDC CEO Geoffrey Qhena. Picture: Supplied.

With total assets of nearly R130 billion, the IDC has the financial muscle to take on higher risks and be invested for the long term, compared with other funding institutions.

Within two years of the inception of the black industrialist programme in 2015, the IDC approved funding worth nearly R12 billion to 185 companies. Cumulatively, the value will be closer to R18 billion by year-end. Of the R15.3 billion in funding approved by the IDC for the year to March 2017, R4.7 billion was approved for funding black industrialists in 83 transactions.

Funding mix

Another criticism of the programme is that there is a high concentration of entrepreneurs funded in traditional sectors such as agriculture and agro-processing, metals and mining, and other manufacturing, with limited export opportunities for businesses.

Black Lite’s Lalu believes that government will be able to create 100 more black industrialists given the success of the first phase. However, he suggests that funding must increase in non-traditional sectors such as ICT and 3D printing technology – sectors that are geared for a 21st-century economy and the fourth industrial revolution.

Qhena says the IDC has a new industries unit, which looks at investing in disruptive sectors. However, the lion’s share of funding is still going towards traditional sectors (see below).

Source: IDC 2017 annual report.

“Some of our interventions will disrupt even the traditional sectors that we are funding,” he says. “It’s well and good for us that we don’t restrict ourselves to traditional sectors.”




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The name Brian Naidoo sounds Indian, not black. Searching the internet his picture also indicates that he is Indian. When does “black” means non-white and when does it mean black? The coloureds and Indians are definitely not classed as blacks for government employment purpose but are they classed black for Dti assistance? Anyway to answer the question in the title, NO.

Government should create an environment which is favourable for the creation of business. Entrepreneurs of any colour do not need anything more.

As a country we dont need any more politicians turned businessmen, who have done so by corrupt means. By something more than creating a business friendly environment.

At present if a prospective black entrepreneur cant take advantage of the many financing institutions which are just waiting for a half decent business plan, then he/she does not really deserve to be in business.

Why? It’s so much easier to be a tenderpreneur. As a middle man who adds no value you can just sit back and collect a 150% mark up “consulting fee”. As long as the ANC runs the country there will be no progress.

Nah…..I figure that now I want more sophisticated things in life so I want the entrepreneur option. Rather have the bakery and the bread than only the bread you know. Want to be bidding for sophisticated things like buffaloes instead of simple BMW’s and versace’s. Tenderpreneurship? No friend. That era is gone.

Not everyone can a tenderpreneur/salesman, there’s only space for 1 person there and all the cheap wins are taken. You need guys to make the product too, so I think actually if there is an opportunity to cut out the middleman and collect 100% of the profits rather than giving half away, wouldn’t you rather be the manufacturer supplying Gov and Big business than a middle-man? Especially if you can get cheap funding to start the business?

R12 billion to 185 companies on average a cool R64 million each. Nice job if you can get it. Most people and small biz I know wont earn that in a life time.

ANC corruption is the biggest inhibitor to creating those elusive 100 black industrialists.

We will never really grow if we continue to focus on colour. Why can’t it have been “Can SA create an additional 100 industrialists?”?

I don’t know, getting tired of everything being turned into race. Black this, whit that. Hell, when will it become South African this, South African that? Us/our/we? Sigh…

A lot of people here commenting like this a corrupt activity from the IDC already. I have not been a BEE advocate at all, but I think this program (black industrialists) is the most brilliant thing any SA president has ever come up with (pre or post apartheid). It has a huge potential for normalization in the manufacturing sector, and it counters the skill drainage we’ve been experiencing as a country. Thanks JZ for coming up with this!

100 more BLACK industrialists to the detriment of who what knows!

Not likely. In SA it can happen that a black business man can take the business over from a majority white owned entity. This will happen with assistance from the state and loyal supporters. The wheel is invented, but the rules may see a new driver that get in the seat with assistance. How did Cyril Ramaphosa get where he is now?

Is there a list of the 102 black industrialists with their amounts and web pages available to the public?

Websites are marketing tools, therefore one assumes they have websites as part of their marketing strategies.

I think its a good program and concept. However I don’t think its start up focused enough. The risk measurement rules are as strict and the cost of funding is as high as commercial banks. In fact I see no difference between a black entrepreneur applying for funding at IDC or funding at a corporate bank other than the fact that the IDC only funds black individuals and has much stricter shareholder requirements. In many ways I think corporate bankers will be easier to deal with for black entrepreneurs.

Perhaps the IDC has better business support and mentoring programmes than commercial banks?

Sounds like a load of bollacks to me…. this is what Russia did and you end up with a handful of mates owning everything!!! R12billion would be better spent on education, housing and social upliftment …. that way everyone gets a slice of the action. Let entrepreneurs develop naturally – if they’re good enough to rise to the top, they will be able to raise legitimate funding for legitimate enterprises. And please stop with this BEE shite – South Africa is for ALL South Africans…after all there’s no discrimination when we have to pay tax!

It starts with beginning education. Children must be taught HOW TO LEARN!! The ANC has done its best to stifle any education progress. That means a couple generations will be under-educated. Thank You Naledi Pandoor for your useless Outcomes based education. I told you on the radio in about 2003 that there was NO EVIDENCE this worked ANYWHERE in the world.Meanwhile the world is dumping their unemployed here.

There is no indication how many jobs were created per rand invested or the return on capital or any other market discipline. In their absence, one must assume the worst.

There is also no indication of how these, ahem, “black industrialists” were selected.

With PIC funding, one may query if Iqbal “ANC’s Goebbels” Survé’s capture of IOL is one of them.

End of comments.





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