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SA’s Black Industrialists Programme gets its first report card

‘Many lessons learnt’; will be used to make ‘the funding support of government more targeted and efficient’ – Patel.
Among the outcomes is the exporting of cooler boxes, internal doors, train brake shoes, wine and machine cutting tools. Image: Shutterstock

Some 793 black industrialist businesses have been funded R18 billion over the last five years by the Department of Trade, Industry and Competition (dtic), the National Empowerment Fund (NEF), and the Industrial Development Corporation (IDC) – with 118 572 jobs created/saved. The total approved funding is R32 billion.

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The inaugural annual report heralding the achievements, the Black Industrialist Report 2021, was launched at a Black Business Council event on April 21 by Minister of Trade, Industry and Competition Ebrahim Patel.

Patel claimed that: “This funding has supported the creation of new and dynamic enterprises in a number of critical value chains across all nine provinces, crowding in additional investment from the private sector as well as creating and saving nearly 120 000 jobs.”

The industrialists and entrepreneurs who received support represent a range of sectors from food production to the fourth industrial revolution.

‘New entrepreneurial class’

Patel said the funding is “creating platforms for a new entrepreneurial class to play its rightful role in boosting industrialisation and fully harnessing the resources of our country”.

“These platforms have been enhanced by the dtic even further through reforms enabled in competition law, efforts to improve the ease of doing business and the implementation of the national sector masterplans,” said Patel.

Patel opined that this focus on transforming SA industries will “make them more dynamic and competitive”, boost domestic demand, and expand access to export markets.

The investment in new industries is expected to reduce imports by 20%, and the implementation of the African Continental Free Trade Area (AfCFTA) will further expand opportunities for South African industrialists.

Read: Is the National Empowerment Fund living up to its name? (Nov 2019)

The media statement accompanying the report submitted that the black industrial programme supports the objectives of the Economic Reconstruction and Recovery Plan in developing the country’s productive capacity and reducing reliance on imported goods, aiming to increase local industrial capacity by up to R200 billion annually within five years.

If achieved, this “can add an additional 4% to annual GDP”.

One would expect that National Treasury will include these projections in the medium-term budget policy statement that should be released in October 2021, supported by data.

Exciting developments

Existing opportunities have been exploited, resulting in exciting new developments – including “exporting of cooler boxes to Mozambique; hollow core internal doors to Botswana; train brake shoes to Zimbabwe; wine to Ghana; and machine cutting tools to Mauritania”.

Patel spoke about the “many lessons learnt over the last five years, which we will use to make the funding support of government more targeted and efficient”.

Transformation and empowerment policies

Transformation is wider than broad-based black economic empowerment (B-BBEE) policies and embraces:

  • Faster and more inclusive growth will be achieved by “transforming the structure of the economy” by, for example, introducing new competition policies to “level the playing field”;
  • “Growth-oriented industrial policies” will reduce reliance on raw material exports; and
  • Broadening the base of entrepreneurship and the “talent pool of enterprises”.

The report recognises the challenges posed by ‘fronting’, where black-owned firms lend names to tender documents, or fraudulently put names in shareholder registers. Increased regulations and a hotline to report fraud and fronting will solve the problem.

Promoting transformation

Transformation will be promoted by various means as set out below:

  • Industrial funding (provided by the dtic, NEF, IDC, and by “crowding in additional investments” from the private sector;
  • Competition settlements: B-BBEE, SDFs (which Moneyweb believes to be ‘skills development facilitators’) and localisation;
  • Competition settlement market access measures that create new commercial opportunities;
  • B-BBEE codes and charters;
  • Equity equivalent investment programme through which multinational corporations support local entrepreneurs;
  • Masterplans: empowerment commitments obtained as part of masterplans in sugar (R1 billion), poultry, clothing and autos (R6 billion);
  • Special economic zones and industrial parks;
  • Small and medium enterprises (SMEs), townships and rural economies; and
  • State preferential procurement.

Empowerment policies include the promotion of local procurement; entry of black South Africans, young people and women into management; skills development for blue-collar workers; and bursaries for young persons.

Black Industrialists Scheme explained

The Black Industrialists Scheme (BIS) offers grant funding and loan funding from the IDC, NEF and other development finance institutions, commercial banks and equity funders.

Support is offered on a cost-sharing basis towards:

  • Capital investment funding
  • Feasibility studies
  • Business development services

The cost-sharing grant ranges from 30% to 50% of the approved funds to a maximum of R50 million.

The quantum depends on the level of black ownership and management control in the business, the economic benefit of the project, and its value.

The project must have a minimum investment of R30 million and should secure or increase direct employment.

The black industrialist must be directly involved in the day-to-day running of the operation and must have expertise in the sector.

The BIS incentive invested more than R4 billion in projects owned by black industrialists, about 20% of which were accessed by black female industrialists

Breakdown of the funding

IDC dtic NEF Total
Black industrialists 313 135 414 862
Value approved R24.5 billion R4 billion R4.3 billion R32.8 billion
Projected investment R36 billion R13.5 billion R16 billion R65.5 billion
Projected jobs to be created 22 719 11 899 28 833 63 451
Projected jobs to be retained 46 063 8 535 11 711 66 309
Disbursements R14.3 billion R1.6 billion R2,7 billion R18.6 billion

Note: Readers may note some discrepancies in the numbers (taken directly from the report) in comparison with the figures quoted by Patel.

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COMMENTS   17

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And how many of these 793 businesses are still standing? Were successful in other words? That is what a report card tells you in the end, did you pass or fail.

I suppose it’s an F.

The loss and wastage and premiums paid make it a FAIL to the SA citizens as well.

A nation’s economy is like sheep farming. The efficient farmer focuses his selection process for fertility on the basis of lambs raised per ewe. The less productive farmer selects for many things simultaneously. He breeds for wool quality and quantity, body shape, no horns, size of lambs, etc and he shows no progress in anything. The number of lambs weaned per ewe determines the productivity and profitability of sheep farming. For some farmers, this figure stands at 60%, while it is over 130% or others.

When the fascists ANC government selects for the colour of entrepreneurs, they are selecting against the performance of entrepreneurs. They are breeding a class of entrepreneur that will be forever dependent on special treatments, protection against competition and handouts. Like the hand-reared lamb, this entrepreneur will never adapt to real life. The government will have to feed him with a bottle and his offspring will be even more dependent on the government.

This is how you go bankrupt slowly while your neighbours get wealthy. The economy is a pet project for this government where they allow certain players and discourage others, based on skin colour. This is how you destroy a tax base and set your newly-selected industrialist pets up for failure. Why will there be any difference in results between emerging farmers and emerging industrialists? The losses will be counted in billions now, and not in millions anymore.

LOL, nice analogy. And those handslammers will come and butt you when they are big.

Exactly. They will fight each other in the future for access to the politician who bottle-feeds them. Then, they will scheme against each other to channel funding away from some to benefit others who are already privileged. This is another gravitational black hole that consumes taxpayers, not only taxes.

Statistically, 85% of all new businesses fail over a period of 5 years in a market economy. Those failed entrepreneurs used their own assets as collateral. They will pay for their own mistakes. In this government-sponsored looting spree, the taxpayer will foot the bill for other people’s mistakes.

If it had a workable business plan, clever individuals would have explored it out of their own free will, using their own money. This is why the government has to hobble white entrepreneurs to benefit black social grant projects. They punish viable businesses to promote future failures.

This is not how you build a winning nation. This is how you breed a nation of losers dependent on handouts.

Funding from Gov has already been efficient at quickly creating an “ Oligarch Class” of Black entrepreneur who spend their gains on flashy lifestyles rather than the future of the business that has enabled this wealth. Until Black business is seriously considering long term investment, job creation and fiscal support….this new targeted funding will just continue to create an artificial layer of entitled connected spendthrifts. Happens in every new Democracy but happening a lot quicker here thanks to the tax contributions from the political minority! In my opinion this is what BEE has really been about.
If SA was a genuinely Democratic Rainbow nation – this Gov funding opportunity should be given to ALL South Africans no matter their skin colour and racist BEE policies should be relegated to the rubbish bin. It’s time.

This program was initiated to benefit Jacob Zuma’s hundred closest friends.

I would like to see an audit of these “industrialists”.

Also, the program is inherently racist by excluding the tax payers who fund this program.

According to these figures it cost R150 000 to create/save a job.

The ANC knows all about fronting, after all, Jacob fronted for the Guptas for many years.
As for application of the competition law, how about making it applicable to Eskom and the Post Office?

I’m afraid ‘jobs saved’ is Patel-speak for public money thrown at failing enterprises.

This Patel has quite a tongue on him. Amazing use of the English language.

Very difficult to take the picture he paints and compare it to the actual.

this is the open shoes and t shirt turkey.

Do they provide a portfolio summarizing the investments – like one sees in a Private Equity fund?

Name, website, business description, key terms, milestones, etc?

Don’t spoil a good story with facts … this smacks of the Soviet 5 Year Plans. I think we all know how that ended.

‘……..793 black industrialist businesses have been funded R18 billion…’

That is R 22 698 612.86 per industrialist. WOW.

Wish I could self-identify.

Money spent is the criteria for success.

I wonder if Mr Patel could just get the Post Office to get back to work for a start.

This actually makes me feel sick.

Sounds like a wish list rather than a report card? The Government acting as lawnmower parents, removing all obstacles and market challenges in the path of their little protégés in nappies, will not ultimately result in good report cards … in my humble opinion.

End of comments.

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