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.
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.
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.
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
|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.