THE GOVERNMENT is quite right to be concerned that so long after the 1994 elections, the bulk of business is still in the hands of a minority, and the aspirations of so many black South Africans remain unfulfilled.
So I am fully in support of the Black Industrialists (BI) strategy to make our industrial landscape more representative of our demographics.
A sign of the government’s commitment comes with the recent announcement by the Department of Trade and Industry (dti) that the first projects under the BI programme have been approved.
But there is a hole in the support framework, which may lead to many worthy would-be applicants for support being automatically disqualified. This is because to qualify for the BI incentive, you need to be making a minimum investment of R30 million. Which is great for the larger entities, but what about the others?
State support measures to date have largely failed to directly touch smaller black businesses, as the incentive payouts have mainly been to the advantage of the bigger firms.
The position in South Africa is that small, medium and micro-sized enterprises (SMMEs) employ more people than large private sector firms and the government combined, so it is worrying that so much of the pool of government incentives is being directed to an elite few – but not to the array of smaller businesses.
By virtue of the R30m minimum threshold in the new BI programme, a lot of important businesses will be missing out, and don’t forget that many of these businesses are black, run by people with the potential to be the black industrialists of the future.
However, without the helping hand of incentives, these smaller businesses will struggle the most in terms of getting financial support from the banks and other lenders.
Almost perversely, given that the previous government support programmes have mainly benefited established businesses, it would be worrying if the new BI incentive just continues this trend, worthy as its objectives clearly are.
Of course, there is a Department of Small Business, but it is in its infancy and does not have the scale of resources that are available to the dti. There is Black Business Supplier Development Programme (BBSDP), but this only caters for people investing up to R1m in capital equipment. As a result, there is a huge lacuna in funding for black businesses with projects of between R2m and R30m.
President Jacob Zuma at the the Black Industrialists Indaba last year. The writer says investments must be channelled to the black entrepreneurs who need it most. PHOTO: DOC
The now-suspended Manufacturing Competitiveness Enhancement Programme (MCEP) could close this gap, but it is no longer accepting applications. The government must again consider whether we can de-racialise the economy while leaving out small black-owned businesses?
If we create 100 new black industrialists to dominate, will this leave out other businesses? Surely the government must also fund projects by black entrepreneurs, which fall below the R30m mark – especially if those involved have experience and a proven track record. These are the projects and companies that have the biggest potential for growth over the next decade.
There are sector-specific programmes for companies in film-making, business outsourcing, the automotive sector, and so on – and it is welcome that agro-processing is being added to the list. However, there will still be black businesses in other sectors that fall outside the net, and can expect no help from the government.
We must have a re-think and look at real need and growth potential where we support black businesses – and the white ones for that matter.
You need to look at the people who need the funding rather than those for whom it is an added bonus. Having 100 mega rich people at the top is not indicative of transformation as a whole. We need an inclusive economy.
Will 100 black industrialists reflect the sort of growth and transformation we need? The solution is to change the threshold for the BI incentive – or to come up with another measure to plug the eligibility gap. What can’t continue is that so many deserving black businesses, with massive growth potential, are being starved of funds while the elite benefit.
Philisiwe Hlongwa is with Cova Advisory, which is sponsoring a session on Black Industrialists at the forthcoming Manufacturing Indaba.