Photo by: Duane Daws
Efforts by government to create a class of black industrialists are being hampered by a lack of support by the private sector, which has not been effectively engaged by the Department of Trade and Industry (DTI) to ensure conceptual buy-in.
“We haven’t done well at convincing big business that we need the creation of black industrialists, because we haven’t presented a good enough business case.
“The DTI needs to engage with the Top-20 JSE-listed companies and identify opportunities for black industrialists within their value chains,” former SABMiller Africa & Asia enterprise development manager Boipelo Nkadimeng asserted during a panel discussion at the Smart Procurement World conference, on Tuesday.
The DTI announced in August that it intended making sweeping changes to black economic-empowerment certification processes and preferential procurement policy in a bid to create a class of black industrialists and accelerate transformation in the local economy.
Describing this as a “radical” stage of the country’s economic “transition”, Trade and Industry Deputy Minister Mzwandile Masina said, at the time, that the department was in the process of engaging with National Treasury over the reform of the procurement legislation, as there was a “major” problem with the designation of goods and services under this legislation.
Business Unity South Africa (Busa) CEO Babalwa Ngonyama further noted on Tuesday that additional efforts would be required to advance the creation of black industrialists, primarily those focused on enabling easier access to finance for black entrepreneurs.
“We have money in this country, we’re not bankrupt, but it’s very difficult for black emerging suppliers to access this finance. We need to support suppliers with more development funding,” she argued.
Ngonyama added that Busa, in partnership with the DTI, was currently reviewing the structure of DTI incentives, which she said favoured big business.
“We want to downgrade these incentives so that it’s easier for small emerging suppliers to navigate,” she noted.
Advisory firm Signa Advisors MD Murray Chabant added during the panel discussion that, while South Africa had sufficient policy in place to support the creation of black industrialists, the on-the-ground implementation of this policy had proved challenging.
He believed policies created by the DTI to advance black entrepreneurs were not being implemented [by the private sector] in the spirit in which they were created.
“We need people to understand the need for black industrialists and there seems, in this regard, to be a lack of courage [among business] to implement government’s plans,” he commented.
Iterating Ngonyama’s position that access to funding was a primary constraint, Chabant noted that development banks were not adhering to their mandate of providing funding to businesses that had yet to prove themselves, but rather acted as risk-averse conventional banks.
“If your return on investment isn’t what the bank thinks it should be, then the development banks won’t even look at you. Thus, the biggest problem for [emerging black industrialists] is funding,” he said.
In August, Masina said the DTI had established an advisory panel to assist government to “work fast” in the creation of a framework strategy and implementation plan for the creation of the envisaged black industrialist class and would announce a suite of related incentives shortly.