IDC denies politically connected elite has ‘hijacked’ black industrialist scheme

22nd June 2018 By: Terence Creamer - Creamer Media Editor

IDC denies politically connected elite has ‘hijacked’ black industrialist scheme

Economic Development Minister Ebrahim Patel has promised that the IDC will release the names of beneficiaries
Photo by: Creamer Media

South Africa’s Industrial Development Corporation (IDC) has defended the integrity of the credit approval processes for its flagship Black Industrialist Programme and has given the assurance that the scheme has not been captured by individuals with connections to the governing African National Congress (ANC), as suggested in a recent media report.

The programme, which is aligned with government’s Industrial Policy Action Plan (Ipap), has become a core feature of the State-owned development finance institution’s lending activities in recent years. In 2017/18, approvals of R7.9-billion were made under the scheme out of total approvals of R16.7-billion.

The IDC’s total funding support to black industrialists, since 2014, stands at R16.9-billion. Approvals for women- and youth-owned firms remained at R2.2-billion and R1-billion respectively for 2017/18.

However, an article published on the front page of The Star on Thursday suggests that many of the programme’s 128 beneficiaries have ties to the ANC. It quotes South African Federation of Trade Unions general-secretary Zwelinzima Vavi as describing the programme as yet another example of the broad-based black empowerment concept being hijacked by South Africa’s black elite.

The article arose following the release of an answer by Economic Development Minister Ebrahim Patel to a Parliamentary question posed by Economic Freedom Fighters Member of Parliament Ntokozo Hlonyana. The reply included an Annexure, which named each of the Black Industrialist Programme beneficiaries.

IDC divisional executive for corporate affairs Zama Luthuli describes the tone of the article as “unfortunate” and insists that the programme is being operated in strict adherence to the IDC’s in-house credit-approval processes.

She also notes that the publication of the list of beneficiaries, including those considered to be politically exposed persons, or PEPs, is in keeping with a renewed commitment at the IDC to full transparency and good governance.

She tells Engineering News Online the approvals process is also fully aligned with South Africa’s Financial Intelligence Centre Act, as well as the international Financial Action Task Force on Money Laundering in the way it deals with PEPs.

Individuals flagged as PEPs are not excluded from accessing the programme, but are subjected to a rigorous due-diligence exercise as part of the larger due diligence that is undertaken for all transactions. Should PEPs fail to comply, the transaction is immediately disallowed.

Since April 1, 2017, the IDC has also committed to publishing the names of all beneficiaries on its website on a quarterly basis. The names of all beneficiaries of IDC funding until April 1, 2017 can be found on the IDC’s website using this weblink.

Recipients of loans extended under the Black Industrialist Programme also have to meet the criteria for the scheme, including having black ownership of greater than 50% and/or having black individuals exercising of control over the business. The black owners should also be operationally involved and take a personal risk in the business, which should be a manufacturing enterprise, or in a sector supported under Ipap.

“We remain convinced that this is a good programme and will not be deterred from continuing to fund black industrialists,” Luthuli states.