President Cyril Ramaphosa used the inaugural conference about a programme aimed at propelling black South Africans into the big league as industrialists to set out his stall about what he wants corporates to do to promote transformation.
“We want concrete proposals on how to leverage both capacity and resources from across society. We want a frank conversation about impediments to the expansion of black business, not just from government but from the private sector as well,” said Ramaphosa, who gave the keynote address at the Black Industrialists and Exporters Conference in Sandton.
The comments by Ramaphosa, who was accompanied by trade, industry & competition minister Ebrahim Patel, could pile pressure on companies wanting to do business with the government to support its transformation agenda.
Launched in 2015 within Patel’s ministry, the black industrialist programme is part of Patel’s industrial policy goals to deal with the shortcomings of BEE, a policy that has been widely criticised for enriching politically connected individuals and failing to create a meaningful cohort of black South Africans who control productive enterprises in key sectors of the economy.
It has doled out about R44bn in funding at “favourable” interest rates to more than 900 businesses and projects, thanks to the government-owned financiers, the Industrial Development Corporation (IDC) and the National Empowerment Fund.
“Most of the funding to black industrialists has been in the form of loans and not grants, [meaning] that money has to be paid back,” Patel said during a media briefing.
Patel said there are many programmes which allow companies to support transformation such as the supplier development programmes, which broadly means a company could sometimes be legally required to buy from domestic sources.
The programme was thrust into the spotlight more than a decade ago when Patel, who was then the minister of the defunct economic development department, sought to have Wal-Mart meet targets on local suppliers for its acquisition of Massmart to get regulatory approval.
Constrained
The government has pointed out that given many black businesses are constrained by a lack of collateral and capital, the state has to provide more focused interventions to support black industrial start-ups, while continuing to support firms that are broad-based BEE compliant.
Patel suggested private players can step in to support the project and that SA could consider improved public funding for the IDC in order to fast track transformation.
Giving Brazil as an example, the minister said the South American country’s development finance institution receives regular funding similar to UIF contributions.
“And we think we should do that, but we understand we have other competing interests, like health, education, etc,” Patel said. “We will always have companies that do not qualify because of the limited budget that we have.
“What the department relies on is first the balance sheet of the IDC.”
Value chain
The state will specifically seek to support companies in the food, beverages and entire agriculture value chain, the minister said.
“We have seen now with a number of global crises which have pushed energy and food prices up across the world. Countries that have a greater supply of food have some buffer against these enormously high price increases, and so food will always be an important area that we want to focus on,” Patel said.
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