Since the fall of institutional apartheid, Government has invested in an organised effort to reconstruct South African society through the socio-economic promotion of historically marginalised sections of the population.
In the realm of economic life, this implies the need to transform the patterns of asset ownership in a manner that reinforces the national objective of building a society that harnesses the power of diversity.
In light of the latter, Government developed various policy instruments with the objective of achieving an inclusive economy within the strategic framework of black economic empowerment. The intent of this is to transform the structure of South Africa’s economy in a manner that promotes spatial integration, high levels of decent employment, demographic transformation of our industrial assets, growth, and global competitiveness of black-owned enterprises operating in the manufacturing sector.
It is in the context of the above that the Department of Trade and Industry (the DTI) will be launching the Black Industrialist Programme mid-late November 2015. On 4 November 2015, cabinet approved the Black Industrialist Policy which aligns with the Industrial Policy Action Plan, the National Development Plan and the Nine Point Plan that was announced by President Zuma in the 2015 State of the Nation Address. The Minister of Trade and Industry, Dr Rob Davies will hold a separate media briefing to unpack and provide further detail on this policy.
The Black Industrialist Policy places particular emphasis on the need to strengthen and increase black participation and enhance entrepreneurial dynamism in the mainstream economy. According to the DTI, thus far R2 billion has been assigned to kick-start the incentive drive, with more funding expected to be raised from stakeholders such as commercial banks and Development Finance Institutions. Furthermore, multi-corporations and State-owned Enterprises are set to partner with the DTI to assist black industrialists with access to markets.
With the recent introduction of the new broad-based economic empowerment codes, Government has taken a rigid approach to support black industrialists in a bid to enhance South Africa’s industrialisation efforts.
The concept of black industrialists refers to black people who are directly involved in the origination, creation, high-level ownership (>50%), management, control and operation of industrial enterprises that derive value from manufacturing goods and services on a large scale, thereby acting to unlock the productive potential of our country’s capital assets for massive local employment. Government is essentially looking for black industrialists who not only make long-term commitments to business but are also medium-to-long-term investors.
The incentive seeks to achieve the following socio-economic objectives:
- Accelerate the quantitative and qualitative presence and participation of black industrialists in the national economy through state-backed integration plans – this includes the systematic ring-fencing of state procurement opportunities so that such opportunities are only accessible by black industrialists;
- Create greater industrial linkages amongst black entrepreneurs and established industrial enterprises;
- Improve the capacity and competitiveness of black manufacturers through the use of modern technology and innovation; and
- Utilise black industrialists for economic growth, economic transformation, employment creation and sustainability.
Targeted beneficiaries include established industrialists with extensive experience, operations, and track records in their respective industrial sectors who require support to expand their operations and/or improve their business efficiencies. Also included are emerging new black industrialists in pursuit of starting a new business or taking over brownfield projects.
Government has been quite strategic and smart in selecting priority sectors that make the greatest contribution to the economic hub. These include the likes of:
- Clean technology
- Mineral beneficiation
- Creative arts
- Pharmaceutics, and
- Automotive components.
The challenges of accessing capital and markets, developing the necessary technical skills and improving productivity are without a doubt the main constraints confronting black entrepreneurs in general. This is often due to the limited pool of financiers, lack of security to back up loan applications, high cost of borrowing and, simply put, fear of rejection when applying for loans. The Black Industrialist Programme responds to these challenges by offering the following support:
- Investment grants and equity loans for the purpose of acquiring, constructing, expanding or rehabilitating plants;
- Working capital support via low-interest concessional loans;
- Incubation and mentorship support for emerging entrepreneurs and enterprises;
- The creation of a portal for networking and match making;
- A joint venture support package consisting of an investment grant and an equity loan;
- Funding of feasibility studies, licenses and quality assurance standards on a cost-sharing basis; and
- Export support in the form of export insurance funding and market access support.
If we want a strong economy that is inclusive and sustainable, we must address the challenges that black businesses face. In so doing, we will broaden the industrial foundation together, as a diversified nation.
By Rorisang Tabane, Assistant Manager in PwC's Incentives Practice.