The New Industrialists

Drive around any of South Africa’s leafy suburbs and you are likely to see dozens of men standing on street corners looking for jobs. This is a reflection of the dire state of South Africa’s employment situation which is keeping the government on its toes trying to find solutions. One such solution is the Black Industrialist Programme (BIP).

The BIP, designed to support the new industrialists, has been shrouded in secrecy, with the Trade and Industry Minister, Dr Rob Davies, only showcasing four of these new industrialists during the budget vote in May 2017. This has left many asking: who are the new industrialists, what do they do, and what could be done to ensure that a noble project such as this one achieves its intended results.

Disrupting conventions

The four firms introduced by the minister in 2017 were Yekani Manufacturing, an information communication technology company; K9 Foods, a manufacturer of pet food; United Industrial Cables, whose core business is the manufacture of industrial cables; and Microfinish, a producer of valve guides and valve seat inserts.

Asked what the term new industrialist encompasses, the managing director of one of the showcased companies, Microfinish, Deshan Naidoo answers: “The new industrialists are business people who are diligent, knowledgeable, and committed to making a difference to both their business and social communities by utilising all opportunities at their disposal.”

The 29-year-old adds: “They are disrupting conventional business principles and are implementing tech-savvy, data-oriented decision-making and leadership.”

In his presentation to the media briefing ahead of the Department of Trade and Industry (DTI) budget vote, Davies said that the BIP “attempts to give effect to the inclusivity side of the efforts to promote industrialisation”.

At the same briefing, the minister announced that his ministry had supported “46 black industrialists and deployed about R2-billion in loan capital financing” on top of another R122-million in grant incentives made available by the DTI. The minister defines the new industrialist as “serious industrialists with real capacity to increase their performance through the programme”.

In January this year, at the South African Premier Business  Awards, Davies announced that his ministry was working on a new programme that would be a successor to the BIP .

R3.6-billion in funding

The vision statement for the policy that launched the BIP reads: “The vision of this policy is to facilitate the meaningful participation of majority black-owned and managed companies in the value chains of the key economic sectors of South Africa in a manner that promotes government’s priorities of inclusive growth and development.”

With funding of about R3.6-billion, the aim of the fund is to provide support to investments linked to manufacturing. Apart from the funds made available by government, the programme is also funded using money obtained from development finance providers like the National Empowerment Fund and the Industrial Development Corporation (IDC) which announced in 2017 that it would set aside R7.4-billion in funding the black industrialists.

When the DTI initiated the programme, it announced the objective of working with entrepreneurs to establish 100 black industrialists by March 2018 (later moved to March 2019). However, in a report by the ANC Today, the ruling party publication, the ANC’s then treasurer-general, Zweli Mkhize, was quoted saying that “much more must be done to effect fundamental and radical change in the economy; 100 industrialists just isn’t enough”.

The ANC Today continues to quote Mkhize who believes that the situation is different today from what it was pre-1994 as there are now “thousands of black professionals, technicians and entrepreneurs who have the requisite set of complex skills and industry experience as well as a track record of outstanding achievements to be trusted to become competent industrialists”.

However, the DTI indicates that the programme could not be opened to more than the initial 100 new industrialists because it has to be run in a feasible manner based on the available funds. The department hopes that once the programme is running and interest has been established more funds will be sourced to broaden the programme.

It is clear from both the definition advanced earlier by one of the participants, Naidoo, and the DTI that this is a programme that wants to create not only just participation by the black majority in the industrialisation of South Africa but also to have effective control of these industries. This is a different initiative from the Black Economic Empowerment Act, which aims to facilitate the participation of black people in businesses that are already established.

According to Naidoo “the core business of Microfinish is the production of valvetrain components used in internal combustion engines.” He adds: “The company exports more than 99% of its production to developed markets and via strategic international distributors.” According to him, Microfinish products are supplied to about 130 countries.

Another company introduced by the minister is K9 Foods, whose managing director is Fazielah Allie. According to the SA Government News Agency, K9 is the only 100% black woman-owned company operating in the pet foods industry. In 2017 it was awarded a contract to supply food and clothing retailer Woolworths with pet food. The company will now replace an Australian manufacturer that Woolworths was importing from.

The benefits

According to Naidoo, participating in the BIP has been of great benefit to his organisation. He says that “the global manufacturing industry is experiencing the 4th revolution and the domestic industry is in need of re-industrialisation; in order to achieve or maintain global competitiveness, it is necessary to invest in technology. Being a participant in the programme has supplemented this investment.”

For K9, Allie indicates to SAnews.gov.za that participating in the programme has made it possible for the company to meet Woolworths’ production needs.

The assistance has made it possible for the company to acquire “a state-of-the-art 3 600m² facility” and increased the number of its employees from 11 to 24 with plans to increase this to 35 in 2018.