BUSINESS DAY NEWS

Business / Trade & Industry

Definition of black industrialist ‘is strict’

BY BEKEZELA PHAKATHI, 16 SEPTEMBER 2015, 06:18

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Trade and Industry Minister Rob Davies. Picture: TREVOR SAMSON

THE definition of a black industrialist will be strict and tight, according to Trade and Industry Minister Rob Davies.

But Mr Davies, who spoke to Business Day on Tuesday, did not specify the basis of the assertion or say whether he was referring to fronting, which has dogged black economic empowerment (BEE).

The Broad-based Black Economic Empowerment Amendment Act, which came into effect in October last year, made fronting a criminal offence.

The state will be strict in determining who qualifies for the multibillion-rand scheme to bolster the creation of large and competitive black industrialists.

"This (policy) is not a way someone can dress themselves up differently and call themselves an industrialist," Mr Davies said.

Last month he said no black industrialists had been chosen for the programme as a policy framework was still to be approved by the Cabinet. Last year the department established the black industrialists’ development programme, which aims to create more than 100 industrialists within three years in an effort to revive the sector.

On Monday Economic Development Minister Ebrahim Patel said the Industrial Development Corporation would spend R23bn to fund more than 100 black industrialists in the next three years.

The state will help black-owned manufacturing companies access finance and markets, develop skills, and improve quality and productivity, according to the scheme’s outline.

Mr Davies said the black industrialist policy still had to go through final Cabinet processes before more details on qualifying criteria could be made public.

He said the manufacturing sector remained the most "untransformed" in the economy.

"We are now applying the codes of good practice as required under the amended BEE Act, which means we will be making requirements on people that draw on our incentives that they develop a BEE programme," Mr Davies said.

A number of companies had benefited from the department’s support measures, including clothing and textile companies through the competitiveness improvement programme, he said.

Mr Davies visited the factory of Prestige Clothing, the manufacturing arm of The Foschini Group, which he said had made progress after improving its production through the programme.

Prestige Clothing CEO Graham Choice said of the 6-million garments sold to TFG’s retailers last year, 41% went from concept to store in under 56 days.

BUSINESS DAY NEWS

Business / Industrials

Blacks urged ‘to build, make things’

BY MARK ALLIX, 15 SEPTEMBER 2015, 05:58

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Economic Development Minister Ebrahim Patel: 'We want to say to fellow black South Africans ‘get into the economy — build things and make things.’ Picture: TREVOR SAMSON

THE government is intent on increasing competitiveness in SA’s economy through preferential procurement and developing black industrialists, says Economic Development Minister Ebrahim Patel.

Empowerment through equity alone has limited value, and black South Africans must be able to produce goods and services using localised inputs for sale in SA and the rest of Africa, he said on Monday on the sidelines of the results presentation of the Industrial Development Corporation (IDC).

"If we don’t watch (the creation of black equity stakes in businesses) carefully it simply becomes like a tax on companies. We want to say to fellow black South Africans ‘get into the economy — build things and make things’," he said.

The IDC said on Monday it had spent R5.9bn on 85 empowerment transactions in the 2014-15 financial year. This was more than half of the total R10.9bn disbursed during the year, which was close to the previous year’s R11.2bn.

The development finance institution raised borrowings from R21bn to R24bn, increasing financing costs in the period. Operating profit fell 60%, but profit for the year rose a marginal 1% on gains in equity accounted investments.

IDC chief financial officer Gert Gouws said total impairments had declined. But the corporation had made a book loss of about R17bn on its investments in blue-chip companies amid the global commodities rout. These included big losses on Kumba Iron Ore, Sasol and steel maker ArcelorMittal.

However, there was still plenty of financing headroom, despite the IDC’s debt to equity ratio in the year rising to 27% from 20%. The board had a mandated debt to equity ratio of 50%, he said.

Mr Patel reiterated that the IDC would spend R23bn to fund more than 100 black industrialists within the next three years.

This was about 22% of budgeted IDC investment over the next five years.

Another R4.5bn would be spent on women and youth-empowered businesses each.

The IDC had boosted industrial funding over the past five years to R61bn and would raise this to R100bn in the next five years.

Private sector contributions should double this amount, on the basis of a historical ratio of R2 of private sector funding for every R1 of IDC spending over the past decade.

In the past 21 years the IDC had provided R28bn to black-owned businesses, and more than R53bn for general black economic empowerment.

In the last financial year it had refocused spending from renewable energy to manufacturing, mining and infrastructure.