Lu­mi­nat­ing the way for­ward

A dif­fer­ent view on the Lu­mi­nance fund­ing de­ba­cle, and BEE in gen­eral

Finweek English Edition - - INSIDE -

Once upon a time, in a king­dom far away, a wise king r uled over t he l and. The king­dom was boun­ti­ful, but some of the sub­jects were un­happy and wanted a bet­ter life for them­selves. One day, two of th­ese loyal sub­jects asked for an au­di­ence with the king.

“What can I do for you?” asked the king af­ter wel­com­ing them into his cham­ber.

“Well, sire,” be­gan the f irst man, “I would dearly like to own a farm and grow my own pota­toes.”

“Very good,” replied the king, “and what can I do to help?”

“Ac­tu­ally I’m a bit lazy, sire, and I have no de­sire to learn how to till the soil and plant the pota­toes my­self. I would much rather just take over my neigh­bour’s potato farm. He has been work­ing the soil for many years and ev­ery year he pro­duces the most de­li­cious pota­toes in the land. Why should I put in the hard work when I could sim­ply take what he pro­duces? That would be much eas­ier! I would like you to in­struct him to hand over 25% of his farm to me. Oh, and you might have to throw in one or two gold coins to make him feel a bit less un­happy about the whole sit­u­a­tion.”

The king was not pleased. He threw up his hands in anger and ban­ished the lazy man from his pres­ence. Then he turned to

the sec­ond sub­ject. “And what can I do for you, my dear man?”

“I too would dearly l i ke to own a potato farm. It’s my dream.” He gazed out the win­dow and pointed to a dry empty piece of land in the dis­tance. “You see that piece of land? To you, it’s a dusty piece of earth, but to me it’s my fu­ture. I would love to buy that land, till the soil, plant the seeds, and cre­ate a lit­tle piece of par­adise where noth­ing ex­ists to­day. And I would like to hire lo­cal towns­folk to help me re­alise my dream.”

“What do you need from me?” asked the king.

“I do not ask much, sire,” replied the man. “Just two sacks of gold to help me buy the land at a fair price. I prom­ise to pay you back ev­ery last gold coin you lend me. And I’ ll even put in my own sack of gold to show you how com­mit­ted I am. You’ll see, in no time at all, there will be more pota­toes for your peo­ple to en­joy, and your king­dom will be a bet­ter place.”

The king was very pleased. He gave the man what he wanted, and they all lived happily ever af­ter.


If only this South African fairy tale were true. In re­al­ity, the king is not so wise, the sec­ond man is ban­ished from the king­dom in­stead, and the f irst man gets what he wants. In fact, in mod­ern day South Africa, the king says to the f irst man: “Why do you want to take over 25% of the pre­vi­ous owner’s potato farm? That means you’d ac­tu­ally have to l e a r n t o g r ow pota­toes on your new land. That sounds like hard work. Let’s rather get the pre­vi­ous owner to hand over ev­ery fourth potato he grows to you. That way you don’t even have to get your hands dirty!”

Yes, this is a rather cyn­i­cal take on the BEE land­scape, but it’s one which rep­re­sents the views of a lot of South Afri- cans. And it is one which came into stark view with the re­cent furore over the fund­ing of Lu­mi­nance by the National Em­pow­er­ment Fund (NEF).

The NEF pro­vided a loan of R34m to Ndalo Lux­ury Ven­tures (NLV), a fash­ion and life­style re­tail com­pany founded by suc­cess­ful en­tre­pre­neur Khanyi Dhlomo, to open a lux­ury bout ique i n up­mar­ket Hyde Pa r k . The name of the store, Lu­mi­nance, is taken from Dhlomo’s own first name, Khany­isile, which means “light”.

Ac­cord­ing to its web­site, Lu­mi­nance is a “high-end fashi on a nd l ifest yle bou­tique depa r tment store for con­sumers who covet world-class qual­ity and beauty.” This world-class qual­ity and beauty doesn’t come cheap – for ex­am­ple, you can pick up an orig­i­nal Os­car de la Renta cre­ation for a whop­ping R80 000, or a Baby Dior col­lec­tion bib for a stag­ger­ing R960.

The NEF trans­ac­tion has been widely crit­i­cised across the board. The SA Cloth­ing and Tex­tile Work­ers’ Union called it a dis­grace which “un­der­mines lo­cal pro­cure­ment of cloth­ing, tex­tiles, and leather goods and hence pro­motes lo­cal job losses.” Op­posit i on pa r t i e s were equally dis­mis­sive, say­ing it was “anyt hing but broad­based and es­sen­tially amounts to em­pow­er­ing the em­pow­ered”. Even Julius Malema chimed in: “It’s un­ac­cept­able to f inance the e l i t e who are al­ready swim­ming in riches, it’s money down the drain when our peo­ple re­main poor and dis­ad­van­taged. She should re­turn the money im­me­di­ately.” In re­sponse to this crit­i­cism, trade and in­dus­try min­is­ter Rob Davies is­sued a direc­tive in terms of which, go­ing for ward, Govern­ment funds may not be used to sup­port the im­por­ta­tion of f in­ished goods and ser­vices.

The South African pub­lic has been par­tic­u­larly vo­cif­er­ous in its con­dem­na­tion of the deal, if com­ments on news web­sites and so­cial me­dia are any­thing to go by. At the risk of go­ing against pub­lic sen­ti­ment, I think Dhlomo has been given a raw deal. Let me ex­plain why.


As any en­tre­pre­neur will tell you, it’s not easy start­ing a new busi­ness. In fact, it’s re­ally, re­ally hard. Re­search shows that 63% of small busi­nesses fail within the first two years and this fig­ure goes up to an 80% fail­ure rate within the first five years. Th­ese are sober­ing num­bers.

It is against this back­drop that the NEF must ful­fil its man­date of “pro­mot­ing and fa­cil­i­tat­ing black eco­nomic par­tic­i­pa­tion by pro­vid­ing f inan­cial and non-f inan­cial sup­port to black em­pow­ered busi­nesses”. In the­ory, it would be great if the NEF could loan 34 young black busi­nesses R1m each in­stead of giv­ing R34m to one in­di­vid­ual. This

Khanyi Dhlomo

Lu­mi­nance store in Hyde Park

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