Luminating the way forward
A different view on the Luminance funding debacle, and BEE in general
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.
LET’S COME BACK TO REALITY…
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.
IT’S NOT EASY
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
Luminance store in Hyde Park