Missing element in dti’s plan is the banks

THIS week, Trade and Industry Minister Rob Davies gave an update report on the black industrialists programme.

According to his department, 107 applications have been received since the launch of the programme earlier this year. Five applications were approved to the tune of R553-million; three were totally rejected. Many have been sent back to the applicants for further work.

At first glance, 107 seems low for a programme that seeks to leapfrog black business from small business to large industrial players, accelerating economic transformation.

But if you consider that the approval committee first considered applications at the end of March, and that the minimum investment was R30-million, it was to be expected that transactions would be few. Besides, it’s still early days.

The deputy director-general for broadening participation at the department, Sipho Zikode, said the first five successful applicants to the programme were from the plastics, pharmaceuticals, metals, electro-equipment and agri-processing industries.

“The whole idea is to create people who will have influence in the sectors they play in. People who will be able to influence the whole value chain of their industries. So we are expecting to deal with large projects and to accept that there won’t be too many of those around,” he said.

A big chunk of the applications was apparently from agri-processing projects, which was encouraging given the sector’s largely untapped potential, its ability to create jobs and its importance to food security.

My only criticism remains the plan’s exclusive limitation to manufacturing and its subsectors.

This week, Stellenbosch University’s Professor André Roux, author of Everyone’s Guide to the South African Economy, made the point that “with or without junkbond status our economy remains in distress”. He pointed to our production factors not being used efficiently. “It is becoming difficult to be internationally competitive on the export side — in fact, imported goods are often cheaper than locally produced goods. This lack of competitiveness is aggravated when wage increases are in excess of productivity increases,” he said.

If you look at various sectors and their contributions to GDP, you will note that manufacturing has been slipping since 1989 from around 24% to about 13% currently. The financial services, real estate and business services sectors are 21% of GDP. The retail, hospitality, transport and communication industries give another 22% of GDP.

Given the low base of large black-owned and black-led businesses, how can we justify leaving out other industries?

While there is clear appreciation of the broader impact and importance of the manufacturing sector, especially in its ability to create jobs, it would be foolhardy to believe that only one sector should be the focus of a national and, dare I say, politically important, programme such as the black industrialists programme.

Perhaps it’s a case of the tail wagging the dog, with the programme being located in trade and industry as opposed to a department with a wider economic mandate, such as economic development.

The other reality is that trade and industry is the custodian of the grant funding, which acts as equity, allowing development finance institutions such as the Industrial Development Corporation, National Empowerment Fund, Land Bank and Development Bank of Southern Africa to adequately gear the projects.

A conspicuous absentee in this conversation is the commercial banking industry. What role are the banks playing in the black industrialists programme?

We are all too happy to poke holes in the government’s attempts, but aren’t asking about the custodians of the most important catalyst of growth in any economy: capital.