Billions lent to thousands of black firms through government programme

In 2016, Nhlanhla Dlamini decided to start a business manufacturing pet foods after seeing a gap in home-grown products that could be exported to international markets.

He founded Maneli Pets, with an ambitious target of creating 1,000 jobs.

Dlamini — who has a background in management consulting — is a recipient of funding via the government’s black industrialists’ programme, established eight years ago to provide funding and other forms of support to blackowned firms seeking to scaleup and compete with established players.

“South Africa has some of the best meat.

“It felt like a good opportunity to enter this market and no-one was exporting [locally produced] pet food and treats to the rest of the world, so I set out to do that,” he told Business Times at the recent Black Industrialists and Exporters Conference held at the Sandton Convention Centre in Johannesburg.

Over the last 13 years, the department of trade, industry and competition (DTIC) — through the Industrial Development Corporation (IDC) and National Empowerment Fund

— has advanced more than R100bn in loans and grants to 1,714 black-owned companies as part of the programme.

The department defines black industrialists as those running entities that are majority black-owned.

Companies that are blackcontrolled also qualify under the programme.

The department says this differs from “black empowered” companies, which refers to firms in which black South Africans have a shareholding above 25% but do not have majority control or ownership.

The industrial sectors covered are manufacturing, mining, agriculture and a range of productive services such as ICT and logistics.

Maneli Pets received a R12.5m grant from the department in 2016.

A loan from the IDC enabled the company to set up a manufacturing facility in the east of Johannesburg.

Dlamini said he and other equity partners also put in their own money.

Today, Maneli Pets is one of two companies exporting to Europe and Asia, and it is the only company selling locally manufactured pet food to North America.

It boasts Checkers, Absolute Pets and Woolworths among its clients locally.

Dlamini employs 30 people, but this is down from a peak of 190 before Covid-19 struck.

He said 85% of the business was exports, which were wiped out by the pandemic.

However, he is confident Maneli Pets can add jobs as it adds clients.

Dlamini ran the business solo for nine months, then later, through an angel investment, added another person.

Though the application process was long and onerous, Dlamini said “the funding support was meaningful and helped us get through the first few years”.

“Beyond the initial funding, we also applied to other agencies such as the Small Enterprise Development Agency [Seda] for small grants to help the company grow.”

No 1 Hair Industry chief executive and director Andrew Lebitsa is another recipient of a grant from the department and a loan from the IDC, which helped him set up a factory to produce synthetic hair used for braids.

He started the business in 2019 but Covid-19 derailed production as machines were stuck at ports for months due to lockdowns around the world. The company employs 60 people but plans to increase this to 150 “when we operate at full capacity.

“We are still trying to build our client base”, he said.

It supplies wholesalers and is in discussions with retailers to stock its products.

Lebitsa said the department helped him expose the business to trade fairs outside the country, but he would like to see more non-financial support for small businesses.

Speaking at the conference, Absa Corporate & Investment Bank managing executive for the public sector, Steve Seaka, said red tape and tedious funding application processes were a challenge for entrepreneurs.

He suggested creating a template to be used across funding institutions for faster turnaround times.

“In other markets, they call it a certificate of competence.

“If someone [from another institution] has checked it, the next person to check it should not take much time on it.

“We need to have a workshop around one template to reduce time for entrepreneurs.”

Minister of trade, industry & competition Ebrahim Patel said there was scope to improve on the turnaround time for funding, and room to cut more red tape.

“Markets don’t stand still when a business plan is developed and funding is required.

“If you wait too long, opportunities may disappear.

“While funding agencies want to be thorough because loans have to be repaid ... we want to transform and scale-up technical expertise to do this faster,” he said.

Sometimes entrepreneurs were also not be aware of what was required.

“We need more communications workshops to educate potential industrialists so they are aware of what is required to speed up the processes.”

Patel said pledges taken at the conference by big businesses to procure from black industrialists and partner with them would help beneficiaries of the programme get regular orders.

This would see financiers supporting these black-owned businesses as they demonstrate demand for their products.