Time for coun­try’s busi­ness to see BEE as an op­por­tu­nity

The Star Early Edition - - OPINION & ANALYSIS - Duane New­man

AS WE AP­PROACH the Man­u­fac­tur­ing Ind­aba in the last week of June, the eco­nomic land­scape is lit­tered with un­cer­tainty and con­cern. A rise in un­em­ploy­ment and a slide into re­ces­sion have pre­sented South Africa’s man­u­fac­tur­ers with more gloom than they de­serve, and there might be a temp­ta­tion for us all to wring our hands and to moan a lot.

How­ever, this sec­tor is re­silient, and has a strong ally in the gov­ern­ment, which pro­vides tens of bil­lions of rand each year in in­cen­tives to sup­port in­vest­ment and growth.

The road map for sup­port is laid out each year by the Depart­ment of Trade and In­dus­try (dti) in an an­nual doc­u­ment called the In­dus­trial Pol­icy Action Plan (Ipap), and the lat­est ver­sion was un­veiled in the run-up to this Ind­aba, of which the dti is also an im­por­tant spon­sor.

Ipap con­tains three im­por­tant driv­ers for boost­ing man­u­fac­tur­ing:

A re­dou­bling of the com­mit­ment to rad­i­cal eco­nomic trans­for­ma­tion;

On­go­ing ef­forts to pro­mote the trans­for­ma­tion of own­er­ship of busi­ness;

A rapid ac­cel­er­a­tion in the Black In­dus­tri­al­ists pro­gramme.

The com­mon theme in all three of these driv­ers is a fo­cus on in­creas­ing and pro­mot­ing black eco­nomic em­pow­er­ment (BEE) on a more sig­nif­i­cant scale through­out all the sec­tors which Ipap sup­ports.

The fo­cus may be new, but the pol­icy is not. The dti has been try­ing to pro­mote higher lev­els of BEE for years through its in­cen­tive pro­grammes, but some­times this has been in an in­con­sis­tent man­ner.

Now it seems these in­con­sis­ten­cies have been iden­ti­fied, and there is a strate­gic fo­cus right across Ipap 2017/2020.

From my own per­sonal ex­pe­ri­ence in help­ing busi­nesses to cope with changes in BEE codes, it has be­come clear that many large cor­po­rates in South Africa have seen BEE as a com­pli­ance is­sue, rather than as a strate­gic one – tick­ing boxes, rather than ask­ing what should they be do­ing dif­fer­ently as a re­spon­si­ble cor­po­rate in South Africa to keep their busi­ness sus­tain­able in the long term.

It is clear to me that the dti does recog­nise that big busi­ness will need some as­sis­tance to trans­form more quickly. It has a Strate­gic Part­ner­ship Pro­gramme (SPP), an in­cu­ba­tion and sup­plier devel­op­ment in­cen­tive, and pro­vides sup­port for the devel­op­ment of SMME’s – and specif­i­cally black firms – in the sup­ply chain.

Rad­i­cal change

For such in­cen­tives to be ef­fec­tive, we need a rad­i­cal change in ap­proach to help de­velop black sup­pli­ers of scale in the sup­ply chain. This needs strate­gic in­tent by boards and ex­ec­u­tive teams of large cor­po­rate busi­nesses.

We have been see­ing pro­gres­sive com­pa­nies us­ing the var­i­ous in­cen­tive pro­grammes – such as the Jobs Fund, the SPP and the Busi­ness In­tel­li­gence pro­gramme – to help cre­ate new busi­nesses that ei­ther sup­ply them up­stream or down­stream – as cus­tomers and sup­pli­ers. This is a win-win for­mula.

Trade and In­dus­try Min­is­ter Rob Davies rightly stresses that the rules are tight to pre­vent the win­dow dress­ing of pre­dom­i­nately white-owned com­pa­nies with a few black faces – which is known as “fronting”. I fully sup­port this drive.

It is vi­tally im­por­tant to make sure that fronting is ad­e­quately ad­dressed up­front. Oth­er­wise, firms could be dis­al­lowed from ac­cess­ing in­cen­tives, and – in ex­treme cases – could be act­ing il­le­gally.

It is clear that one of the lessons from past in­cen­tive pro­grammes is that fu­ture in­cen­tives should be much more fo­cused on spe­cific sec­tors, and hence the re­cently-launched agro pro­cess­ing sup­port scheme, which re­flects such a fo­cus on the agro pro­cess­ing in­dus­try – which in­cludes fur­ni­ture, forestry, fer­tiliser, feed, and food and bev­er­age pro­cess­ing.

The agro pro­cess­ing in­cen­tive will cover all ac­tiv­i­ties af­ter the farm gate, but it is clear that agri­cul­ture and agro pro­cess­ing are in­tri­cately linked.

Work to­gether

We rec­om­mend, there­fore, that the dti and the Depart­ment of Agri­cul­ture, Forestry and Fish­eries work closely to­gether – to en­sure sup­port is given across the whole value chain, and that the gov­ern­ment sup­ports fur­ther pro­cess­ing of lo­cally-grown pro­duce. So, the Man­u­fac­tur­ing Ind­aba comes at an im­por­tant time. It is im­por­tant that clear ac­tions are iden­ti­fied for fol­low-up from this Ind­aba by busi­ness and the gov­ern­ment in part­ner­ship.

It is also vi­tal that the trust gap be­tween busi­ness and the gov­ern­ment is nar­rowed. We need a com­mon agenda and ac­tions.

The Man­u­fac­tur­ing Cir­cle has come up with an im­por­tant tar­get of cre­at­ing 1 mil­lion new jobs in in­dus­try.

Set­ting tar­gets is easy; achiev­ing them is less so. We will need far closer col­lab­o­ra­tion be­tween busi­ness lead­ers, and be­tween busi­ness and the gov­ern­ment, to achieve this. Of course, we can­not ig­nore the ten­sions within or­gan­ised busi­ness, most clearly shown by the re­cent spat be­tween Busi­ness Unity South Africa and the Black Busi­ness Coun­cil. Surely, they must have the same aims: to boost black busi­nesses and to sup­port the wider man­u­fac­tur­ing sec­tor?

I would like to see a consensus at the 2017 Man­u­fac­tur­ing Ind­aba that all of busi­ness will work to­gether with gov­ern­ment to re­verse the de­cline in our econ­omy, while wel­com­ing and pro­mot­ing the emer­gence of a new co­hort of black in­dus­tri­al­ists.

We fail at our peril. Duane New­man is a co-founder of Cova Ad­vi­sory, which sup­ports com­pa­nies seek­ing in­vest­ment in­cen­tives. Cova is a spon­sor of the Man­u­fac­tur­ing Ind­aba. dnew­man@co­v­aad­vi­sory.co.za

Set­ting tar­gets is easy; achiev­ing them is less so. We will need far closer col­lab­o­ra­tion be­tween… busi­ness and the gov­ern­ment.

PHOTO: REUTERS

A worker waits for cus­tomers at a cloth­ing store in Jo­han­nes­burg. The Man­u­fac­tur­ing Cir­cle has come up with a tar­get of cre­at­ing 1 mil­lion new jobs.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.