Sandile Zungu on the Black Business Council wooing black US partners
Americans’ access to capital seen as key to local empowerment
Sandile Zungu, president of the Black Business Council (BBC), says an alliance with black business in the US will inject capital and expertise into local black business and help it to play a bigger role in the South African economy.
The BBC has entered into a “co-operation agreement” with its US counterpart, the National Business League.
“They have better access to capital. Most of the black businesses in South Africa have poor access to capital.
“The benefits for South African black business of partnering with people who have much easier access to capital are obvious,” says Zungu, who co-hosted the inaugural US-SA Black Business Summit this week.
“To play a meaningful role in the South African economy you need access to capital.” Partnering with black US businesses will give South African businesses which, for historical reasons, don’t have access to capital, a chance to remedy that.
He says it’s more about US black businesses partnering with black businesses in SA than investing in them.
“We want them to partner with us. We need their money and their expertise and their relationships.”
This will help local black businesses integrate into the supply chains of US-based multinationals, he says, citing Ford as an example. “Ford wants to deepen its empowerment model in South Africa. Through our partnership with black US business we have a better chance of persuading Ford to integrate local black business into their supply chain.
“It’s easier for us if we use leverage from people domiciled in the US who can talk directly to the headquarters of Ford.”
Ford is a signatory to the automotive master plan in SA whose goal is to transform the local auto manufacturing sector.
The biggest threat to the success of this goal and even the continued presence of multinational auto manufacturers like Ford in SA is the government’s failure to provide policy and regulatory certainty around the manufacture of electric vehicles in SA.
Zungu says the BBC will use its influence with the government to incentivise US businesses to partner with local black businesses.
“We will try to make the cost and speed of doing business in South Africa as attractive as possible, especially for those companies who think that our relationships in South Africa will add that kind of value.”
In addition to facilitating partnerships between black business in SA and the US, the BBC’s aim is to attract more foreign direct investment.
“We are most definitely interested in greater participation by black investors in our economy, which we believe offers attractive returns.”
Zungu says SA is an attractive investment destination in spite of policy and regulatory uncertainty, an “uncertain” electricity supply and other “challenges”.
He says the National Business League has raised the issue of broad-based BEE. “They’re saying will they also be required to comply with the BEE laws if they’re African Americans?
“We’re saying yes, they will, the law is the law. But instead of seeing it as an impediment they just need someone to hold their hand and take them through what this is really all about.
“They’ll obviously factor this in to their own return calculations, but I don’t think they’ll be dissuaded because of that.”
A considerable attraction for US businesses considering partnerships with local black businesses is the platform it will give them to benefit from the African Continental Free Trade Area, he says.
“This doesn’t only open markets in excess of a billion people to the north of us, it also deals with issues of tariffs which make it easier to trade across African borders.
“If you come into South Africa you stand to benefit from this vast market and reduced constraints around tariffs.”
Whoever wants to enter Africa will see
the advantages of entering “through the South African gate, notwithstanding impediments such as corruption, red tape, regulatory uncertainty and so on”, he says.
Those operating from SA would also enjoy the benefit of its “much more sophisticated financial markets and much more amenable legislative and legal environment”.
In addition, industries such as mining are “obvious low-hanging fruit” for investors, he says. “There are certain minerals which are powering the fourth industrial revolution which are found in abundance in SA.”
He says the BBC, which has 50 members, including professional organisations such as the Association of Black Securities and Investment Professionals, chambers of commerce and corporations such as Patrice Motsepe’s African Rainbow Minerals, will use “every avenue” to attract partners for local
black businesses.
“People can invest directly, but what we’re arguing is that it’s better if you have a local partner who will hold your hand and help you navigate through difficult terrain.” And confer certain political advantages? “We plead with them not to see it that way because American companies operate in a highly regulated and scrutinised environment from the point of view of political connections.
“When we meet our counterparts in the US we’ll encourage them to subject their prospective South African partners to scrutiny so that they don’t fall into the kind of terrain where they get caught up in acts of corruption.”
He says black business in SA needs to take greater advantage of the African Growth and Opportunity Act (Agoa), which offers access to American markets.
“At the moment I don’t think they’re taking sufficient advantage. It’s a historical thing. Black business has minimal influence and ownership of the South African economy, and even more reduced influence in export-oriented businesses.
“So if Agoa is about offering access to South African export products, you’re less likely to find products sold by black suppliers.”
Black businesses need to see Agoa as an opportunity and work harder to derive their share of the benefits, he says.
It’s also an opportunity for their counterparts in the US. “It provides export-oriented incentives for black businesses in the US to partner with black businesses in SA.
“Ours is to sit them down and say we’d like to attract you into South Africa, and by the way you’ll have easy and more facilitated access into the American market.”
We want them to partner with us. We need their money, expertise and their relationships Sandile Zungu
President of the Black Business Council