Goverment takes a page from apartheid to create black industrialists

2015-03-29 15:01

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Government is going back to the past to redress the economic landscape – it will use a model pioneered by the apartheid state to create 100 black industrialists.

And it is setting aside billions of rands to ensure it happens.

The department of trade and industry revealed at its first black-industrialists indaba this week that it would use the Industrial Development Corporation (IDC) model to create huge conglomerates owned by black people to redistribute wealth in South Africa.

“We want to develop a customised package of support. This was something that used to be done by the IDC,” the department’s director-general, Lionel October, told City Press.

“The IDC was set up for Afrikaners because the British owned everything. The IDC got instruction from the department of trade and industry to go to Sandton, set up an office there and help Afrikaner business.”

He said Sasol was the prime example of how this system of patronage had been successful.

“Sasol came and said we have this new technology to turn coal into petrol, and the IDC asked what it needed. Sasol needed a coal licence and it was given a coal licence. It wasn’t a struggle or a long process that had to go out to tender,” said October.

“Then the IDC decided Sasol wouldn’t be able to compete with BP and Shell, and created an off-take agreement and said only Sasol would be able to sell petrol inland. The bigger companies didn’t have a choice but to buy from Sasol, so that created a market for Sasol.

“But then the IDC said: ‘What about the price of oil? What if it falls below a certain level and you go bankrupt?’ So Sasol was given a subsidy so if the oil price fell below a certain amount, the state would subsidise it. Sasol didn’t get legislation and queues, it got everything it needed to succeed. It’s the same principle here,” said October.

Deputy Trade and Industry Minister Mzwandile Masina said this approach was necessary to change the structure of the economy.

“It can’t be that we have the majority of people who are black and they are poor and helpless, and you have a minority that is white and successful. We want to increase the role and participation of black firms so that we can make a huge contribution to the JSE. The statistics the president mentioned [President Jacob Zuma recently claimed only 3% of stock on the JSE is directly held by black investors] are worrisome and we need to do something to deal with them.

“We want to create huge corporations out of these industrialists. That’s why we didn’t allocate a big number. People always ask why 100, not 1?000? It’s because we want to build big companies,” he said.

A total of R1?billion has already been set aside to reach this goal, it was announced this week. But that is just the beginning.

Masina said financing options were still being finalised.

“What we are going to do is that after the policy has been approved by Cabinet, the president will then announce the entire financial package; the R1?billion is just to recapitalise the NEF [National Empowerment Fund] so that it can focus its direction, but it’s not all the money – because that’s too little. We need much more than that,” said Masina.

Masina said the department of trade and industry was crafting an incentive that would benefit the programme and it would establish a specific chief directorate in the department to look after the project.

The black-industrialists programme would focus on creating black companies in the sectors of manufacturing, advanced manufacturing, energy (oil and gas), telecommunications, agroprocessing, automotive products and creative industries in line with the policy framework articulated in the Industrial Policy Action Plan.

The programme had already received 40 applications from interested black businesspeople, the department revealed.

The applications were to be processed by an “expert panel” consisting of professionals, including accountants and lawyers, to make sure they met the criteria, Masina said.

“So if you say you have a factory, we must be able to come and visit your factory and look at your papers and financials and so on,” he said.

Despite this helping hand, October warned that the chosen black businesspeople should not expect an easy ride, but anticipate resistance.

“If you enter the market, the existing players will create barriers for you, challenge [your] registration and steal [your] patents.

“It was the same thing the Afrikaners faced from English companies, such as Anglo American.

“If you’re going to break a syndicate, then you must also have a syndicate,” October joked.

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