Johannesburg – A new pledge between FNB and the Department of Trade and Industry (DTI) will see black industrialists gain better access to opportunities and finances.
The Memorandum of Understanding (MoU) was signed by Trade and Industry Minister Rob Davies and FNB’s chief executive for Public Sector Banking Kgosi Ledimo at a ceremony on Tuesday.
Speaking at the event, Davies said that the partnership with FNB was natural, given the rise of technology and the fourth industrial revolution which presented new ways for them to work together for the benefit of both entities.
The partnership will allow the two entities to share information about various projects offered by the DTI, particularly its incentive programmes for black industrialists, through FNB’s platforms. The partnership will also help improve access to finance for black-owned businesses in manufacturing. This will also allow new entrants in the market and improve competition conditions.
One of the issues raised at the briefing is that banks allocate more credit extension for consumption purposes than the productive sector of the economy.
“It is easier to borrow money to buy a car than it is to start a business,” said Davies. “We need to see a turnaround in the way credit is extended in this country and in the different categories of credit.”
Speaking to Fin24 on the sidelines of the briefing, Davies said he does not think this new partnership could help change things overnight but from the point of view of developing the economy, the private sector should consider investing in the production side.
AUDIO: Davies on the importance of funding the productive side of the economy
He explained that the Financial Services Charter which is being finalised also makes provision for financial institutions to increase their support for black players in the productive sector. “We want to see the financial institutions more involved in supporting and financing private investment in productive activity.”
Following engagements between government and the financial sector, it was found that banks want to support successful businesses. This is why steps have been made to help businesses succeed.
Davies commended the success of the Black Industrialists Programme launched last year. So far the programme has surpassed the halfway mark by approving 52 projects out of the 100 target by March 2018. These 52 projects are worth a R4.5bn investment. The funding is provided by government and other financial institutions. Over 9 000 jobs have been created through these projects.
He said beyond funding, and exchanging information on the DTI’s incentives, government and business should move toward a “seamless process” of making recommendations of black business to partner with private players in providing services.
Davies said that the DTI is open to similar partnerships with other financial institutions.
FNB’s chief executive of Business Value Adds, Sanjeev Orie, explained that the level of attrition of new businesses is high. For every 100 new businesses started, 20 to 25 fall out in the first year, followed by 15 in the second year.
Orie said the ultimate goal is to create job opportunities by ensuring the success of entrepreneurs who can employ more people.
FNB simplifies the incentives, making them easy to for applicants to understand. The platform makes it simpler for entrepreneurs to register their business, while applying for a business banking account. The partnership will hopefully attract customers for FNB through the ease of starting their business.
The MoU will see FNB make information on the Dti's incentives for black industrialists on its platforms. (Photo: Lameez Omarjee)
The incentives that become available will be made available on all websites, such as the DTI, FNB and the Companies and Intellectual Property Commission. The idea is to integrate the process with opening a bank account.
“When you open a bank account, that is the most opportune time to present the incentives to the customer,” said Orie. If the process is integrated, it will be simpler for the customer, he explained.
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