Cape Town - Economic Development Minister Ebrahim Patel announced that government will look to create opportunities for workers to participate as shareholders in companies and having worker representatives on company boards.
Delivering his budget speech on Thursday, Patel said South Africa must look at new ways for broad ownership in the South African economy.
"We must build our own economic co-determination model in which workers and investors cooperate in growing the economy, creating more jobs and ensuring that the wealth generated in the economy is more fairly and equitably distributed.
“High levels of economic concentration and racially-skewed ownership profiles stunt economic growth, prevent entry of new players, reduce consumer choice, limit the levels of innovation and dynamism in the economy and feed a growing resentment among black South Africans of the failure to realise the vision of the Constitution,” Patel said.
“We will be finalising proposed changes to the Competition Act,” Patel said. His Department released a framework earlier on Thursday and will work with a panel of experts to complete recommendations within six weeks.
“To deepen our information base on the extent of transformation, we will also work with other departments to quantify the extent of black citizen participation in the economy,” Patel said.
Competition authorities’ actions
In the financial year ahead, the Competition Commission will investigate about 100 cases of cartels' behaviour in different sectors of the economy, including food, infrastructure, chemicals, financial services and car-parts.
To improve resources for the competition authorities, the Department of Economic Development will gazette an adjustment to the filing fees for mergers, Patel said.
He lauded the work of the Competition Commission and Tribunal in the past year, saying it is opening new markets and lifting the lid on collusive practices.
“We are busy with market inquiries that will help to lift the lid off practices in private healthcare, the grocery retail sector, public transport and the liquid petroleum industry,” Patel said.
Industrial Development Corporation (IDC)
In the 2017/18 financial year, the Industrial Development Corporation (IDC) will target new investments of between R15bn and R18bn and bring in a further R30bn in private sector investment, Patel said.
“The IDC is Africa’s largest industrial bank,” Patel said, “and showed strong performance in tough market conditions.”
He pointed out that the entity facilitated R47bn of fresh investment, of which R15,3bn is from its own funds and the rest from private investor partners. “This is the largest yet in its history.”
In addition, the IDC gave approvals to 77 black industrialists totalling R4.7bn, a growth of 60% on the previous year.
Patel emphasised that the IDC is a transparent organisation and that it will from June this year make known details of all investors to whom it provides industrial funding.
During a media briefing earlier, Patel was asked about the IDC’s ability to make a profit, after the entity reported a drop in profits of 87% in the 2015/16 financial year.
The loss was attributed to the IDC’s significant interest in two subsidiaries – steel producer Scaw Metals, in which it has a 74% stake, and Foskor, a phosphates and phosphoric acid producer, which is 59% owned.
Patel emphasised that the IDC had not made a loss in the previous financial year, but that it made a “smaller profit”.
“But the mandate of a development finance institution, such as the IDC is to be counter-cyclical and take on greater risk. We expect the IDC to lean in against the wind and take on greater risk,” he said.
‘Disband the Department’
During the debate on the department’s budget vote later in the afternoon, Michael Cardo, Democratic Alliance (DA) spokesperson on economic development, said in his speech that Patel’s department cannot justify its existence, financially or institutionally.
“We believe the Economic Development Department should be disbanded and its functions absorbed by other departments,” Cardo said.
He said Zuma wants to use the IDC and competition regulators to drive radical economic transformation. “But we need to ensure that these institutions don’t enrich politically-connected cronies in the guise of de-racialising the economy.”
“That is why the DA will watch closely to ensure that the R23bn earmarked by the IDC for the Black Industrialist Programme serves to grow the economy and create jobs for the poor, not produce a new elite of radically transformed billionaires.”
Cardo further said the DA will keep up pressure on the IDC to reveal who “these industrialists” are, how much money they get from the IDC and what their return on investment is.