Black Industrialists Programme: DTIC, NEF, IDC, DMRE briefings; with Deputy Minister

Meeting report

The Chairperson opened the meeting by explaining that the Committee would receive briefings on the Black Industrialist Programme (BIP) from the departments of Trade, Industry and Competition (DTIC) and Mineral Resources and Energy (DMRE). He greeted the staff and all present in the meeting. He thanked the Deputy Minister (DM) of the DTIC, Mr Fikile Majola for being present with his delegation and welcomed him. He asked if there were any apologies.

The Committee Secretary noted that Mr V Zungula (ATM) sent apologies as he would join after 11:00. Further, the Minister also sent apologies as he was attending the National Coronavirus Command Council (NCCC) meeting.

The Chairperson asked the DM to bear with him, saying that he hoped he was not making a protocol error as the Committee's sector did not have a deputy minister. If he happens to recognise the DM when there is someone, he should have recognised ahead of him such as the Minister or someone else; he asked that he be borne with as he only just saw his gadget confirming his presence on the meeting. The Committee had been engaging with the DMRE on the Black Industrialist Programme (BIP) and whilst it was dealing with these issues, it had two challenges. It thought that DTIC would be able to help it as it continued to perform its work as the Portfolio Committee responsible for Mineral Resources and Energy. The first issue had to do with its conceptual understanding of the programme. The Committee understood that the programme was under the custodianship of the DTIC and on this basis, it decided that before it can measure whether the DMRE is performing to the general expectations that exist regarding the programme, it needs a first-hand understanding of the programme itself. Secondly, it wanted to get a sense of how; beyond where it currently is as a sector; it can say that the Department is on course in its execution of this task [of promoting black industrialists in the minerals sector]. DTIC was not there to account as there is a Portfolio Committee for it to account to. DTIC was here to inform the Mineral Resources and Energy Committee on the specific programme so that it can perform from a point of basic understanding of the programme itself. The Committee hoped to gain a better understanding so that it can monitor and ensure that the programme is on course and if not, that it is able to say where it thinks there is a lack. It would still return to the DMRE to deal specifically with its performance However, the Committee feels it would be better able to measure this once it receives the general trend of the programme, including perhaps, what the intention was behind the programme and what the performance across the sectors is so that the Committee can look at what it was meant to monitor from its side. There was a lot to do, so he asked the DM to introduce his team and said he would take over again when his team was done.

Briefing by the Department of Trade, Industry and Competition (DTIC) on the BIP

Mr Fikile Majola, Deputy Minister of Trade, Industry and Competition, thanked the Committee for its invitation and said he was happy to hear that the DTIC was not present to account so much as to inform the Committee of the work DTIC has been doing with regards to the programme which it considers a very important part of its work as a department. The Minister would not be present in the meeting, hence the Chairperson did not default on any protocol. He understood that the Committee's sector had not had a deputy minister for a very long time. He suggested to Minister Mantashe that he did not mind to moonlight as his Deputy; however, he had turned him down. He explained that the Acting Director General (ADG) would introduce the team. He would take the Committee through the introduction and the ADG would then take over.

The question of greater inclusivity in the economy is one that has been in South African discourse for a very long time. The question of how best to integrate black South Africans into the productive economy has been looming large for a long time. The BIP is, importantly, only one of the responses to this question by government. The programme aims to leverage the state's capacity to unlock the industrial potential that exists within black-owned and managed businesses and to deliver targeted and well-defined financial and non-financial interventions. The intention is to contribute towards shifting the demographic composition of South Africa's industrial sector and engage the underutilised source of jobs and revenue and taxes and innovation that are found in black industrialists. 

The programmes objectives include:

- accelerating the participation of black industrialists in selected industrial sectors and value chains as reflected by contribution to growth, investment, exports and employment in the national economy

- to breed multiple and diverse pathways and instruments for black industrialists to enter strategic and targeted sectors and value chains.

Definition of a black industrialist

A black industrialist is a juristic person [i.e. a company] incorporated in terms of the Companies Act of 2008 and is owned by a black South African as defined in the Broad Based Black Economic Empowerment Act. The following are some characteristics of the black industrialist:

- one that provides strategic and operational leadership to the business

- has a high level of ownership that is over 50% and exercises control over the business

- identifies opportunities and develops the business to take advantage of the opportunities; in other words; an entrepreneur

- takes personal risk in the business

- does business in the manufacturing sector and makes a long-term commitment to the business

- is a medium to long-term investor

DTIC’s programme supports programmes operating in the following manufacturing sub-sectors:

- the blue or ocean economy

- oil and gas

- clean technology and energy

- mineral beneficiation

- aerospace; rail and automotive components

- industrial infrastructure

- information and communication technology

- aqua processing

- clothing and textiles and suit-wear

- pulp, paper and furniture

- chemicals, pharmaceuticals and plastics

- nuclear manufacturing related logistics

- designated sectors for localisation

Challenges

The challenge of access to finance has been expressed as one of the main constraints confronting black entrepreneurs in general for the attainment of shared, inclusive growth. The Black Industrialist scheme offers branding, and this is often in tandem with loan funding from the Industrial Development Corporation (IDC), the National Employment Fund (NEF), other development finance institutions, commercial banks and equity funders. These provide industrialists with the resources needed to secure the premises, equipment and materials they need to develop and grow their businesses.

The DTIC has advised other departments to develop their own BIPs within their mandates. The DTIC understood this to be a matter which it would be interrogating today as it relates to the Department of Mineral Resources and Energy.

The Deputy Minister said that the ADG would outline the general concept of the BIP in the presentation along with the work the department had done, progress to date and some of the constraints that it had confronted. One of the things that has happened in relation to challenges faced up to 2020 includes COVID-19 which has had a severely negative impact on the BIP. His department is trying to do everything it can to raise the profile of the BIP. It is aware that many black industrialists suffered during COVID-19 and are among many of the companies that are currently distressed. The DTIC will work together across the economy and with the assistance of the Committee in its sector in trying to support the industrialists. He handed over to the ADG.

Ms Malebo Mabitje-Thompson, ADG of the DTIC, thanked the Committee for the opportunity to come and share its experience on the BIP. The DM had just sketched the important pillars of the programme, defined what a black industrialist is, and defined the areas of focus for DTIC. He has also laid out the partnerships which DTIC had sought to strengthen. She intended to take Members through its progress to date and to share some of its success stories. Due to the fact that the focus of the meeting is minerals, it had also invited, its development finance institutions (DFIs) to share the work that it had done in the mineral sector. The NEF would make a presentation and the IDC would speak to some of the transactions that it had supported through the BIP.

DTIC's mandate is to support economic growth, job creation and transformation. Transformation is at the centre of the work which DTIC does and slide 5 of the presentation details a 9-element graphic detailing the process. Its [Black Economic Empowerment] codes and charters also pursue this goal.

Over the past five years, about R4 billion has been invested in DTIC in support of 135 black industrialist businesses. In the next five years, it aims to invest in new industries and to reduce reliance on imports by 20%.

- 135 black industrialists have been supported and the number is rising.

- R4 billion is the approved investment

- R13.5 billion is the projected investment

- 11 899 jobs were projected to be created

- 8535 jobs were projected to be retained

Disbursements of R1.6 billion has been disbursed thus far. Disbursements are made with reference to the 9-elements on performance (slide 5). DTIC only pays once certain milestones are reached.

Black industrialists by province: Slide 10 outlines the figures by province.

Investments by strategic sectors: These figures are represented graphically on slide 11. DTIC is encouraged by the fact that it is starting to use things that are produced in South Africa and by black industrialists.

Case Studies:

The DG did not go through all the case studies [which are each detailed in the slides] but highlighted the following businesses:

- Africa Sun Oil (Pty) Ltd: 134 jobs were created through support of this black-owned business.

- Rondex Parts (Pty) Ltd: This company is in the automotive industry and was foreseen to help DTIC choose its reliance on imports.

- Dalisu Holdings: This provides a dust suppression service to the mining industry and is considered to be an innovation.

- Kevali Chemicals: This company focuses on chemicals and adhesives. It has been supported in order for it to expand its market and enable it to begin exporting.

- ALCU Products (Pty) Ltd

- D-FENCE: This business was interrupted by COVID-19, just as it was about to start.

- ZK Roof Manufacturers

The DTIC said that it had tried to provide a snapshot of the work being done by the Department. As the DM had said, black industrialists are slightly different from other black business as DTIC is looking for owner participation. These leaders are invested in the vision and medium-to-long-term investments of the company. In order to ensure optimal profit in how applications are looked at, DTIC has a team of technocrats coming from government and professionals from its DFIs that look at each investment and the merits of each investment in making a decision about that funding. The DM indicated that the DTIC has supported other departments such as the Department of Agriculture and others that have approached it to see how they can implement a BIP using their mandate and the tools that they have, such as the ability to direct access to contracts.

The NEF works in the space of supporting black enterprises in general and has experience in working with enterprises in the mining space which it would now share with the Committee in order to provide it with the broadest sense of how DTIC is providing support for black industrialists.

NEF

Mr Mzi Dayimani, General Counsel at the National Empowerment Fund, spoke to some of the transactions the NEF worked on in the mineral space. Over the years, the NEF has invested over R833 million in the mining and energy sector. Over 4 000 jobs were created in 121 transactions.

Investment projects

- Liciatron, slide 3: This investment deals with high quality granite found in the area and the project aims at facilitating 83 jobs. The area has potential to create up to 200 jobs in an area which has a high rate of unemployment.

- Colliery Dust Control, slide 4: The NEF invested R30.9 million and the entire investment has been fully repaid by the project, which employs 20 people and has a management trust with 20% shareholding. It is owned by black people and is led by a black woman.

- Dense Mense Powder (Pty) Ltd, slide 5: Like Colliery, this company has managed to raise enough revenue to repay the debt obligation of R30 million, incurred from the NEF. 200 full time personnel are employed.

- Active Blue (Pty) Ltd, slide 6: This is a stone quarry mining operation in an area owned by a traditional community. The NEF invested R15 million in partnership with DTIC, in this case, there is a R35.6 million incentive under the employment creation fund of DTI. The slide breaks down the percentile benefit of NEFs investment to the community.

- Sehwai Exploration Drilling, slide 7: Black entrepreneurs are involved in the exploration and drilling work in the coal and platinum mining region. NEF invested about R10.4 million in the acquisition of drills. 64 people have been hired.

- Stenda Trading, slide 8: This is a youth and woman owned company employing 75 people which received NEF funding of R9.1 million.

- Mmutle Mining Projects, slide 9: This is a 100% black-owned company. R12 million was invested during 2018. The company has since grown a lot and received further funding from the NEF with SEFA.

- Mohalefi Engineering, slide 10: This supports roof structures in mines. the business now has R27 million annual turnover. to date. NEF has invested R25 million

NEF investments in the fuel sector:

The area of service station ownership has been identified by the NEF. It has accordingly invested R603 million in this particular space, supporting 111 service stations across the country. 48 of these are women-owned and have created 3 473 jobs. Of those invested in, 36 have dully repaid their NEF loans with a success rate of over 95% in the businesses it is funding in this space and sees this as a huge opportunity for job creation.

The last slide, slide 11, represented the investments made graphically. The risk rating shows that it is sure that 66% of the businesses will fully repay the NEF. 17% are high risk and the remaining 17% are low to medium risk. For those who have challenges with performance, the NEF has mentorship, and hand-holding where necessary until it fully recuperates its investment. In order to create jobs, it continues to work with DTIC who continuously provides it with incentives and other support so that it can continue to support businesses in the space. He thanked the DM.

The ADG asked if Mr Jarvis could speak from the IDC. The DM allowed it and asked Mr Jarvis to present.

IDC

Mr David Jarvis, Strategy and Corporate Affairs Executive, IDC explained that the IDCs mandate is broader than the manufacturing sector. It also covers broader productive sectors of the economy including mining, minerals and infrastructure investments. Its key mandate is industrial development with chief outcomes being job creation, saving jobs, preventing de-industrialisation and inclusion of black industrialists through the BIP that it has been partnering with DTIC on over the past few years. From the Chairperson's brief, he understood that he should focus on policy and implementation issues. He would reflect on these briefly as he thought the ADG had covered them very well. The IDC has supported black entrepreneurs to the tune of R70 billion over the last five years. R29 billion of this was approved for the support of black industrialists. This is a major initiative of the IDC.

Energy sector: IDC had invested over R14 billion in the Renewable Energy Access Programme (REAP) with its value proposition being to focus on back economic empowerment (BEE) funding to ensure that there is localisation, which it believes is an important opportunity for synergy between the renewable energy programme and manufacturing opportunities. There was a recent announcement about Redstone, which reached financial closure where it supported localisation, BEE as well as community involvement in the project. It believes that this is a sweet spot for development finance institutions such as itself.

Mining sector: IDC has supported mining services as well as well as mining operations from coal, through to gold.

Reflections

First, he observed the importance of a partnership approach with the business partners from development finance and from government. Patient capital and supportive business partners are required. Mr Dayimani had already highlighted the importance of business support and of assisting business industrialists who are new entrants and often enter into markets at a disadvantage to established players. These industrialists need to be given the right kind of support to facilitate their success. The focus is thus on value creation and partnership with black industrialists. it was worth mentioning that opportunities are across multiple sectors for black industrialists. IDCs books have a number of clients in the mining sector, with black industrialists being prevalent across the sector. The IDC knows that there are entrepreneurs who have lots of ideas and innovations, and yet who may not have the balance sheet to facilitate their entry into the market.

Financial approach

Having a blended finance approach is key if there is going to be success for black industrialists. There is more than economic impact of COVID-19 as there is a challenge of importing equipment and skills and technical support from overseas. Lastly, he mentioned a point already raised by the previous speakers namely, the importance of blended financing not simply being seen as financing. Support finance is crucial, however, the ADG also mentioned that market access is also a key issue. There are definitely partnership opportunities, if one looks at the regulatory role supporting localisation and facilitating the entrance of black industrialists as being key in making opportunities available to black industrialists, He hoped these insights were useful to the Committee.

The DM asked if the ADG had anything add. The ADG said she did not

The DM said that this brought the presentation to an end from the department and the two entities. As is the nature of a market economy, some of the businesses it supports will fail. In future, it would endeavour to give the Committee case studies of both its successes and failures as well as explaining why it had not been successful. In those cases as it tries its best to ensure that all the entrepreneurs and industrialists it supports can succeed. Secondly, it was excited when the Committee called it as this meeting would help in the integrated work it does across departments. It would now be more carefully able to look at what its colleagues are doing with regard to the programme in mineral resources and energy. For all to be effective, there was a need to update its efforts. It was important to measure performance quantitatively and qualitatively, for example, to assess what impact it has made on the economy over a period of five years. Thirdly, A discussion has happened in DTIC as to how it can bring the New Economic Development Programme more into focus in its work. Fourthly, DTIC has had discussions on how it can be more impactful in its coordination with the NEF and IDC. As the Acting DG said, it would be available to come back whenever the Committee needs anything from it.

Mr Chairperson thanked the DTIC and asked the Committee Members if there were any questions.

Discussion

Mr J Lorimer (DA) said he was not hearing of a distinct separation between new businesses and existing businesses. He asked how many of the 135 businesses were new businesses started from scratch with the money, because if it was only replacing ownership in existing companies, it did not seem to be helping growth. Secondly, DTIC highlighted 38 companies. He asked for similar profiles for all 135. Thirdly, he asked for DTIC to define the meaning of saved jobs versus jobs created. Without the money, he asked if the saved jobs would have been lost. Fourthly, he asked how the beneficiaries are selected. Lastly, he asked about the process of, and the individuals involved in, selection. He asked what political involvement there is in candidate selection. Concerning the NEF, he asked what the requirements there are to get an NEF funds; specifically; whether an applicant must be solvent and tax compliant. He asked what else it looks at. Further, he asked what kind of monitoring the NEF does on how the money is spent on an ongoing basis. Lastly, he asked how many NEF loans have gone bad and whether there are any such in mining.

Ms T Malinga (ANC) said she wanted to ask about the 135 business. How many of them are still operational and how many were impacted by COVID-19 and what was being done to address those impacted by COVID-19. On slide 9, the presentation mentioning projected jobs created, the figure was 11 899, whilst the figure for retained jobs is 8 535. She was not sure whether the projected jobs also included temporary jobs or whether there were jobs that were lost. On slide 29, she thought the project spoken to was in the petroleum space. She asked if the project had started and for the timeframe to have the programme up and running. She was not going to ask about requirements for funding from the NEF, as the question had already been asked.

Ms P Madokwe (EFF) was interested about usually excluded groups within the black community in the 135 industrialists. She asked for figures as to how many there were that were women owned, youth owned and disabled owned. She felt it was important that they not be overlooked. Secondly, she asked for data on how many were Indian and coloured owned. She asked if DTIC had any initiatives to promote its initiatives. She recalled the Proudly South African initiative that existed when she was in primary school. She noted that some companies were only making one or two jobs and she did not think it made sense to fund companies like this, as one of the reasons it aims to fund jobs, is to ensure that there are lots of jobs. She asked the NEF and IDC if there are initiatives for job creation in rural communities.

Mr M Wolmarans (ANC) said a number of his concerns had been raised by other speakers. On a positive note, he felt that the presentation did a lot of justice to a number of questions that the Committee asked earlier in the year. Of the 135, he asked that it be broken down into demographics and the different projects. He could see the collaboration across the sectors. He asked what the contribution of the Department of Minerals and Energy was and whether there was information from it that ended up at NEF or IDC. He thought that most of these programmes are driven by business people who of their own, end up at these institutions. On one of the slides, it details figures from 1997/1998. He felt this was far off from the four years in which it had been dealing with the matter of creating black industrialists. At that stage, the target was to get at least 100 black industrialists. He thought the 135 figure includes historical industrialists and he wanted to find out how it had done in the past four or five years. Lastly, between the two departments, he wanted to know what the target for black industrialists was, vis-a-vis the 135 figure. He said he was a bit at ease with the collaboration between the departments and the entities. He could see a ray of light in the improvement of past misunderstanding and miscommunication. He applauded the presentation, but added that from time to time, it would be important to get an update on where the department is on programmes and projects of this nature and how Members can become mouthpieces of this environment in their different communities and constituencies.

The Chairperson thanked the presenters. He raised two issues. First, he wanted to own up to what he had said earlier. However, as dedicated public representatives, it was not up to him even though he had said that that DTIC was not coming to account but was here to give Members a better understanding of the programme. He thought that there were key issues which the Members had raised. He would leave it at this as it would need a much more thorough discussion. He noted how the sectors were defined which are a target of the programme, but when listening to the presentation, it seemed too broad. He thought that for anyone who is granted a mining license, it seems the department of mining and mineral resources could come back and say they are a black industrialist. He could not clearly see the difference between a black industrialist and an entrepreneur or business person, especially without clear indicators. As Mr Wolmarans asked, he asked for greater distinction, for example in the mining sector, according to its targets. What made matters more complex for him, especially for DFIs, he was not sure what was original and what was industrial. He asked for the Department to assist in its responses. He asked the DM to begin, however, the DMs network was bad and he was inaudible so he asked the ADG to speak.

Responses from DTIC

The ADG said that the department came to the meeting with a different object in mind but she could tell from the questions asked that the Committee needed more information, which ordinarily formed the kind of information it accounted to its Portfolio Committee, but which was available.

Existing and new industrialists

DTIC would not support an entity, merely to change equity, this would not be the nature of the support it would provide. The support it provides would be for a new project. The entity owned would be undertaking a new project.  Very few cases existed that required a pity injection and, in those cases, it would have been both the IDC and the NEF which would lead to the acceptance of such a transaction, depending on the business case and the strategic nature of the sector. BIP is therefore not really about shifting ownership from a white to a black entrepreneur. It is about increasing the number of entrepreneurs in the value adding sectors of the economy in particular. There are enterprises and greenfield investments that it would also have supported.

Remaining 135

On the DTIC website, it breaks down the different enterprises across the different sectors in groups of 40. One of the reasons why it listed the different enterprises was in order to give information about them and to show that it was dealing with real businesses facing real challenges and not to simply paint a positive picture. It has been the policy of the DTIC to publish guidelines and based on these guidelines, entrepreneurs apply to it for funding assistance. It has conducted road shows, and has partnered with its DFIs and the banks, given the fact that there are no modern enterprises have a prospect of growth who will not have business with the banks. It tried to ensure that the message goes as far as possible about the existence of the scheme.

Application process

There is an independent adjudicatory committee made up of professionals who are well-qualified to do the work of assessing projects in order to see if they will be successful before DTIC supports them. She could say without fear that there was no political involvement in deciding on who black industrialists are. Anyone can apply, the only change is how beneficiaries are defined and, in this programme, requires a black industrialist to have 51% or more ownership in the enterprise, be operationally involved and take financial risks related to the growth of the enterprise and there should be a long-term investment in it. DTIC looks for follow-through from beginning to end in a project and entrepreneurs cannot simply hop from one to another.

Enterprises needing resuscitation

The DTIC does not have generalised plan in order to deal with companies going through a difficult time, however, it is dealing with them.

The ADG’s connection was cut off at this point. The Chairperson said that the ADG might have experienced loadshedding but thought that the DM was back, and asked the DM to continue as he was back. The DM asked that the other entities respond in the meantime.

IDC responses

Existing and new industrialists

Mr Jarvis said that the bulk of its funding has gone to new businesses. Three quarters of its funding goes to either start-ups or expansionary activities. As IDC, it supports transfer of ownership, however, this is a very small percentage of its approvals. In terms of the selection process, anyone is free to apply for funding from IDC.

Application process

IDC has governance structures in place with credit committees and in the event that it is a large amount of finance, it is referred to its board and it even has external members beside board members on its credit committees to facilitate the approval process. It approves transactions on the basis of the risks, and they need to have economic impact. These factors are taken into consideration and it publishes the approvals on its website as the Minister instructed. In these statistics, it includes as part of its due diligence, guarantees that there is no political or undue influence over its due diligence teams. This is something which it is very proud of. There are, however failures. COVID-19 has meant it has needed to step in to assist businesses. This links to the question of jobs saved.

Jobs saved

IDC aims to prevent de-industrialisation, therefore where there are sustainable business opportunities that it believes will still exist post the current economic environment, it will step in to support this company. If its intervention prevented liquidation, then it counts those jobs as jobs saved. IDC has found that preserving industrial capacity is easier than starting new capacity, provided the company can prove that it was really due to the current economic climate that they were performing poorly and that they could turn around the business.

Demographics

IDC could provide breakdowns of female and youth-owned entrepreneurs. It would operate through the Department to provide a consolidated response to those questions. In the remit of this Committee, the opportunities for rural development are great, looking at the renewable energy programme and fact the location of solar and wind power is often in smaller towns and rural areas. This is similar for mining areas, so the opportunities are there to ensure that it has an impact in areas outside of the main economic hubs. The trick is to ensure, localisation opportunities within the communities around projects. IDC is monitoring this specifically and has recently launched “SME Connect”, where it tries to link large projects, through their supplier programmes, procurement operations and enterprise development to smaller, mainly black-owned companies within those regions. The trick is to ensure that the economic impact is felt in those areas. The Minister sent it targets for black industrialists and these targets were able to have been achieved in the 5 years given.

NEF responses

Application requirements

Mr Dayimani said that the business ideally needs to be tax compliant with the South African Revenue Service (SARS). NEF ensures that [an applicant] enters into arrangements with SARS so that it can include them. Where NEF can support businesses to be tax compliant, it tries to do so. It tries to ensure people who do not have access to traditional funding to come it and it will find ways to support these businesses. There is no requirement that businesses applying for funding should supply security or should have balance sheets. The NEF recognises that as a DFI, its target market does not necessarily have assets to provide as security. It looks into the businesses it supports and ensures that businesses are able to access funding from it. One of the key requirements is that the person funded needs to be operationally involved in the business. It does not support people seeking passive investment opportunities. Job creation is another key requirement because in as much as it supports business, NEF had an empowerment mandate involving the support of job creation, women, youth, people living with disabilities and supporting businesses in rural areas. It also does not necessarily require that someone should have their own contribution. Where a business is insolvent, it does not automatically exclude them, especially under the current economic conditions. In collaboration with DTIC, it has started a Distress Business Relief Fund which supports businesses that are in financial distress as a result of COVID-19. Members would appreciate that such businesses will not necessarily be in a solvent situation. The requirement that is key is that it should be able to demonstrate that it can turn the corner and return to normal business within the next 24 months. If management can provide such a plan, it will do so.

Rural areas

The NEF has a rural and community development fund. It has projects being undertaken in a number of rural areas all over South Africa. It has staff speaking to rural and traditional communities. It is very deliberate in terms of the support it provides. It has a number of workshops where it goes and educates the communities as to the services available.

Ms Hlengiwe Makhathini, Divisional Executive, Venture Capital and Corporate, NEF, said that most of the transactions discussed are ones funded more than 5 years ago. Its involvement in the mining sector has been to people providing services to the mining sector. However, as a result of COVID-19, only 25% of the businesses in its portfolio could continue operations during the hard lockdown of 2020. 16% could operate in a limited sense, meaning 59% of businesses within its portfolio were not generating revenue at all during lockdown. As a result, it has seen that its impairment numbers in this financial year, are going up. Before the reality of the pandemic, the NEF had an average impairment ratio of 18%. Impairment is one's expected losses from the loans given out. This figure has since grown to 22%. As a DFI, it needs to be more patient with businesses and support them going forward. Once it wrote off about R134 million in the previous financial year, which is about 6% of its loan portfolio. Businesses face challenges and it tries to support entrepreneurs in order to make sure it does not lose businesses that it has invested in.

The DM asked for the ADG to respond to the strategic questions asked by the Chairperson as many of them had been answered.

The ADG thanked the DM and said that she would focus on the Chairperson’s questions. From the beginning, it tried to define what a black industrialist is as a specific kind of enterprise. It proceeded to define the kinds of sectors it would find itself in. The majority of the time spent in defining the policy was in defining the beneficiary, especially as the BIP is one of the many support instruments designed at supporting transformation and growth.  Appreciating that the remaining questions were covered by her colleagues, she handed over to the DM.

Deputy Minister concluding remarks

The DM thanked the ADG, who said it had come to the end of what it needed to respond to. He felt that the question of criteria was sufficiently answered. One of the things which would characterise the success of these institutions is that there would not be undue interference when they are carrying out their mandates. This is something DTIC wants to continue whilst strengthening companies ‘developmental mandate.

COVID-19

With regard to the impact of COVID-19, this had been covered. Its impact on companies generally and the black industrialists programme has been of concern to the department and it is keeping an eye on them. It could bring back a breakdown on the demographics and of the industrialists. He thanked Mr Wolmarans for noting the improved collaboration between departments and the different spheres of government; using the district development model in particular; this was something it wanted to strengthen.

Conceptual questions

He had heard the difficult conceptual questions that the Chairperson posed at the end about what makes this programme different and its choice of sectors and subsectors. This is something he felt needed to be discussed together. Having listened to these questions, it is in a better position to know how to craft a presentation to the Committee the next time and it would be happy to return after it has engaged with mineral resources and energy in the future. He apologised for the technical difficulties faced.

The Chairperson said that as it continues with its work, the Committee will need to ask relevant questions. In terms of the accountability measures and in terms of the targets, it would like clearer accounting on targets. In terms of what has been contributed and what has been accomplished. The Committee needs this information so that it knows what its contribution is as mineral resources. It can measure progress, so that it knows how to first: assist the Department, and second, to push it, if needs be. The Committee cannot contest what is being presented, as the custodianship and conceptual interpretation of the BIP rests with DTIC. However, if the Committee cannot contest what [the DTIC] says, from where it sits, it should be something which is deliberate, monitored and has a commitment of achievable goals. As a sector, it should be able to identify that it has been able to develop specific skills and services. This may not necessarily be de-linked from beneficiation of the products which it produces. It must be able to say in terms of the manufacturing base, how many people produce which products. He thanked the Department and the DM and felt that they may be released. He asked Members if they thought that they would be doing justice to the Department of Mineral Resources as there were only 30 minutes remaining. If the Department could make the presentations up until 12:00, perhaps it could continue. He asked for guidance but received none and so he asked the Director General (DG) of Mineral Resources to continue until 12:00 and then the Committee would see.

Briefing by the DMRE on its commitment to the BIP

Adv Thabo Mokoena, DG, DMRE, said he would be very brief. The DM had explained that the role of DTIC is to integrate the work that is being done by different departments.  For his Department, the sectors are mining and petroleum which relate to energy economic activities which are also taking place. He said, the Deputy Director General (DDG) would make the presentation, however, he introduced it.

The definition of black industrialist was given as people actively involved in the origination, majority shareholding, management and operation of industrialist enterprises.

Why BIP

The three aims of the Department are transformation; involving job creation and participation; Inclusiveness and competitive efficiency. Looking at all of these aims, people participating in the BIP need to be physically engaged or involved in the projects so that there can be meaningful participation and contribution to the economy.

The DG asked the DDG to continue with the balance of the presentation which was only a few slides

Ms Bongi Mabusela, DDG, Mineral Resources and Energy, said that the reason why it may seem that its strategy for black industrialists leans towards procurement is because the Department understands that black industrialists as defined are involved in the creation and manufacturing of products. It further understands that since the turn of the century, many economies which reintegrated into the world economy have noticed a lack of growth in the area of localisation of products and local content. Its primary concentration is not only on resource issues but also localisation and industrialisation. The Department wants to use the mineral industry as a centre facilitating localisation through using procurement as a catalyst. There are many barriers to entry for black industrialists, especially in the mining industry. The Department takes steps to look at the mining industry to rechannel its buying power towards black industrialists and ensure that the opportunities created are sustainable. It also ensures that the process followed is transparent. Listening to the NEF, she thought mention of its funding of Personal Protective Equipment (PPE) projects would have been mentioned. It was already in talks with IDC to look at categories where it can contribute to the industrialisation of the country by virtue of the mining industry's buying power and take the top 10 commodities, forward them to IDC and ensure that it finds these commodities.

Process Followed

There was a three-step process outlined in the slides.  One challenge DMRE has noted is that black industrialists are not trusted, so it makes a point of making sure the industrialists meet end-users because it is of the view that they are trustworthy and able to go as far as they can,

Challenges

As much as finance is key, access to markets is a challenge.

Pillars of success

These include access to markets and opportunities; justice and fairness, transparency in selection. Linked to this, it wants to create a digital platform for the mining industry to ensure that anyone who wants to participate can apply. Lastly, competitiveness is importance, especially of prices for its services.

Localisation is deeply needed in the mining sector. The Department felt boards of companies exist to ensure that the company is thriving and have external monitoring playing an oversight role. The Department may not have clear categories at the moment because it is supporting the bigger picture that government wants to achieve.

The DG concluded by saying this was the end of the presentation and it had completed it in 20 minutes.

The Chairperson asked if there were any questions from the Members. He noted one

Discussion

Mr M Mahlaule (ANC) greeted all present and asked how on slide 9, it indicates that there are no black industrialists in the Northern Cape and whether this was not a worrying factor.

The Chairperson began by apologising if he was understood as being too rough. He noted that there was only one question. He proceeded to speak to an example of a mine and suggested that this business might be allowed to come and explain its success and how the Department was involved. First, he asked what a black industrialist is and how the Department helped them to become industrialists. He thought he was too confused and asked what the difference was between a black industrialist, a black entrepreneur and a black enterprise. He did not want for the sector to play with words and call something that exists by a new name. He would rather that there are people who produce and model something new and deliberately push for this, such as a car, since South Africa only assembles. He thought his expectations might be too much. He asked for assistance in understanding what is a black industrialist? If he stood on a mountain, how would he identify it. He did not have typical examples. He asked if the Department goes out [to find] who has new innovations or whether anyone approaches it and is directed to a room for processing. He asked how black industrialists are measured. Whatever the Department says—whether it is true or not— it is difficult for him to measure what the Department was saying. As there were no other questions, he asked for the DG to respond.

Adv Mokoena said that the Department does have black industrialists in the Northern Cape, and this may have been an issue of information packaging. He understood the Chairperson's definitional questions. He read out the definition of a black industrialist as being a juristic person and actively involved in the origination, with more than 50% shareholding, management and operation of the enterprise and who takes a financial risk in the organisation. There are many black owned companies who have strategic partners that provide strategic and financial support. There are also many black people who mining companies only and these are also classified as black industrialists because if you look at the definition of it. The difference may be that DFIs may not be playing a role in these enterprises and they may have approached conventional funders such as banks to further the aspirations and objectives of black industrialists. Both DTIC and the DMRE work closely together and can come back to present on the work they are doing and to touch on other areas mentioned if needed and given the examples the Committee had given. He asked the DDG if she wanted to add something.

The DDG said that from its side, the Chairperson was correct in saying that it needs to be a person or entrepreneur who has started something very new in the manufacturing space. Using the Blue Ocean example, it needs to be a person who is occupying [previously] unoccupied space. It is looking at companies that make competition irrelevant. At the core, this is to ensure that it achieves industrialisation because if the spending on items from offshore is diverted to items manufactured locally, it can industrialise successfully, including the successful black industrialists.

The DG thanked the DDG and said this brought its contribution to the end.

The Chairperson thanked the DG, saying he thought that it was dealing with a very difficult matter, as it is possible that they would think they were speaking about the same thing and yet, be misunderstanding each other. He hoped that in the future the Committee and Department will be able to find one another. The intention was good as it brings those marginalised into the mainstream. The intention is not to question the programme, however, the fact that there is a structure does not mean it cannot be improved upon and where there are gaps, these should be improved upon. He hoped moving forward that it would be able to deal with these matters. He asked if there was anything else to be added by Members.

The Committee agreed that there was not.

The Chairperson adjourned the meeting.