Black Industrialist Programme & SEZ progress & challenges

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Meeting Summary


In a virtual meeting, the Department of Trade, Industry and Competition (DTIC) gave a presentation on the progress of the Black Industrialist Programme. The programme had provided R36.7 billion to over 1 000 black industrialists over the past seven years, but they still faced several challenges in the marketplace.

Members questioned whether any recipients of these funds were politically connected, or if any fraud had taken place. The Department responded that there were very few beneficiaries, if any, with political connections. This had never been a political project with a predetermined list of people who were supposed to receive assistance. The case studies shown in the presentation had no political connections with anybody. They were entrepreneurial black South Africans, and they should not be treated with any suspicion because they were entrepreneurial and black.

Other issues raised by Members included what measures had been put into place to ensure that it was not the same people who were dipping into various available funds, and that the empowerment that was being done was truly broad-based; how the DTIC ensured that all, or most, of the special economic zones (SEZs) progressed towards using sustainable energy; the need for policy certainty to be given to international investors, otherwise South Africa was not going to get the investment it needed; the challenge of servicing original equipment manufacturers, and what the Department had done to help mitigate this issue; what had been done about fronting; to what extent cooperatives had benefited from their position; and why applications for loans were rejected.

Meeting report

Committee matters

Report of the Select Committee on Trade and Industry, Economic Development, Small Business Development, Tourism, Employment and Labour on Budget Vote 31: Employment and Labour

The Committee voted to adopt the report on Budget Vote 31 (Employment and Labour).

Mr T Apleni (EFF, Eastern Cape) voted against.

The DA chose to abstain.

Committee minutes of 7 June 2022 were adopted.

DTIC on implementation of black industrialist policy

Mr Shabeer Khan, Acting Director-General (ADG), Department of Trade, Industry and Competition (DTIC), said that on 4 November 2015, Cabinet had approved the black industrialist policy, which was aligned with the then policy action plan. The scheme was officially launched in February 2016. The policy's purpose was to leverage the state's capacity to unlock the industrial potential within black-owned and managed businesses that operate within the South African economy through deliberate, targeted and well-defined financial and non-financial interventions.

The policy sought to achieve the following objectives:

1) accelerate the quantitative and qualitative increase and participation of black industrialists in the economy;

 2) create multiple and diverse pathways and instruments for black industrialists to enter strategic and targeted industrial sectors; and

3) promote industrialisation, sustainable economic growth and transformation through the support of black-owned entities in the manufacturing sector.

The policy’s instruments were two-fold. The first was the need for capital. Through partnerships, the Department provided syndicated funding from development finance institutions such as the Industrial Development Corporation (IDC), the National Empowerment Fund (NEF), the Land Bank, and the Public Investment Corporation (PIC), as well as the Department. The second instrument focused on market access, where the objective was to provide new markets for black industrialists as they entered the economy.

Challenges in implementing policy

Ms Malebo Mabitje-Thompson, Deputy Director-General (DDG): Industrial Finance, DTIC, said there had been a number of issues with implementing transformation policies, including:

-Fronting practices were used in a number of cases, where companies misrepresented the position of the true shareholders and beneficiaries, to falsely claim that they were black South Africans;

-In some cases, black-owned firms ‘lent’ their name as the contractor in tender documents, with the work actually done by another company; and

-In other cases, individual persons would be put on a shareholder register without their knowledge, representing outright fraud.

The DTIC had strengthened the regulations to tighten controls and made fronting a criminal offence.

Under the black industrialist programme, the DTIC, IDC and NEF had provided R36.7 billion in funding to more than 1 000 black industrialists and black-owned businesses in the last seven years, comprised of:

-R27.4 billion in loans from the IDC (Black Industrialists);

-R4.2 billion in grants from the DTIC Black Industrialist Scheme;

-R5 billion mainly in loans from the NEF support to black-owned entrepreneurs.

However, black industrialists still faced challenges, such as:

-Limited access to support and facilities from commercial banks, based on the lack of business track records or collateral;

-Concentrated markets, where incumbents (existing dominant firms) effectively limit the entry of new players; and

-Limited market experience in some sectors resulted in over-expansion or limited ability to respond to fast-changing market conditions, or reliance on a limited number of large customers.

(See the presentation for more detail).

Mr Khan said that transformation was a continuous journey. As a Department, they emphasised that it was much broader than black economic empowerment (BEE). Whilst they would see successes, there would still be challenges they would continue to address as they rolled out the programme.


Mr J Londt (DA, Western Cape) commended the Department for discussing the challenges that they had had with the programme. Usually, entities flagged only the highlights and did not show the issues. They now needed to ensure that these same issues were not raised in the future, as they often saw this with departments and entities.

How did the DTIC ensure continuation of a project or programme when the business owner passed on, for example from Covid-19? What had been put in place to ensure that the loan was not linked to an individual, but an idea or a project? How did the Department ensure that there was continuation should there be a death, so the money was not wasted?

He did not realise that the 1 000 black industrialists supported by the programme had received R37 billion over the past seven years. It had been shown that a small, connected few "double dipped" into the available funds. What measures have been put into place to ensure that it was not the same people dipping into various available funds, and that the empowerment being done was truly broad-based? He proposed that the Committee hold a meeting on this subject to examine how many individuals or companies got more than one source of support from various entities.

There seemed to be a disconnect within Cabinet regarding green energy. Some encouraged the move towards green energy, and others regressed and held on to old energy supplies. How did the DTIC ensure that all, or most, of the special economic zones (SEZs) progress towards using sustainable energy?

There was a complaint that South Africa did not get enough foreign direct investment. This was entirely the fault of the government. There was policy uncertainty and it had been flagged multiple times, within and outside of the country. Until policy certainty was given to international investors, South Africa would not get the investment it needed. This was something that the government and the DTIC needed to address, and it was a problem that could be fixed.

Mr M Dangor (ANC, Gauteng) asked whether the Department would consider solving spatial apartheid by targeting funds to lessen the division between the old apartheid areas and the cities. They needed a policy position that focused on this and aimed to give preference to these areas that were still suffering. What was the definition of “community," as used by the Department? What happened to the workers' trust if a company applied for an IDC loan and went into distress and was bought over? What if the new company took over and ignored the reality of IDC loans and the workers' trust?

Ms H Boshoff (DA, Mpumalanga) said they needed to see a report on the R37 billion to ensure that no “double dipping” had occurred. For years, they had been speaking about the Nkomazi SEZ. Once again, it was shown in the presentation as a logistic hub, a fresh produce market, and had a "just transition" focus. In September last year, the Deputy Minister and the Premier of Mpumalanga had visited Nkomazi and were supposed to provide a report. This report had not been provided, because there was nothing to report on. The Committee needed to ensure that this SEZ was part of something that would be built in Mpumalanga. Nkomazi was on the N4 and was close to the Mozambican and Swaziland borders. The development of the Nkomazi SEZ would mean so much to the people in the area, especially in the current economic climate. She requested a report on the progress of the SEZ.

Mr M Mmoiemang (ANC, Northern Cape) asked about the challenge of servicing original equipment manufacturers (OEMs) outlined in the presentation. Having observed this point, what had the Department done to help mitigate this issue? In the previous presentation on this programme, reference had been made to Kele Mining, and he was worried about it being missing from this presentation. Did this mean it no longer benefited from the black industrialist programme?

He appreciated that the presentation focused heavily on structural transformation and broadening the capacity of black entrepreneurs. Could it be said that the investments made by the IDC in the renewable energy sector, particularly around companies identified in phase 1 of the renewable energy procurement, were beginning to yield results? One did not get the sense that they were connected to the grid. In that situation, what was the procedure of the IDC? At one point, the IDC had applied for business rescue for Khalahadi. Had this situation stabilised?

Mr T Apleni (EFF, Eastern Cape) asked what had been done about the issue of fronting. He asked about transformation in the Eastern Cape, as examples of this had not been covered much in the presentation. 

The Chairperson said that the issue of “double dipping” and politically connected individuals raised by Mr Londt and Ms Boshoff kept coming up. It has been a continuous issue since 2016. He would like the Department to provide the Committee with a list of all businesses and individuals assisted through the black industrialist programme so that this issue could be laid to rest.

The policy talked about cooperatives. To what extent had they benefited from their position? Members in 2016 were also concerned about the ten years of experience requirement. At the time, there was no mention of youth and women. The Department’s focus had changed to include these groups. How could women and young people fit this requirement? This excluded many, even though the DTIC admitted that women and youth were new entrants into the market.

At what level were the incentives for the DTIC grants capped? Cost sharing had been mentioned. How much would a beneficiary have to contribute to the shared cost? For the IDC and NEF, what was the interest rate that was charged, and what was the time period for the payment? The NEF’s mandate was to assist black businesses. Should the DTIC grants not form part of the blanket finance of the NEF, as part of the transfer from the Department to the NEF, so that it formed part of this finance? The NEF gave a loan, but on the other hand, it also gave a grant in the form of co-sharing.

Regarding the Public Finance Management Act (PFMA), he was not sure if the DTIC was allowed to transfer funds to another entity. If this was the case, the allocation that the IDC gave the beneficiaries could also go to the NEF. He did not know whether someone could get a DTIC grant, loans from the IDC and the NEF, and other incentives of the programme. Could this be clarified?

Were there any challenges surrounding the applications for loans? Some people had complained to him about their application being rejected by the Department, particularly the IDC. He had referred them to the Parliamentary Liaison Officer (PLO). Why were the applications rejected? The sectors were outlined in the policy, and they aligned with the Industrial Policy Action Plan (IPAP). However, the policy also indicated that they could be reviewed. Since 2015, has there been a review of the sectors? In the presentation, he could not see some sectors originally listed in the policy, such as the blue ocean economy, mineral beneficiation and aerospace.

What was the failure rate of individuals and companies given assistance since 2015? The policy indicated that at the time, only 3% of black people participated in the Johannesburg Stock Exchange (JSE). Did they have a recent figure, in light of the programme?

Could the DTIC indicate the success and progress made by black industrialists in white-dominated areas? This was important, as the effects of apartheid were still felt and some may not want to support black businesses. In terms of master plans, there had been a lot of assistance of black industrialists in the automotive sector. Were there any other sector master plans with similar aims, and were they succeeding?

Were there examples of black entrepreneurs making inroads in the African Continental Free Trade areas? Previously, a few were mentioned, such as those exporting wine to Ghana. Could the Committee get an update on this?

Since former President Zuma's rule and the national Broad-Based Black Economic Empowerment (BBBEE) summit, had there been any other summit of this nature to review the policy framework and see whether any progress had been made? The programme focused only on manufacturing, but what role would the DTIC play in ensuring that there was also black participation in the commercial banking sector?

Mr Dangor said that in 1996/7, a community reinvestment act had been proposed. The issues that the act sought to cover had not been resolved. Should they dust off this act and bring it to the table? It was not a revolutionary act -- it was used in the US extensively.

DTIC's response

Mr Khan said that when the programme was launched in 2016, the key objective was a one-step policy adopted and approved by Cabinet. This was to ensure that implementation was sound and free of any corruption. The instruments they utilised to implement the programme were there to ensure its success. The programme was designed to allow many black South Africans to participate. Since 2016 until now, the DTIC has had a number of audits done on the programme, including internally by the Auditor-General (AG). All the support that had left the Department had gone towards real black industrialists and the real economy. The risks around double dipping had been addressed through these measures.

When the programme was introduced, they wanted to ensure that all of the development finance institutions (DFIs) were a part of it, including those within the DTIC family and the Development Bank of Southern Africa (DBSA) and the PIC. They wanted to ensure that they provided blended support across the board. If this matter was approached as a single Department, they knew that there would not be sufficient funds to address it. There was a single adjudication committee comprised of the DTIC, the IDC, the NEF, the PIC and the DBSA. When it came to risks such as double dipping, those were adequately addressed within that committee already. They ensured that companies did not request funding from the DTIC and then go to the IDC and the NEF. The programme was structured in this way to ensure that there was a blended facility that provided funding. The core part of the DTIC’s work was to ensure that the grants provided lowered the cost of capital once other facilities were brought on board, both by the IDC and the NEF. These facilities included loans, grants, and any equity taken from the IDC and the NEF.

Regarding continuity in the case of death, because there was a loan element as part of the facility, it was always important that those loans be repaid. To ensure this, stringent due diligence was applied across all applications to ensure that the money would be repaid. The IDC and the NEF had stringent and robust credit committees that looked at all applications to ensure that the business plan was sound and that the loans would be repaid.

The DTIC had a team that oversaw a programme called InvestSA, which dealt with the issue of policy certainty daily. InvestSA’s job was to ensure that any policy or process impediments were dealt with decisively. Their core mandate was to support investments. The DTIC reached 95% of the Presidential R1.2 trillion target within four years. This showed that some of the policy impediments for investment had been adequately addressed. There were a number of international investors who chose the DTIC to participate in their equity equivalent programme. Because they could not give up equity, they agreed to participate in the programme. Through this programme, there were real benefits which these multinationals provided to local supply chains and allowed black suppliers to enter these supply chains.

Ms Mabitje-Thompson said that when they were evaluating projects, they were always aware of the risk of a key individual leaving the business. It was a condition that they looked at when assessing the various businesses and projects. When a key individual did exit, especially in unforeseen circumstances, it put the project at risk. The DTIC would then go to the remaining individuals and see how it could be taken forward.

She said the request to define 'community' was a “trick question,” because the definition depended on each project. This prevented somebody from claiming to be a community leader, when really they were uninterested and fronting. The DTIC looked at the members of a community, and it was defined in terms of a geographic area, or a group of people involved in a specific activity. The DTIC looked at what their interests were and what governing structures had put these people together. They did not consider fronting individuals who claimed to be representing the community. They learnt a lot about this from their experiences with the mining sector, and they had taken these lessons forward. They make sure that the projects actually benefit communities, and that the people who were supposed to benefit actually did so.

The Department was looking at competition settlements closely. The settlements must ensure that the governing structures that allowed transformation were respected and not jeopardised. Every time the Department looked at something like a merger transaction, it ensured that the transformation arrangements were kept. They also looked for a way to strengthen these arrangements. One of the ways they did this was by adding more suppliers to the merger to make sure that the supply base was strengthened, not shrunk, by a major transaction.

For all incentives, the Department published a list of the beneficiaries. She found it peculiar that it was only when they introduced the black industrialist programme that there had been such a big interest in this list. This showed the Department's commitment to being transparent and accountable. There were very few beneficiaries, if any, with political connections. This had never been a political project with a predetermined list of people who were supposed to receive assistance. The case studies shown in the presentation did not have any political connections. They were entrepreneurial black South Africans, and they should not be treated with any suspicion because they were entrepreneurial and black. The Members could see the list. They were currently updating their booklet of projects so that all the information had been audited.

Contract manufacturers faced a risk. As a contract manufacturer, one had to equip one’s enterprise with what the main contractor asked. The enterprise was put at risk if anything went wrong, such as not meeting standards. The IDC would address this further.

Kele mining was not included in the presentation because there was no space. As far as she was aware, there were no issues with the project.

To combat the fronting issue, the DTIC strengthened its due diligence. Ordinarily, people would give them documents to show that they were black industrialists in their enterprises. These industrialists were then interviewed individually, and it was clear whether fronting had taken place or not. Applications where fronting had occurred, were immediately turned down.

A slide on the Eastern Cape province was meant to be included in the presentation, but it was not. The DTIC had supported companies in Buffalo City, metropolitan municipalities, Nelson Mandela Bay, OR Tambo District municipality, Amathole, and the Sarah Baartman district.

The programme was open to cooperatives. However, most had not applied. The threshold for approving projects was that the project must have a particular value. They were relooking this to support many more enterprises that may be smaller than those they are supporting now. The ten-year experience requirement had been implemented with finesse. The requirement did not necessarily say that an applicant had ten years' working experience in that particular enterprise. They had to show that they knew the field so that the taxpayers' money was not wasted.

The cap on beneficiary contributions was R50 million, which went up to a 50/50 cost share. The issue of the money going into one institution was an on-going discussion. The diversity of institutions allowed for the opportunity to see where the different strengths in the DTIC family lay, and to harness those strengths more, than if they were to rely on one entity. They used blended financing. For example, the enterprises that were supported would get some money from the IDC and grant support from the DTIC.

There had been no double dipping that they have found out about, as their databases were shared across entities. No one had received a loan for the same thing from the NEF and the IDC, and this kind of thing would have come to the fore quite quickly.

The DTIC had had a black industrialists' roundtable in 2018, and the issue of market access had been raised. Following this dialogue, the Department had implemented a number of measures, such as allowing the industrialists to showcase their products to secure markets. Sometimes there would not be a direct match between what was approved and what sectors were outlined in the policy. In some areas, they had not received any applications aligned with these sectors. They had included this in the policy because the economy was growing in these areas.

Ms Joanne Bate, Chief Operating Officer, IDC, addressed the issue of IDC-funded companies going into distress and being bought over. External attorneys usually handle these processes. The IDC did try to ensure that the transformation objectives could still be achieved. This could be difficult when there was a liquidation and the IDC was being settled on a sale of security. However, in all instances, they did try to ensure that the transformation objectives were achieved.

Kalagadi was going through a business rescue process in front of the courts, and that was all she could say. Kele Mining was still operating in the Northern Cape, and they were looking at a number of new contracts with the mines in the area, and were servicing facilities. The past two years have been tough for many companies and supply chains because of Covid.

Concerning OEMs in the motor industry, it was one of the key risks in the motor industry for all companies operating. The IDC support scheme attracted assemblers into the country and had been key to building South Africa’s motor industry over the past ten years. Black industrialists in the industry had secured future business and had received strong technical and financial support from the OEMs. Although the business models for many of these manufacturers had appeared marginal initially, the IDC had seen very strong production capacity being built. They believed that the motor industry was important for black industrialists to participate in, especially as the world moved towards new electric vehicles. The IDC and the DTIC have looked at how they could attract these OEMs in the future so that the sector continues to grow and contribute significant employment.

Concerning renewable energy in the Northern Cape, all projects the IDC had funded were connected to the grid and fully operating. The Redstone concentrated solar plant had had some delays in getting to a financial close, and they had broken ground and the project was now under construction. She was not aware of any risks in connecting to the grid, but that would be closely monitored. All the operating entities and renewable energy plants in the Northern Cape were yielding dividends to the IDC and the communities.

The IDC was not a deposit-taking institution like the banks. Their funding cost was immediately starting at a higher rate, because the IDC borrowed its money from the banks and international lenders. They also funded themselves from the dividends received from successful projects. Their interest rate was prime-linked, and it was risk-based pricing. They looked at a risk-based return on the risk that they were taking. However, that risk-return was reduced significantly by the development impact of the transaction. For development impact, they had a scorecard that looked at transformation, the involvement of women, youth and black industrialists, masterplan contributions, localisation, and spatial development. They looked at the development impact to ensure that when they priced their transactions, it was priced on a return of both development and financial returns. It was important for the IDC to remain self-sustaining, a core element of their mandate. As a result, the IDC did need to provide a level of commercial return.

Mr Mziwabantu Dayimani, General Counsel, NEF, said that over the last two years, there had been increasing collaboration between the NEF, the IDC and the DTIC. As a result, a number of allocations were made by the DTIC to the NEF to focus on specific programmes. There had been a particular focus on the needs of smaller entrepreneurs. The DTIC and the NEF had established the Black Business Manufacturing Fund. This focused on transactions around R1 million, up to R15 million. This was an area that historically had not been focused on.

Now they were seeing a number of these black industrialists emerging, growing from small and medium enterprises (SMEs) to big industrial players. An example of this was Wasaa Gasses. The NEF provided the company with capital on two occasions of around R10 million, and now it was funded by the IDC, because it was a big player in the field. The company had contracts with multinationals like BP.

Collaboration ensured that between the entities, there was close working together to cater for all the needs of the South African community. The DTIC had established regular working groups and committees where they looked at areas that each entity should focus on. Their processes were streamlined to ensure that they reached everyone and provided support to as many people as possible.

The NEF had established the Women Empowerment Fund. It focused on black women operating businesses in townships and rural areas. This was helping the NEF's reach. Cooperatives start as being small. The NEF had come up with a cooperative support programme, as they had noticed that they had to be supported with grants initially, and they could grow to become manufacturers. The NEF was currently supporting over 20 cooperatives. They were in the manufacturing space, but they would need a lot of hand-holding to ensure that they were compliant and accredited.

Many of those programmes had stringent regulatory requirements. The NEF took them through this process and saw them emerging and becoming big players after a couple of years. It required patience and support, which was why they had a non-financial programme to provide them with mentorship. The NEF’s focus was on funding a business that would provide a quality service. Unfortunately, in many areas, the competition was stiff and they got rejected. If the product or service they provided were of high quality, they would start to develop a good reputation in the market. The key was ensuring they had the entry, which was why the issue of capital was so important. With financial and non-financial support, they got accepted into those industries. In the process, they received a lot of rejections, but with the government’s help in development, the NEF saw businesses that start to flourish.

Mr Maoto Molefane, Deputy Director-General: Spatial Industrial Development, DTIC, said that after a long struggle, the Department had managed to get a breakthrough with the Nkomazi SEZ. They had been struggling with institutional capacity, but had managed to establish a company with a board. They had secured funding for infrastructure and a large investment from DP World. They would be establishing a logistic hub in the SEZ. DP World was also finalising their own environmental assessments (EIAs). Once these were complete, he anticipated that the investment would be operationalised. When the Department engaged with them initially, the timeline was six months but unfortunately, that could not happen because of the EIAs. There had been a major hiccup in infrastructural development because of a traffic engineering study which culminated from the conditions given by South African National Roads Agency Limited (SANRAL) when they applied for the approval. They indicated that a flyover for the exit of the SEZ needed to be built, but the Department could not do that. This was because of the budget, and because it was unnecessary, as the SEZ was still in the development stage and there would not be much traffic. The Department had agreed to do a traffic engineering study, and had appointed a service provider to do that.

The other issue was concerning land clearing and the erection of boundary fencing. That had been delayed because of the Treasury directive issue. They hoped that they would be able to break ground soon. The meeting that Ms Boshoff had referred to had not occurred because the Premier was unavailable, and it was being rescheduled. There was a scheduled meeting that would take place soon, and they would extend an invitation to Ms Boshoff to be a part of that meeting.

Ms Lindiwe Mavundla, Director: B-BBEE Sector Charters, DTIC, said that in terms of the sector code for the financial centre, they had received a report on the ownership of black people in this sector. It had been published 10 May 2022. The target was 23%, and the sector was currently around 15%. Ownership did not include only commercial banks, but also insurance and asset managers. Asset managers were the only ones who were doing really well. Commercial banks were gradually growing to meet that target, but it was worrisome and needed more attention. The financial sector was in the process of reviewing the sector codes, and these issues would be addressed. Black participation in the JSE was less than 1%. Some black-owned companies did not even register to be listed. The DTIC got reports from the BBBEE Commission, because the Commission collated information on the JSE listed entities. JSE-listed companies were responsible for submitting information on their BBB status.

Mr Khan said they had reported in one of their previous meetings that the negotiations about the African Continental Free Trade Area were at an advanced stage. Rules of origin were close to 90% of the products agreed to, and South Africa submitted its tariff offer on 90% of the 7 000 lines. These were key developments in this process. In anticipation of the African Continental Free Trade Area being operational soon, Minister Patel had launched the black exporters network. This was to identify key black suppliers that could take advantage of some of the opportunities the Free Trade Area may provide. This was what the DTIC’s export programme would look to drive forward.

The Chairperson asked about the failure rate and the basis on which applications were approved. He had referred someone complaining about his application being rejected, to the PLO. Why did someone get rejected? What was the timeframe for reviewing the SEZ and the industrial parks (IPs) requirements? He understood what Ms Bate had said regarding the interest rate, but if one looked at the policy of the Black Industrialist Programme, it said that there should be an emphasis on favourable financing terms, such as lower collateral requirements and interest rates. Was the Department or the IDC deviating from the policy with their current interest rates?

Ms Mabitje-Thompson said they were looking at the failure rate across all incentives to see whether there had been a change. The general failure rate, particularly pertaining to green field projects, was around 40%. It seemed that black industrialists were doing a little bit better than this rate, but they did not have a definite figure yet. They had started the study and could answer within three to four months. They would look not only at the failure rate but also at the reasons for failure and how these could be improved.

The DTIC was still working on finalising the new SEZ funding model, and it could be ready for public viewing around September. This was not just about what was written on paper, but also evolution that occurred as they implemented their programmes. For example, they implemented a tripartite agreement with local government and provinces that needed to be agreed upon before the Department went into a SEZ that was already in action. They had implemented a new IP requirement -- they would not support the IP if the owner (in the form of provinces and local government) had not ensured that the park was sustainable. These measures were not just written on paper, but had materialised in practice. Anchor tenants, which allowed the IP or SEZ to be sustainable, must be credible and reliable in terms of what their order book allowed for, and bringing in other suppliers.

Another summit was being considered but she was not at liberty to make a big announcement about it. Concerning loan conditions, the DTIC had been increasing them and funding them to ensure that they could relax the conditions, so that the issue of longer timeframes and lower costs were possible. The manufacturing enhancement programme had set an interest rate limit for the purposes of working capital. The IDC had limitations with the rate, because the projects had to raise funding and had not been capitalised. However, within these limitations, they were compelled to comply with the policy. This could be seen in measures such as relaxing conditions and the price at which the industrialists received support.

Ms Bate said pricing was not as concessional as the DTIC blended finance. Their pricing was higher than that because of risk-based pricing, but the IDC did provide a discount. The black industrialists’ discount was up to a 1.5% reduction on the interest rate. Typically, they did accept a lower contribution and security from the black industrialists. Their funding was not a direct comparison to bank funding, and bank funding was not available for many of these entities. The IDC also provided long-tenure funding. Working capital could be for up to five years, and plants and equipment could be up to seven years. For new business enterprises, they did provide extended moratoria to provide support for the start-up phase. They offered a number of concessions to businesses over and above the pricing concession.

The IDC did an analysis last year on the failure rate. They had noticed that, post-Covid, the black industrialists had performed in line with the normal portfolio. There were good successes that were coming out of the black industrialist funding. The IDC’s objective in providing funding was to ensure that the businesses had the best opportunity for success. One of the key challenges facing black start-ups was the lack of access to equity. Even if the IDC provided a moratorium and there was the manufacturing competitiveness scheme, the loans did pile up. They needed to be sure that there were no unnecessary delays in the start-up of the ventures and the market access, otherwise a venture had very limited opportunity of success because an equity buffer was not there to absorb the risk. The IDC typically looked to see if the venture had some technical and marketing support, particularly in a highly competitive market. There did not need to be a firm offtake, but there had to be an intent for purchase. The IDC ensured that the black industrialists, who were also putting money into the venture, were not unnecessarily risking their capital and had the best opportunities to build a successful business.

Mr Khan thanked the Members for their robust questions and their role in strengthening the programme.

The Chairperson thanked the Department, the IDC and the NEF, the Members, the meeting staff and the Parliamentary Monitoring Group (PMG).

The meeting was adjourned.

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