Taking the dti to factories in Uthungulu District Municipality

Programme `director,
The Honorable MEC
Leadership of Uthungulu Municipality,
Esteemed Guests,
Ladies and Gentlemen,

On behalf of the Department of Trade and Industry, I wish to express gratitude for being afforded the opportunity to address today’s gathering. As the department we always appreciate invitations to come and engage with important stakeholders about the work that we do.

It is for this reason that we happily accepted the invite to come and talk about our important programme of creating Black Industrialists. In doing this explanation, I will start by providing a brief account of how South Africa has progressed since 1994.

Since the fall of institutional Apartheid the democratic government has engaged in a systematic effort to reconstruct South African society in a manner that overturns the apartheid social and economic architecture.

This objective derives from the South African Constitution’s injunction that we need to restore the dignity of all citizens through deliberate socio-economic promotion of the historically marginalized sections of the population.

In this context, the ANC government began its transformation project through the introduction of the RDP; whose objective was the provision of houses, education, electricity, water, roads, and other social infrastructure. This led to millions of South Africans receiving these services at a large scale.

In this context, the State has a moral obligation to creatively harness national resources towards the resolution of the historical injustice of racial, gender and class exclusion in all spheres of life. This is why government has over the years worked to ensure that our economy is stable and works in a manner that empowers all of our citizens.

In the realm of economic life, this implies the need to transform the patterns of asset ownership in a manner that reinforces the national objective of building a society that truly belongs to all who live in it.

This derives from the recognition that the bulk of industrial assets in South Africa have hitherto been racially concentrated, and thereby generating uneven social and economic relations that undermine this national objective.

In light of the foregoing, the democratic government has evolved various policy instruments whose objective is the achievement of an inclusive economy. All of these instruments have been merged within the framework of Black Economic Empowerment.

These interventions have all been directed towards transforming the structure of the South African economy in a manner that promotes spatial integration, high levels of decent employment and demographic transformation of our industrial assets.

However, it is important to note that the goal of a dynamic and sustainable growth need not be achieved at the expense of economic inclusion as the two are not opposed to each other but are ntertwined; as reflected by both the National Development Plan and the Industrial Policy Action Plan.

The National Development Plan outlines South Africa’s Vision 2030 and seeks to eradicate poverty and reduce inequality. The National Development Plan also recognizes the importance of improving the quality of economic management for the purposes of both sustainability and impact on inclusion.

To achieve a more dynamic growth trajectory requires all South Africans to work together to implement measures to create a united society and an inclusive economy that is characterised by less inequality. This must be an economy that creates high levels of sustainable employment and equitable distribution of the wealth produced.

The Industrial Policy Action Plan (IPAP) requires the country to pursue an industrial development path that is characterized by increased participation of previously marginalized citizens and regions of our country.

This is an acknowledgement that if no special measures are put in place, the country can possibly industrialize and become globally competitive while at the same time deepening apartheid patterns of economic development and wealth distribution.

The IPAP also outlines specific measure to achieve a more dynamic and sustainable economic growth; which is a core goal of the National Development Plan.

All these pillars place particular emphasis on the need to strengthen and increase black participation in the mainstream economy which remains stubbornly concentrated in the White minority. The continued economic dominance of the white minority, as reflected through the patterns of ownership, management and control of strategic resources within the economy; systematically directs almost all economic opportunities and benefits away from the majority black population.

It is in the context of the above that the Black Industrialists Programme arises. It is a practical tool of achieving the demographic transformation of economic power and spatial concentration within the overall industrial strategy outlined in IPAP and the objectives of national development as articulated in the National development plan.

In this regard I want to provide an explanation of what this programme of creating black industrialists is all about. Firstly, the concept of black industrialists refers to black people directly involved in the origination, creation, significant ownership, management and operation of industrial enterprises that derive value from the manufacturing of goods and services at a large scale; acting to unlock the productive potential of our country’s capital-assets for massive employment locally.

The view of government is that the black majority need to produce more and more entrepreneurs and industrialists as a way of creating multiple avenues for channeling economic opportunities and benefits to the black population. Expansion of the base of black industrialists may rapidly create more employment and thereby rapidly reduce poverty and inequality

We recognized that the current support measures for industrial and enterprise development are biased towards the dominant players in industry and business, namely, whites. While these measures are necessary for continuous and sustainable economic growth, competitiveness and innovation; they continue to exclude black entrepreneurs and industrialists.

The current base of white entrepreneurs and industrialists was created through dedicated mechanisms to promote and produce white industries and businesses. It is quite clear that black entrepreneurs and industrialists cannot emerge and play a more meaningful role in the economy without special support measures dedicated exclusively to them,

Black entrepreneurs, industrialists and business continue to contend with greater barriers and obstacles in comparison to their white counterparts; due to the country’s political and economic history. The greater majority of black entrepreneurs have no historically accumulated capital-assets as a result of our history of political and economic suppression. Thus, they have limited capacity to finance their industrial ambitions and have difficulty accessing private credit without productive assets to use as collateral.

The tendency of Development Financial Institutions has been to employ similar measures as those of commercial banks in determining eligibility for credit access. There is a need to systematically align the respective functions of these Development Finance Institutions towards a quantitative black economic empowerment output that will qualitatively alter the racial balance of industrial ownership.

South Africa’s industrial economy is spatially concentrated and systematically leaves out great sections of the population in investment-starved regions. Thus, a stronger base of competitive and innovative black entrepreneurs and industrialists is not only necessary but may also be much better placed to drive the government’s efforts for industrial decentralization, given that the black population is more regionally spread than the white population

This means that we must see the growth of factories in more areas than Johannesburg, `Durban, Cape Town etc. we want to help develop black industrialists who will invest in the development of factories in regions of the country where job creation is needed.

Our support for these black industrialists includes Access to finance:

  • Low interest loans through the DFIs for priority sectors and value chains
  • Syndicated financing
  • Dedicated Black Industrialist Development Fund
  • The relevant incentives for black enterprises within the dti

We also use government’s public procurement as a support mechanism through buying goods and services from these black industrialists.  Added to this will be support measures to help them sell their products outside the country in foreign markets.

the dti takes very seriously the role of government in fostering transformed economic relations. We view this in line with the national objectives of building an inclusive society.

It is in this context that the dti progressively evolves a policy regime that is a midwife to transformed relations of assets ownership and high economic growth.

Our policy objectives are designed to help the economy overcome challenges of the market in resolving structural and social inequalities historically embedded in Apartheid state policy. This includes overcoming spatial inequalities amongst provinces in terms of industrialization.

I thank you!

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