Let black industrialists follow whatever path they choose
This week I attended the government's launch of the Black Industrialists Programme, hosted by the National Empowerment Fund and the Department of Trade and Industry.
I listened attentively as minister Rob Davies and deputy minister Mzwandile Masina provided details of the programme, how it would work, and what it would fund and not fund.
I am a big fan of what the government is trying to achieve with the Black Industrialists Programme. It is time we deliberately and unapologetically used state levers to create globally competitive black business champions in our economy.
The symbolism of being able to point to black entrepreneurs who control and operate major corporations in big industries is something we desperately need as a country still grappling with racial discrimination and inequality. This will have a profound impact on the psyche of future generations, who remain most affected by stubbornly high levels of unemployment.
The implementation of this programme must therefore be well thought through to ensure our efforts yield the best outcomes. In other words, we need to use our collective experience to give ourselves the best chance of success.
Unfortunately, at the end of the launch, I concluded that the government's programme comes with two key flaws.
The first is that the government has single-handedly redefined the term "industrial" to mean "manufacturing". Not only is this simply incorrect, it is in stark contrast to local realities and global trends.
Just last month, world leaders at the World Economic Forum in Davos debated "the fourth industrial revolution". That had nothing to do with manufacturing. It had everything to do with the knowledge economy, the fuel behind the growth of modern economies.
The second flaw is that the programme seems to have been crafted outside of the threats and opportunities before us today and in the foreseeable future.
In case you are not aware, the programme will focus on very specific sectors. These are the ocean economy; oil and gas; clean technology and energy; mineral beneficiation; aerospace; rail and automotive components; industrial infrastructure; information and communications technology; agro-processing; clothing; textiles, leather and footwear; pulp, paper and furniture; chemicals, pharmaceuticals and plastics; nuclear; and manufacturing-related logistics.
Why limit the programme to specific sectors? Black people hardly control any key sector of the economy. The closest we have come is the taxi industry and football.
We ought to invite applications from any black entrepreneur in any sector, with a convincing plan, credible expertise and the will to succeed, with size, experience and expertise the only criteria. The programme shouldn't be closed to sectors, only to small ideas with no major impact on inclusive economic growth and transformation.
The programme must be about catapulting or graduating existing black entrepreneurs in all industries to become leaders who control and operate the biggest companies in their sectors.
I have previously referred to a golden opportunity presented by depressed commodity prices. The list above does not include mining. The policymakers have instead included "mineral beneficiation". I have yet to be exposed to this industry in South Africa. As far as I am aware, it doesn't exist. Yes, I appreciate that we need to start adding value to our minerals, but right now there is hardly any meaningful impact to be derived from having a black-controlled mineral beneficiation operator. Even if the biggest mineral beneficiation company in South Africa was black-controlled, it would not move the needle of economic growth and transformation in the broader resources industry - because this industry is not yet adequately developed. It is a small part of the resources industry. So why are we wanting to create black industrialists in beneficiation when an even bigger opportunity beckons?
Imagine if a black steel operator acquired a Highveld Steel in business rescue or even an ArcelorMittal that recently announced that its loss is going to be 22 times higher than the previous year and more job cuts are on the way.
Imagine our pride if a black steel entrepreneur bought these businesses, drove down operating costs, the government stepped up to better protect the industry, and when global markets improved, we might have a steel industry actually controlled by black people.
I can say the same for platinum. Yes, Sibanye has acquired some of Anglo Platinum's mines and Aquarius, but there is still Lonmin. Imagine if Lonmin could be an asset we point to one day as a product of a clever move by a smart government, in a time of depressed platinum prices, that backed experienced black platinum group metals operators who persevered through the tough times and eventually controlled one of the largest platinum miners in the world!
Thanks to a question asked by the Black Business Council's Gregory Mofokeng at the launch, I learnt that the construction industry has also been excluded from the so-called focus sectors. It has been replaced by "industrial infrastructure". It's not clear what this term means, but what is the logic of excluding the construction sector? I am only aware of Dr Thandi Ndlovu's Motheo Group as a credible, sizable, top-grade black-controlled construction group. Notwithstanding its impressive growth, Motheo is small fry compared to the big boys. Are we saying we don't need a black-owned and -operated Aveng, Group Five or Murray & Roberts? Surely not.
Let's just be open to any big idea that will create a thriving economy that is controlled and operated by black people. Let us also move with the times. We live in a world where the best economies thrive because of innovation and knowledge, not because they manufacture the most goods. Excluding service industries and making the Black Industrialists Programme exclusively about manufacturing is ill-advised. For example, ICT is on the list, yet the biggest ICT companies to come out of South Africa are mostly in the services space, such as Dimension Data and EOH.
We need to learn from the past and craft policy that will give us the results we want. I'm afraid even the 100 industrialists in three years that Masina speaks of so passionately may very well be a pipe dream if the department guidelines are anything to go by.
Khumalo is chief investment officer of MSG Afrika Group and presents "Power Business" on Power98.7 Mondays to Thursdays