Cape Town - The department of Trade and Industry has learnt its lesson from the controversial funding of businesswoman Khanye Dhlomo’s upmarket boutique, and has issued a directive to stop the use of government funds for importing finished goods.
Luminance, the luxury Hyde Park boutique which sells high-end women’s clothing, homeware and gifts, found itself in the firing line when it was revealed that the company was set up using R34.1 million in funding from the National Empowerment Fund.
A total 71 percent of the store’s stock is locally made, but the rest comes from Italy.
Questions around the deal were originally raised by the portfolio committee, and yesterday, the fund’s chief executive, Philisiwe Mthethwa, presented the fund’s reasoning for rubber-stamping the deal.
Among these was that Dhlomo’s boutique would operate in a retail sector dominated by white-owned businesses, and which had been very slow to transform.
Mthethwa indicated that the fund had originally rejected a request for funding from Dhlomo’s Ndalo Luxury Ventures, but that a reworked deal which increased shareholding for rural women, required a financial contribution from the shareholders and promoted skills transfer, was eventually agreed upon.
The business is now 100 percent owned by black women, and is also managed by women (81 percent are black). It has created 51 jobs, most being women and youth.
Additionally, local designers will be trained by “international practitioners” and rural women will be trained in craft-making, investment and business management. The Johannesburg factory making the local stock employs more than 100 women from Alexandra.
Mthethwa said the deal had met all seven of their codes of good practice.
She said Luminance was “just one store”, but that Ndalo had a long-term plan to open more stores.
Minister of Trade and Industry Rob Davies said the deal had been in line with the fund’s mandate, but had also shown up areas where the dti could “tweak” that mandate.
In this light he had issued a directive to all the dti’s agencies stating that “government funds may not be used to support the importation of finished goods and services”.
Government funds would also be prioritised to support productive sectors, including agriculture, mining, manufacturing and services such as tourism, and the creative industries.
The directive would have no impact on the Luminance deal, as it would only be implemented “going forwards”, Davies said.
In cases like the Luminance deal, where a portion of the goods were local and the rest imported, Davies said “we shouldn’t be putting our own money into importing”.
“But if it’s a very compelling case, we must be part of the decision,” he added.
Members of the committee said they were satisfied with the presentation. Committee chairwoman Joanmariae Fubbs said she was “heartened” that 71 percent of the stock was locally made.
Wilmot James, for the DA, said he hoped Luminance would be a case study of a successful business, studied in graduate business schools.
He later welcomed the move by Davies, but said there was “a clear public display of disapproval” over the transaction with Luminance, which was “owned by the wealthy Ms Khanyi Dhlomo”.
The ANC’s Bheki Radebe said he wanted it on record that he had been the one to raise the issue over the funding, and not the opposition.