An Open response to Trade and Industry Minister Rob Davies’ directive, stating that government funds may not be used to import finished goods or services.
I have been observing from the sidelines for the past eight or so weeks as Khanyi Dhlomo has been hauled over hot coals from every corner for getting a R34 million loan from the National Empowerment Fund (NEF). She used this to open a department store at Hyde Park Mall, Luminance, which sells expensive clothes in line with the rest of the high-end stores there. Few, if any, of the shops in the mall have local manufacturing.
Everyone, including the minister, was complaining that R34m is too much to give to one person. Armchair critics have been saying that same amount could have been given to 100 black entrepreneurs to create more jobs. They say all her products are imports and she is not producing anything locally. Due to the Luminance loan, on August 23, our honourable minister of trade and industry signed a directive preventing government funding for finished-goods imports.
If an imaginary Nhlanhla Mbambo from Soweto were to come and ask the NEF, the Small Enterprise Finance Agency, the National Youth Development Agency, the Gauteng Enterprise Propeller, Ithala, and others for a small R340 000 to open a children’s toy shop at Carlton Centre, they are all supposed to say “No”.
Luminance’s rent is probably R200 000 a month. Dhlomo most likely had to spend R15m to R20m before selling a single item to get her landlord’s deposit, research, interior design, staff, shop fitting and stock at an unpredictable rand/euro exchange rate. I further estimate she probably needs to sell between R3m and R4m of clothes a month to break even. If she were loaned R340 000 by the NEF with 99 other loan recipients, as some have suggested, she could only have gone as far as a small shop in Carlton Centre where she would only sell cheap Chinese imports.
If she made the clothes locally, they likely would not meet Hyde Park standards because the local garment industry is on its death bed.
The people at the Department of “Unfair” Trade and “One-sided” Industry who proposed this unreasonable directive must stop, take off their clothes and read the labels. I bet my last R34m that their underwear is made in China and not at Ninian and Lester in Durban as they would like us to believe.
If the government does not fund the import of cheap finished stuff from China, Turkey, and so on by black entrepreneurs, it means our elected government is giving exclusive import rights to the Somalian, Nigerian, Indian and white wholesalers and supermarkets who import everything from 2-minute noodles to Hugo Boss suits and luxury cars for resale to black people and government departments. These black people happen to make up 80 percent of the country’s population and voted this government into power. They cannot afford to fill a ship with cars, clothes and noodles from China or Germany for resale at their shops.
It is an open secret that township shops are dead and that the malls have taken over township and suburban disposable income.
What surprises me is that Luminance has been crucified without support from the black business associations. There was no public applause from the oligopoly of importers to the minister for further entrenching their historical pole position. I’m sure they quietly toasted the decision at some exclusive restaurant in, you guessed it, Hyde Park Mall.
I would like the honourable minister to admit that this directive is a mistake, and realise its unintended effect will be to forever relegate black business to the “Chappies Little League” of South African business, with no chance of catching up to the JSE-listed importers of finished goods.
If the NEF would provide funding for our imaginary Nhlanhla Mbambo from Soweto to import children’s toys for his Carlton Centre shop, they would allow him to buy from the same factory line that all the big toy companies and retailers buy from. To expect him to make his toys in Orlando East and sell them in Sandton is wishful thinking on the department’s part. They are sending him to a gunfight with a knobkierie.
I will close with a challenge for everyone who can afford it: buy at Luminance. If Dhlomo’s concept is successful and keeps her customers happy, she can pay back that loan with interest totalling almost R13m within the regulation time of five years. That will be R13m more for the NEF to use to further level the South African economic playing field.
Ntuthuko Shezi is an entrepreneur, Clinton Democracy Fellow and a 2013 Mail and Guardian 200 Young South African. He is the founder of Scratch Mobile and a co-founder of The National Doing Commission. He writes in his personal capacity. @mashezana