Self-made businessman Herman Mashaba lays down his common-sense reasons for opposing this new government initiative. Picture: Timothy Bernard
Self-made businessman Herman Mashaba lays down his common-sense reasons for opposing this new government initiative. Picture: Timothy Bernard

Business divided over industrialists scheme

By MOGOMOTSI MAGOME Time of article published Apr 5, 2015

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Johannesburg -

Businessman Herman Mashaba has strongly criticised government’s programme to create 100 black industrialists in the next three years, describing it as short-term and unsustainable.

The Department of Trade and Industry has made available a R1 billion fund to offer cheap grants and loans to upscale smaller black-owned firms, to be competitive and become large-scale manufacturers.

Additional funding will be accessed from the National Empowerment Fund, the Industrial Development Corporation, the Development Bank of South Africa and other state development finance institutions.

Discussions are under way to have the loans offered on longer repayment periods and at interest rates ranging between one and three percent, to counter the rejection of smaller businesses’ loan applications by commercial banks.

Government is emphasising access to funding for black businesses as an integral part of its black empowerment strategy, as it believes this will enable smaller black-owned firms to compete against established and overwhelmingly white-owned enterprises in key industries such as energy, agriculture and technology.

Mashaba, a long-time critic of the country’s labour laws, which he regards as restrictive, believes that relaxing the country’s labour laws and investing in the country’s education are more sustainable options to this scheme.

At the centre of his criticism is a free-market belief that government has no place in the market beyond policy development and implementation, and the argument that giving financial support to hand-picked businesses to compete is in itself anti-competitive.

“I am one person who does not believe in short-term solutions (such as this) scheme.

“I cannot understand why we have not learnt from the 20 years of experience that we have had with black economic empowerment.

“On paper it is a programme that seems to have good intentions, but it is more likely to produce crony capitalists and not industrialists who will create wealth,” he said.

Mashaba said there was a mistaken perception that government could provide solutions to problems such as the small number of black industrialists active in the economy.

“That is a wrong perception. Entrepreneurs are created by enabling a good environment for businesses to thrive – not by throwing money at a selected few who are politically connected.

“It is the same mistake that was made over the last twenty years through BEE.

“We created a handful of millionaires instead of people who created goods and wealth,” he said.

Mashaba has spent about R3 million in legal fees fighting the government to change Section 32 of the Labour Relations Act, which allows the labour minister to extend a collective agreement reached at the bargaining council to parties who are not part of the bargaining process.

He says this is one of the pieces of legislation which has killed small businesses and will continue to do so if it is not amended.

“I am lucky I did not start my business under the current government’s labour laws.

“It really saddens me to say I don’t see how I could have succeeded,” said Mashaba.

But the black industrialists scheme and the broader emphasis on business development as a key driver for economic growth and job creation has received significant support from many players in the black empowerment sphere.

The Black Business Council has thrown its weight behind it and adopted the programme as one of its flagship projects to assist black business people to access the funding.

The council has proposed that an additional R10 billion from Treasury be directed towards the programme.

Some of the proposals from an indaba hosted by the department included a review of the Preferential Public Procurement Act, and the increase to a 75 percent black ownership threshold for businesses to qualify to access the funding.

Businesswoman Anna Mokgokong said it was expected that critics of government would call it another BEE scheme where they same people would benefit.

“The prophets of doom and critics of government will say BEE has failed; that this is another scheme of theirs to empower the already-empowered and their friends.

“The problem is that many people have not followed our development. They do not comprehend what it is we are trying to do.

“Black economic empowerment is a journey that began even before our democracy. It only became policy after 1994.”

Sunday Independent

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