The new grant and loan fund – BIP (Black Industrialist Programme) – has been launched.
While the guidelines of the fund might not be 100% clear, the general principles of it prevail.
The fund emphasises the significance of Black Industrialists for economic growth and sustainability.
The rational behind the implementation of this programme is that while strides have been made in promoting and supporting black enterprises, the involvement of black entrepreneurs and industrialists in the mainstream economy remains marginalised. Furthermore, the barriers and obstacles that black entrepreneurs are continuously faced with are greater than their white counterparts.
The fund aims to assist in combating these barriers, which include:
- Access to capital – lack of track record and security, resulting in individuals being unable to access funding from commercial sources, or being charged higher interest rates.
- Access to markets – the lack of long-standing relationships in business that facilitate access to markets, as well as the lack of track record and reputation resulting in reduced opportunities being presented.
- Capacity and skills – lack of management experience and skills contribute to the high rate of failure of new businesses.
The fund, therefore, seeks to address these, and other, barriers by providing a platform to supervise the direction of Black Industrialists.
Before analysing what businesses can benefit from this fund, it is important to understand how a Black Industrialist (BI) is defined.
The IDC defines a Black Industrialist as follows:
A black industrialist is defined as a black entrepreneur who creates and owns industrial capacity and provides long-term strategic and operational leadership to the business and is by definition not a portfolio or purely financial investor.
The DTI defines a Black Industrialist as follows:
Black South Africans who own and, through significant shareholding; control an enterprise whose products are significantly used and have significant impact on decent employment and creates broad based economic opportunities.
From the above definitions, it is clear that to apply and benefit from this fund, the BI needs to have significant (and preferably majority) ownership in a business. Furthermore, the BI needs to be involved in the running and operations of the business seeking the funding, with board and/or executive management control.
The types of business the BIP funds
The priority sectors that have been indicated are; manufacturing, mining and mineral beneficiation, construction, agriculture, financial services, services and creative arts.
The factors that inform the prioritisation of these industrial sectors will include industrial policy direction, the presence of black players in specific value chains, the contribution toward job creation and greater economic involvement.
Support that is available to Black Industrialists through this fund
- Working capital support – Concessional loans, ease working capital pressure
- Investment Grants – Cost sharing grant of up to 80% on capital equipment for entities with black ownership between 51% and 100% capped at R50 million per entity
- Joint venture support – Support package of investment grant and equity loan to assist joint ventures where Black industrialist have both equity and management control in strategic sectors
- Export support – Concessional export insurance funding; and Market access support
While the guidelines are still being finalised for the BIP, applications are being accepted from Black Industrialists seeking to access this fund.