Address by the Minister of Public Enterprises, Mr Malusi Gigaba, MP, during the launch of the Godisa Supplier Development Fund at Koedoespoort, Pretoria
It gives me great pleasure to participate this morning at this historic occasion of the launch of the Godisa Fund.
I thank you all, particularly our partners for making it possible that we should today launch this Fund and make yet another stride towards advancing the vital goal of economic transformation in our country.
We must take deep pride that on this, the 20th year of our freedom, when we are about to celebrate as a nation 20 years of democratic rule, we should reach yet another economic milestone in our country.
Indeed, the President was correct last Thursday to make the bold assertion that South Africa has a good, nay, exceptional, story to tell and that today we are a better country than what we were 20 years.
Future generations must concede, when they look back to this particular year and the choices and decisions today’s generations must and will make, we were correct this year firmly to regard radical and far-reaching economic transformation as the most critical question we had, in the new period, to answer and thus to align all our actions towards this imperative.
Vulnerable South Africans like children and the elderly enjoy social protection in the form of free access to health care and social grants. Through the decisive actions of the past 20 years, particularly through the social wage, we have prevented millions of South Africans from sinking into abject poverty.
Yet, we are all too aware that social grants do not generate sustainable incomes and cannot be a sustainable basis to grow our economy and achieve development and social inclusion and justice.
Furthermore, during the past twenty years, the youth have remained at the margins of economic participation and inclusion as unemployment, lack of skills and access to economic empowerment remained rampant amongst them.
The time has arrived to move South Africa forward, and accordingly, together and decisively shift our focus towards ensuring that young people have access to quality business opportunities.
The most fundamental and sustainable way to grow our economy on a sustainable basis, and achieve jobs and social inclusion and justice is through industrialisation and creating a thriving manufacturing sector in our country. Towards this objective, State-Owned Companies’ investments as well as infrastructure roll-out will play a critical part.
Furthermore, to meet this objective of social inclusion, we must create a corps of black industrialists, an objective that is critical to reversing de-industrialisation and the development of our national manufacturing capabilities.
Manufacturing is unique in that it has the capacity to generate ‘dynamic increasing returns’ in that the growth of output in manufacturing is associated with increases in economic productivity.
In other words, the knowledge gained from manufacturing spills over into the rest of the economy, resulting in overarching economic growth and development.
In particular, manufacturing facilitates the expansion of a knowledge-intensive services sector, hence, growth in manufacturing is overwhelmingly associated with sustained growth in employment and GDP.
The challenge of developing our industrial capability to supply the requirements for our infrastructure build programme is particularly acute. At the moment our current account is out of balance significantly because of our need to import equipment and components for the build programme, which is clearly not sustainable.
It is consequently in all our suppliers’ interest to localize the manufacturing of inputs to the programme if the programme is to be sustained into the medium-term. We are steadfastly committed to supporting people who have demonstrated entrepreneurial flair through the establishment of small businesses.
In South Africa, we have almost 5 million small and medium entrepreneurs and 70% of them do not survive beyond 18 months due to structural problems which include lack of access to funding, which is a serious economic efficiency. It is something that our economy will not self-correct.
The development of black industrialists, to provide private sector leadership to our industrialization programme, is a core strategic challenge facing our economy. This is a critical process if our democratic dispensation is to retain its legitimacy as a means to economic emancipation.
We are here today to launch the Godisa Fund, which is a joint venture between Transnet, Anglo- American’s Zimele and the Small Enterprise Finance Agency with the objective of providing financial and non-financial support to small and medium enterprises in the manufacturing field with firm contracts with Transnet.
The Fund aims to facilitate the economic growth of black-owned suppliers through providing the decisive support required to develop small-scale operators to the point where they have a diversified customer base and are able to sustain themselves independent on any individual customer relationship.
One of the ways that this will be achieved will be through looking for opportunities for emerging Transnet suppliers in the Anglo-American group which will enable greater economies of scale and customer diversification.
It is expected that the Fund will proactively look for common requirements across Transnet and Anglo American and seek to secure opportunities for emerging manufacturers to meet these requirements.
I believe that we cannot overstate the importance of this initiative which marks the start of a process of building constructive collaborative processes between our SOC, the mining sector and our development finance institutions. When we look at South Africa historically, much has been written about the relationship between the mining sector and oppressive labour practices both within and outside of the mines.
However, at another level, we also need to acknowledge that to the extent that the post-apartheid government inherited an industrial base and the infrastructure of a modern economy, it was overwhelmingly a result of a resource-driven industrialisation process. The role of Anglo-American in this process can also not be underestimated. Let me expand on this.
A core element of the South African economy is the so called minerals-energy complex which consists of upstream and downstream linkages between resources-extraction constituted by resource processing, infrastructure provision and capital and certain consumer goods manufacture.
However, it is important to acknowledge that the driving force in establishing the complex was effectively a partnership between the mining sector and the state and there have been many examples of this partnership throughout South Africa’s history, which involved Anglo itself. These investments and partnerships were informed by Anglo’s strategic business motivations.
However, we also need to acknowledge that Anglo-American, as well as Ernest and Harry Oppenheimer, committed very publically that a core value of the company was to leave an economic legacy that would last for hundreds of years after the mineral resources that Anglo- American had exploited was depleted.
Hence, as per these core values, rather than issuing dividends to its South African and overseas shareholders, the company chose to invest in the diversification and sustainability of the South African economy and this needs to be acknowledged.
We need to rediscover the legacy of the mining sector, the SOC and DFI working together, recognizing that the conditions in the country and in the world have changed considerably. Our economy will not recover, and we will neither succeed to move South Africa nor achieve social inclusion, without this working together and correcting the market inefficiency.
We need to increase our appetite for risk, take a handholding approach and trust black people as capable entrepreneurs so that we do not build the economy on the back of fronting entrepreneurs with no experience, skills, or keenness for industry.
This Fund will encourage young black people who have aspirations to be entrepreneurs and suppliers of light and heavy manufactured products to access funding. The success of our industrialisation will be measured through a thriving manufacturing sector and its multiplier effects in the economy.
I call on young people to take this opportunity and apply to the fund. I congratulate Transnet, Anglo-American and the Small Enterprise Finance Agency for taking this bold initiative of establishing this collaborative Fund.
I think it is a historic initiative and marks the start of higher levels of collaboration between key stakeholders in the South African economy to achieve our industrialisation and transformation objectives. Indeed, precisely of this innovative intervention, the next twenty shall be even better that today as today is better than the past twenty years!
I thank you!
