Remarks by President Cyril Ramaphosa at the opening of the inaugural Black Industrialists and Exporters Conference
Minister of Trade, Industry and Competition, Mr Ebrahim Patel,
Minister of Finance, Mr Enoch Godongwana,
Premiers and MECs,
President of COSATU, Ms Zingiswa Losi,
Representatives of labour and political parties,
Representatives of worker trusts,
Members of the Broad-Based Black Economic Empowerment Advisory Council,
Representatives of business and industry,
Leaders of the Black Business Council and Business Unity South Africa,
Ladies and Gentlemen,
Today is an important milestone.
This inaugural Black Industrialists and Exporters Conference is an opportunity to reflect on progress in advancing redress and equity in the South African economy. It is an opportunity to discuss what we need to do together to expand the frontiers of economic transformation for the next decade and beyond. Next year marks 20 years since the promulgation of the Broad-Based Black Economic Empowerment Act. It is undeniable that we have made gains in transforming a skewed, racialised economy.
By way of example, in 1994 there were around 150,000 black-owned formal businesses in South Africa. Today, there are well over 300,000 black entrepreneurs who own over half of all small businesses in the formal sector. In addition to the progress in management, shareholding and ownership of businesses by black and women South Africans, there has also been substantial progress on employment equity.
According to labour force surveys, the number of black managers in the private sector has more than doubled over the past 20 years, from 125,000 in 2002 to over 350,000 today.In the public sector, the number has tripled, from 45,000 to 150,000. As we reflect on this progress, we must also critically examine areas where transformation has been slow and implementation has been weak.
As this conference recognises and celebrates the successes of the Black Industrialists programme, it needs also to set out what our responsibilities are – individually and collectively – to advance inclusive entrepreneurship in South Africa. Our black industrialists strategy is underpinned by two core commitments.
Firstly, to secure greater diversity in ownership and control in the economy, which is crucial for economic dynamism and social solidarity. Secondly, a commitment to promote emerging enterprises to drive inclusive industrialisation. Our strategy aims to ensure that we secure greater representivity across the economy, all the while generating greater prosperity and employment. Over the past six years, the Department of Trade, Industry and Competition, the Industrial Development Corporation, the National Empowerment Fund and other agencies have supported approximately 900 black industrialists.
Over the past 11 years, black enterprises have been supported to the value of R55 billion. Estimates by the Industrial Development Corporation suggest that the socio-economic returns of this programme have been even more far-reaching. This includes supporting and creating some 55,000 jobs and adding over R160 billion to our country’s GDP.
Small businesses continue to benefit from preferential procurement by the state and receive support to grow and expand. The worker shareholder regime also continues to improve. A study by the DTIC found that companies with employee stock ownership plans employ at least 450,000 workers. These successes are testament to a shared commitment to transformation, and to deepened collaboration between the state, the private sector and other actors in the economy. And yet as much as we are working to achieve the vision of the Freedom Charter that all shall share in the country’s wealth, we have not yet overcome the structural defects of our economy.
These defects are persistent and run deep. They are reflected in the high levels of joblessness. Under apartheid, racist patterns of land ownership strangled the black agriculture sector. Black business was relegated to the townships and bantustans. Not only did they receive no government support to grow, but they were also deliberately stifled. Black children did not inherit wealth in the form of businesses, capital or housing. Townships lacked industrial and commercial sites and the infrastructure needed to run businesses.
Many people, especially black women, faced obstacles to getting loans, business operating licenses and premises. With the country’s majority deliberately and systematically excluded from the economic mainstream for centuries, it is little wonder that self-employment and entrepreneurship in South Africa are at lower levels than most peer economies. In other upper-middle-income countries, small and medium employers and self-employed people make up around 1 in 3 of all employed people in the rural areas, and 1 in 7 in the towns.
In South Africa, the figure is just over 1 in 20 in both rural and urban areas. According to modelled estimates from the International Labour Organisation, business owners in South Africa plus family members who work for them make up just 17 per cent of total employment. This is compared to 46 per cent in China and an average of 31 per cent in other upper middle-income economies. Self-employment and entrepreneurship are the engines of growth and job creation in any economy. They support innovation, boost competitiveness and bring new products and services into an economy. To a large extent, this entrepreneurial deficit is the legacy of the policies of the past.
But 28 years into democracy, there are still barriers preventing black entrepreneurs from meaningful and equitable participation in the economy. These barriers are particularly challenging for women, youth and persons with disabilities. They are particularly challenging for entrepreneurs in townships and rural areas. These entrepreneurs have difficulty accessing finance, markets, technology and infrastructure. There is red tape and other bureaucratic obstacles. On a wider scale, there is also the concentrated nature of the economy and ownership patterns, and exclusion from major value-chains.
For this reason, even as we celebrate black entrepreneurial success, our eyes must look towards the horizon. While we are here to deliberate on learnings from the Black Industrialists Programme and other initiatives, this conference is also about shifting the transformation agenda into higher gear. What we want to see from this conference is the makings of a new, improved trajectory for broad-based black economic empowerment. We want concrete proposals on how to leverage both capacity and resources from across society. We want a frank conversation about impediments to the expansion of black business, not just from government, but from the private sector as well.
We need to talk about private sector procurement, about value chains, about access to financing for emerging black business and about how existing systems militate against emerging black business. We need to talk about the inefficiencies in the economy that affect established and emerging businesses alike. We should be discussing the steps we have taken – and still need to take – to significantly improve the state of our ports, rail lines and roads. We need to discuss the far-reaching reforms we are taking in telecommunications, energy and water to improve the competitiveness of our economy and reduce the cost of doing business.
These reforms are all necessary if we are to create conditions that enable black industrialists to emerge, to grow and to flourish. In particular, we need to act decisively and urgently to end the load shedding that is causing such damage to our economy and such disruption to our society. Like every other actor in the economy, black industrialists can simply not grow without a reliable supply of affordable energy. We have done much over the last four years to transform the country’s energy landscape and bring new generation capacity online. But that is not enough. And we need to move faster.
That is why I have brought together all relevant departments and entities to work on an integrated set of measures to add additional power to the grid in the shortest possible time. We are currently engaged in consultations with social partners on these measures, and will soon be able to announce a package of measures that provides an effective response to our energy crisis. At this conference, we need to come up with solutions to the challenges facing black entrepreneurs.
How, for example, can the private sector scale up mentoring so emerging black business men and women do not find themselves set up for failure? What support can the IDC and other government entities offer to black industrialist and black entrepreneurship projects funded by the private sector, whether in the form of guarantees or other instruments? What role can angel and venture capital play in bridging the financing gaps that both aspirant and established black business rely on for their sustainability? The deliberations from this conference should result in commitments from the private sector to procure more from emerging black business and to support their integration into value chains.
They must do this even if it means changing value chains to accommodate black business. Unless tangible, sustainable measures are implemented, we run the risk that empowerment opportunities are confined to black businesses transacting with the state. We run the risk that the private sector, and big business in particular, makes little or no contribution to the empowerment of black entrepreneurs. We run the risk of stifling economic growth. An economy that only benefits a few, and does not reflect the country’s demography, will never be sustainable or dynamic. There can be no growth without economic inclusion and without a business sector that reflects the diversity of our people and our society. There can be no inclusive recovery and reconstruction unless broad-based black economic empowerment is at the centre of our efforts.
The newly appointed B-BBEE Advisory Council has been tasked with advising on the future trajectory of broad-based black economic empowerment as we rebuild from years of slow economic growth and the impact of the COVID-19 pandemic. The Council comprises accomplished South Africans with diverse experiences and expertise in business and the economy. Our vision for the future of black economic empowerment will build on our successes, learn from shortcomings, and must be agile in response to the realities of the national and global economies.
I am pleased that exporting by black industrialists is one of the themes of this conference. This conference will be discussing opportunities to access other markets on the continent through the African Continental Free Trade Area and trade arrangements between South Africa and the rest of the world. Our achievements through the Black Industrialists Programme and other initiatives must act as a springboard to achieving higher rates of economic growth, social transformation and common prosperity. In conclusion, I wish to thank Minister Patel and his team for convening this inaugural Black Industrialist Conference.
Through this conference we want to establish a practice of recognising and celebrating black excellence in the economy. As government, we want to pledge our support to the endeavours of black and women entrepreneurs. We also want to challenge South African business to play its part. Established business needs to understand that transformation is vital for sustained growth and that it is in everyone’s interests that the substantial capabilities of the private sector are mobilised to support broad-based black economic empowerment. Working together, we can grow this economy, create jobs and ensure that no-one is left behind.
It is my pleasure to declare this inaugural Black Industrialists Conference open, and wish you fruitful deliberations.
I thank you.