Black Industrialists – a key aspect in government’s commitment to grow South Africa


Soria Hay | Head of Corporate Finance | Bravura | mail me  | 

As South Africa enters an election year, the issue of black ownership continues to be a dominant aspect within the country’s transformation landscape. 

This was clearly articulated in the ANC 2019 election manifesto address by president Cyril Ramaphosa when he reaffirmed government’s commitment to working with the financial sector to increase industrial and enterprise financing for black industrialists as well as small businesses and cooperatives.

The Broad-Based Black Economic Empowerment (B- BBEE) Strategy is now going into its sixteenth year of existence, with the first B-BBEE codes having been published over a decade ago in 2007. Protracted negotiations on the various industry sector empowerment charters took place and vast sums of money have been committed to B-BBEE. Despite this, the evidence on performance suggests that the best endeavours have produced patchy outcomes, at best.

Black economic empowerment policies have not lived up to the expectation of bringing fundamental economic transformation to corporate South Africa. Although there are a number of B-BBEE success stories, many of these transactions have resulted in black people acquiring minority equity stakes, with little or no operational control or management input and little influence over the board of directors in the entity. Director-General of the Department of Trade & Industry (dti), Lionel October, has said that this country’s BEE policies have “resulted in empowerment partners becoming ‘junior’ partners in other people’s companies.”

Thus, there is now a strong drive towards black entrepreneurs owning ‘real assets’ rather than minority stakes in enterprises they did not establish. In support of this, the dti is putting significant effort into its black industrialist incentive programme to achieve what B-BBEE empowerment policies have so far failed to achieve – genuine and sustainable transformation.

The dti’s multibillion-rand Black Industrialist Policy was established in 2015, with the stated intention to promote the creation and long-term sustainability of black industrialists. It describes black industrialists as black people directly involved in the origination, creation, significant ownership, management and operation of industrial enterprises. The dti set an original target of supporting 100 black industrialists by March 2018, funding black businesses with the potential to become large and dynamic enterprises. The policy emphasises entrepreneurial leadership, majority equity shareholding or financial interest, significant influence on strategic direction, and executive participation or managerial control over operational activities.

If direct ownership of companies and active involvement in strategic decision-making are crucial to ensuring genuine economic transformation, it is important for business and government to be clear on the intent, definitions and requirements of the black industrialist programme, and how it is differentiated from overall transformation and B-BBEE drivers.


An interview with Soria Hay, Head of Corporate Finance, Bravura, and Dr Ivor Blumenthal, CEO, ArkKonsult, discussing the issue of black ownership which continues to be a dominant aspect within the country’s transformation landscape. 

How is a black industrialist identified?

The dti describes black industrialists as ‘black South Africans who own and, through significant shareholding, control an enterprise whose products are significantly used and have a considerable impact on decent employment and create broad-based economic opportunities’.

As such, black industrialists must be directly involved in the strategic and operational leadership of the operation and have the requisite expertise. They should take personal risk in the business and be locked in for a reasonable timeframe to the entity. The dti policy requires black industrialists to have a high level of ownership (>50%) and/or exercise control over the business.

The dti policy targets entities or individuals that have extensive experience, operations and track record in their respective or envisaged industrial sectors and value chains. Within ten years of being on the programme, it is expected that the entities supported will expand their current operations to become major players in the domestic and/or global markets; start a new operation or business that can enable them to become major players; or acquire an existing or new business that can enable them to become major players.

How are black industrialists financed?

The challenge of access to finance has been one of the main constraints confronting black entrepreneurs.

Lack of equity capital also has an adverse impact on black businesses’ cost of debt funding. A contribution to equity capital reduces the risk profile of a black business and thus unlocks funding opportunities for banks to participate in a more meaningful way. Access to requisite equity and loan funding at appropriate terms is therefore paramount to the successful implementation of the Black Industrialists Programme.

The dti set aside R1 billion to invest in…

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