Businessman provides advice on unearthing black industrialists
Finding black industrialists in South Africa is like searching for a needle in a haystack.
So rare are the industrialists that government’s push for the creation of 100 black industrialists by 2017 still sounds like hollow sloganeering. After all, the past 20 years of democracy have produced little towards creation of a class of sustainable black industrialists, who, in turn, can help towards job creation.
Therefore, the story of Eastern Cape-born industrialist Patuxolo Nodada is remarkable. He made his mark in manufacturing long before the mantra of “creating 100 black industrialists” became a rallying cry. He simply rolled up his sleeves and worked hard to succeed in a range of manufacturing sectors from buses to flat-screen TVs and decoders.
Nodada’s industrial holdings, housed in his investment vehicle Siga Capital, include stakes in Vektronix, an East London-based electronics manufacturer that produces flat-screen TVs and decoders; Ulrich Seats, a manufacturer of bus and trainseats; and Busmark, a bus maker that controls 40% of the country’s market with more than 10 000 buses that ferry travellers and commuters on South Africa’s roads.
At a youthful 38 years, Nodada’s story is inspirational. His experience in manufacturing certainly qualifies him to offer advice on what government needs to do to produce other successful industrialists like him.
“South Africa has the ability to create 100 black industrialists but government has to support them because the barriers to entry in manufacturing are very high”
Nodada believes developing 100 black industrialists sectors such as transport, green industries, agro-processing, biofuels and chemicals is feasible but government officials responsible for the implementation of this policy need to provide tangible support to emerging industrialists.
“South Africa has the ability to create 100 black industrialists but government has to support them because the barriers to entry in manufacturing are very high. Potential black industrialists need help with access to land, capital, technology, and research and development,” he says.
STATE MUST USE PROCUREMENT MUSCLE TO CREATE INDUSTRIALISTS
The first thing that needs to happen, Nodada argues, is for government to stringently use its procurement muscle to buy goods from local manufacturers instead of confusing local manufacturers with distributors or middlemen, who import goods and sell them domestically.
This practice sabotages local manufacturers, leaving the country struggling to create jobs despite of the fact that the country’s industrial policy calls for the buying of domestically produced goods by local consumers and an accelerated penetration of South African manufactured exports into African markets.
As a buyer and consumer of goods and services, the state has massive financial firepower, but its Preferential Procurement Policy Framework Act (PPPFA) has been criticised by emerging businesses and government procurement officials for placing disproportionate emphasis on price than supporting small businesses when tenders are scored and awarded.
The PPPFA uses a tender awarding formula that is based on a 90:10 ratio, with 90% accounting for the price of the scorecard and 10 for black economic empowerment. Effectively what this formula means is that a business does not need to have blackshareholders to win a tender.
The price just needs to be competitive. This results in emerging businesses being undercut in pricing by established local and international businesses when tendering for business from government. These big suppliers import goods from low-cost industrial producers such as China and Brazil, which they then provide to the public sector.
Government procures R460 billion worth of goods and services annually from suppliers.
“If 10% of these manufacturers succeed, you have 100 industrialists. Those who fail can become employees in businesses of the successful 100 industrialists”
Nodada notes that South Africa has “good laws that encourage industrialisation” but implementation and monitoring is weak. “South Africa does not have a database of local manufacturers, which results in distributors acting as manufacturers who import goods from China, Brazil, and Western countries,” Nodada explains.
To achieve the 100 black industrialist’s target, Nodada suggests that the government must bring in 1 000 hopefuls into an intensive incubation programme, with a focus on training and mentoring, start-up funding, research and development and then help these industrialists with access to markets through state procurement.
“If 10% of these manufacturers succeed, you have 100 industrialists. Those who fail can become employees in businesses of the successful 100 industrialists,” he argues.
Furthermore, Nodada calls forSouth Africa towork hard to rebuild the productive capacity of its manufacturing sector, giving it the capability to manufacture to European standards.
“We had a better manufacturing base than that of South Korea and China, but today their manufacturing bases are better than that of South Africa, yet they don’t have natural resources to the extent we have. They source minerals from resource-rich countries like South Africa and then beneficiate them. They make cars from our scrap metal and recycled steel,” he explains.
He believes that manufacturing should operate non-stop and that the country must solve the issue of electricity tariffs since power is key to manufacturing and beneficiation. “Manufacturing should operate 24 hours or three 8-hour shifts per day,” Nodada says.
“The reason China and Brazil are beating us is that they work 24 hours and here in South Africa we sleep while they are working. Poland, which is close to Germany, is beating us and is benefitting from learning from Germany.”
This is valuable advice from a self-made industrialist. If his advice can be heeded it would certainly help towards giving substance to “creating 100 black industrialists” mantra. A crop of black industrialists who will play a meaningful role in the economy will be created and, through job creation, the industrialists will uplift others much like the Afrikaners did during the near 50-years of apartheid rule.
NODADA’S INDUSTRIAL PORTFOLIO POISED FOR GROWTH
A closer look at Nodada’s industrial portfolioindicates that one of his businesses, Ulrich Seats, islikely to benefit from the government’s massive investment in transport infrastructurethrough supplying seats to transport parastatals, Passenger Rail Agency of SA (Prasa) and Transnet, which will collectively spend R173 billion to introduce new train coaches and locomotives respectivelyon South Africa’s railway network.
Busmark is supplying buses to the big metros such as Joburg City and City of Cape Town that are currently rolling out rapid-bus-transit systems across the country.
Busmark has also supplied coaches to the Gautrain Management Agency, the operator of the Gautrain rapid-train system that connects Pretoria and OR Tambo International Airport in Kempton Park.
Prospects are also looking bright for decoder maker, Vektronix. The company is eyeing the digital migration tender, which involves manufacturing decoders that will allow households to switch from outdated or analogue television sets to digital television.
Government has set aside R10 billion to subsidise poor households to purchase an estimated 10 million decoders to help them afford the decoders that will enable viewers to experience excellent sound and picture quality. The new decoders will cost no more than R1000 and households that do not have the decoders will have their analogue TVs switched off, blocking them from watchingany of their favourite TV programmes.
Nodada’s entry and penetration in the manufacturing sector has been aided by industrial lender Industrial Development Corporation, which has funded his investments to the tune of R600 million.
His passion for manufacturing dates back to the 1980s when he was growing up in Butterworth,a once-powerful industrial town in the Eastern Cape that unfortunately de-industrialised in the 1990s following an exodus of investors.
Although Nodada’s initial foray into business was in the mining industry, he prefers manufacturing. Occasionally, he dabbles in property development.
“I prefer manufacturing to mining because manufacturing investments create many jobs and mature faster than mining investments. I did not have the patience for mining investments. Mining investments are capital intensive and take a long time to mature because you have to prospect, and the licensing time to get to market is longer than manufacturing investments,” he explains.
*Article first published by www.getbiz.co.za