Fast-track co-operatives to boost emerging black industrialists

Expanding the industrial base of our country is a necessity. Industrialists and investors are critical if we are to pursue this. (M&G)

Expanding the industrial base of our country is a necessity. Industrialists and investors are critical if we are to pursue this. (M&G)

President Jacob Zuma recently voiced his impatience with the slow deracialisation of the economy, citing the fact that black business holds only 3% of shares in JSE-listed companies. He made a call for the creation of “black industrialists” within the edifice of reindustrialisation, aimed at the inclusive growth trajectory espoused in the second phase of our transition.

Economists and pundits alike have remained silent, failing to engage thoughtfully and critically on this emerging policy discourse based on the concrete reality of a stubbornly untransformed economy.

The panel appointed by the department of trade and industry will grapple with the nuts and bolts of the policy and its practical modalities, such as financing, incentives and support mechanisms, but it is important to put in sharp focus the necessity to build on existing instruments to broaden economic participation.

By “existing instruments” I am not referring to black economic empowerment (BEE), which, in its various incarnations, has led to debt-financed BEE deals, fronting and tenderpreneurship. These serve perverse accumulation interests.
Rather, a much more aggressive effort must be made to support collective forms of economic production, such as co-operatives, aimed at building a solidarity-based alternative economic system.

The trade and industry department’s 2009 baseline study indicates that co-operatives exist in most sectors of the economy – the primary, secondary and tertiary sectors. Yet their contribution to gross domestic product is only 0.33%. This is not an accident. Importantly, with the correct policy mix and focus, this situation can be overturned.

Co-operative forms of enterprise are often marginal because of a lack of access to credit facilities and basic infrastructure. More effort needs to be made to upscale co-operatives, pushing them into the mainstream, priority economic sectors and into subsectors such as agroprocessing, the green economy and metal products, as well as the iron and steel and construction industries.

Supporting such initiatives would not simply augment the 100 black industrialists whose development is the present target, spread over the next three years – it would increase the number greatly. Most industries, and in particular manufacturing, are capital intensive. Therefore, government support is crucial, through financing, preferential procurement, guarantees and market access, among other measures.

Capital formation by and from co-operative members and trade union investment funds, as well as pension funds and other development finance institutions, could fundamentally alter the patterns of investment and align them with economic growth and development.

The development of a co-operatives bank, a somewhat neglected idea, is equally crucial if we are to achieve capital formation for sustainable and competitive co-operative enterprises.

Barriers to entry in many industries scupper the development of successful co-operatives. The reality is that our economy is heavily concentrated, with only a few major multinational oligopolies predominant in each sector.

Creating space for co-operatives in the economy would add a great many significant benefits. Worldwide, co-operatives are known for labour-absorptive approaches, minimising income disparities in firms, democratising decision-making, increasing community reinvestment and respecting the environment – precisely because they are not oriented towards profit maximisation.

Expanding the industrial base of our country is a necessity. Industrialists and investors are critical if we are to pursue this. Building industrial co-operatives could also be a powerful weapon in the fight against the obscene levels of inequality, poverty and joblessness plaguing our country.

Sonwabile Ngxiza is the deputy district secretary of the Brian Bunting branch of the South African Communist Party

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