The Pretoria high court has ordered the department of trade and industry (DTI) to pay Murendi Properties and Building Suppliers, a company in its black industrialists programme, a R14.2-million grant that the DTI awarded to the company.
Murendi’s chief executive Mphedziseni Makhesha says that, even though the court made the order in March this year, he is still waiting for the payment, which was approved in October 2017.
Murendi applied for the money in August 2016 through the DTI’s black industrialists programme to co-fund a R46-million expansion of its manufacturing plant for concrete roof tiles.
The department agreed to a grant payment of R14 210 953 with the rest of the project being funded by a R32-million loan from the Industrial Development Corporation (IDC). The state-owned IDC, which falls under the DTI, is mandated to promote economic growth and industrial development and to develop domestic industrial capacity.
The IDC loan was conditional on a grant being approved by the DTI. The total amount allocated for this would see R32-million go to the tile plant, R9-million to commercial vehicles and the remainder for cash flow.
In March 2018, the DTI asked for a resubmission of Murendi’s black economic empowerment certificate, saying that the one that had been submitted by the company had not been issued by an accredited agency. Makhesha says there were delays in getting this certification as he was defrauded by two different verification agencies that, unbeknownst to him, were not registered.
In time, he got a certificate from a legitimate verification agency which he handed to the DTI. He says after a number of enquiries, instead of paying the grant the DTI launched a due diligence process for re-evaluation of the application in relation to its B-BBEE certificate.
The department was supposed to take 90 days to complete this work but he is yet to receive its report.
After waiting for close to a year for the grant to be released by the DTI, Makhesha decided to approach the courts earlier this year.
The Pretoria high court ruled in favour of the company and said that, as the applicant had met all the qualifying requirements for the payment of the grant, the department must pay the money. It did not, however, indicate when it should be paid.
Makhesha says he wants the DTI to deliver on its promises. “It is a matter of principle to do right by well derserving applicants who were approved based on their businesses,” he said.
The black industrialist programme is intended to encourage competitiveness and economic participation by financially empowering previously marginalised businesspeople.
The DTI’s website says “the term black industrialists will in a general sense refer to black South Africans who own and, through significant shareholding, control an enterprise whose products are significantly used and have significant impact on decent employment and create broad-based economic opportunities”.
At the department’s budget vote in July, it was revealed that its budget has increased from R9.5-billion in 2018/19 to R10-billion in the 2019/20 financial year in nominal terms.
In his budget vote speech, Trade and Industry and Economic Development Minister Ebrahim Patel announced that over the next five years, R40-billion will be used to support the black industrialists projects. This will be done through the co-ordination of the DTI, the IDC and the National Empowerment Fund.
Makhesha says its unfortunate that the DTI has forgotten to fulfill its mandate. “If you look at the black industrialists scheme, it was a well intended project — but it’s regrettable that the people trusted with the implementation are failing the very same beneficiaries.
“What they have done with us, it shows that they are working against their own mandate by not supporting those businesses,” he said.
Makhesha’s project was expected to start on March 2018, but it was delayed to September 2018.
The company agreed to access another loan from the IDC to continue with the project but on a smaller scale. The IDC agreed to provide an additional R3-million.
The project is now in operation but the company had to retrench 11 workers out of the workforce of the 35 newly appointed employees since the grant approval. Murendi currently employs 130 workers.Makhesha says the non-payment of the grant means the DTI is putting Murendi in a situation where the business is not going to be self-sustainable in a long run simply because it’s not producing enough. He says so far Murendi has paid more than R5-million in interest.
The Democratic Alliance’s Dean Macpherson, the party’s spokesperson for trade and industry, says the programme is mired in non-transparency and secrecy. He says that, to date, the party has very little information on who has received billions of rands’ worth of grants and funding. “There is also little evidence of new jobs and little to no evidence of new businesses created as it is focused on putting massive amounts of money behind individuals to buy into existing businesses instead of creating new ones,” Macpherson said.
He says the approach by the department is flawed because you cannot create “an industrialist, you become one over time [by] building your business”.
Macpherson says that the country should be looking to support small- to medium-sized businesses that can create new jobs instead of enriching people who are already successful in business.
The DTI’s Malebo Mabitje-Thompson told City Press earlier this year that the industrialist scheme worked better than most incentives the department had deployed.
“As part of our commitment to zero tolerance to corruption, we will defend any action against the department in court where we believe that governance processes have been breached,” she said.
A DTI spokesperson said the Murendi judgment was being appealed.
Tshegofatso Mathe is an Adamela Trust business reporter at the Mail & Guardian