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An Open Letter to Rob Davies, Minister of Trade and Industry (by Ntuthuko Shezi)

September 7, 2013

I have been observing from the sidelines for the past eight weeks as Khanyi Dlomo has been hauled over hot coals from every corner for getting a R34million loan. From my back row seat, it seems crystal clear that her only sin is that of being the recipient of a loan from the National Empowerment Fund. She used this loan to open a department store at Hyde Park mall. Her store, Luminance sells expensive clothes in line with the rest of the high end stores that operate in that mall. Few, if any, of the shops in Hyde Park mall have local manufacturing. Loans from the NEF require monthly repayments from the date you receive it are due and payable within 5 years.

Everyone, including the minister was complaining that R34 million is way too much to give to one person. Armchair critics are saying that same amount could have been given to 100 black entrepreneurs to create more jobs. They say all her products are imports from other countries and she is not producing anything locally. Due to Luminance, on 23 August 2013, our honourable minister of Trade and Industry signed a directive preventing empowerment funding for finished-goods importers.

In other words, if an imaginary Nhlanhla Mbambo from Soweto were to come today and ask the NEF, Khula, NYDA, GEP, Ithala and other s for a tiny R340,000 to open a clothing shop at Carlton Centre, they are now all supposed to say NO.

Firstly the disclaimers:
I have never met Khanyi in person nor do I have her number or email. I have appeared twice in her Destiny Man publication where she covered the small business I run at OR Tambo Airport. I have been following her rise to where she is through the lens of the mainstream news media that are available to everyone. Secondly, I have never received a loan from the NEF nor have I submitted an application for one.

Her short story reads as follows: She was a beauty queen and an editor for True Love magazine; she resigned from True Love and moved to Paris. She then left Paris to study her MBA at Harvard Business School in Boston, USA. She graduated, came back to SA and started Ndalo Media and partnered with Media 24 to launch Destiny Magazine and later Destiny Man.

I do not think she received any funding from the NEF for those two major magazines. She had to struggle through it like every black entrepreneur in South Africa has to in order to get seed capital. Her Harvard credential must have helped because it brought the social capital and credibility to help her make the jump from being a beauty queen to Luminance founder.

Luminance rent at Hyde Park is probably R200,000 per month, I have not seen the store and do not have the actual square meters. Her salary bill is probably another R200,000. So she has to make a gross profit of at least R400,000 from selling clothes every month just to cover rent and salaries before taking a cent in profits. This means that she needs to have sold at least R4million of clothes every month just to not lose any money. She probably spent R5million on interior design and shopfitting and another R10-15 million on stock for winter, spring, summer collections, depending on the unpredictable rand vs euro exchange rate.

In summary, Khanyi probably had to spend R20 million before selling a single item of clothing. If she were loaned R340, 000 by the NEF together with 99 other loan recipients as others have suggested, she would have gone far as a small shop in Carlton Centre where she would only sell cheap Chinese imports. If she made all the clothes locally, they wouldn’t look as nice because the local garment industry, contrary to what we would like to believe, is on its death bed and the skilled pattern makers are either dead, dying or in retirement.

The people in government who have just signed a directive to prevent the import of clothes and other finished products using government loan funding must stop, take off all the clothes they are wearing one by one, and then read the labels at the back of those clothes. I can bet R34million that even the minister’s underwear is made in China and not at Lillian and Lester in Durban as he would like us to believe.

If the government does not fund the import of cheap stuff from China by black entrepreneurs, that means they are effectively giving exclusive import rights to the Somalian, Indian and White wholesalers and supermarkets who import everything from 2minute noodles to Hugo Boss suits for re-sale to black people,. These black people happen to make up 80% of the country’s population and due to historical reasons, cannot afford to fill up a container with clothes and noodles from China and sell it at their shops, because the township shops are dead and the malls have taken over all township disposable income.

The status quo will then continue with the have’s importing, with no competition and creating no local jobs as they have done for the past 20 years. The have not’s will continue buying clothes and noodles because at some in a day, everyone gets hungry and must eat a cheap meal.

I therefore challenge all people to go buy from Luminance if they can afford to. Khanyi deserves to be higher up the ladder than some of us are because she has earned her stripes. If we can rally behind her as she blazes a trail, we won’t have to defend our loans from the NEF on 702 like she had to. Then she can pay back the loan of Prime +5% in less than five years.
With interest, she would have paid back installments totaling approximately R46,940,040.00, making the NEF a cool R12 million in profit. The NEF can then fund the 99 other black entrepreneurs.

In closing, I would like the honourable minister to get a new advisor on Small Business policy development. The minimum qualification for the advisor must not be a PhD in Economics from Sussex, but at least someone who has run a Spaza shop for at least one month and made a profit.

Ntuthuko Shezi is an entrepreneur, Clinton Democracy Fellow and a 2013 Mail and Guardian 200 Young South African. He is the co-founder and Chairperson of The National Doing Commission. He writes in his personal capacity.

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From → BBBEE, Opinion, Retail

2 Comments
  1. If the minister does not reply to this, he is dropping even lower on my scale than he already is – and due to many reasons of my own – that is already quite low.

    Like

  2. Bobs not my uncle. permalink

    I tried to get DTI grant to train 8 safety officers a year over 10 years to integrate into the labour dept as inspectors and another 15 safety consultants per year over the same period in a incubator – cost R1,5m per year – that’s 23 trained staffers per year and 230 over period created jobs….. they told me that its not sustainable!!!!!!!!!

    Like

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