Page 55 - IDC

CITY PRESS, 18 NOVEMBER, 2018 7
The IDC financing

process in 5 steps

R1 million or more for
entrepreneurs for new
businesses or expansions

1 The potential
client drops
off their
business plan
at the IDC's
Pre-Investment
Business Centre (PIBC) at 19
Friedman Ave, Sandown, or at
one of the IDC's regional
provincial offices

2 All business
plans are
registered by
the records
departement
and screened for
a mandate

3 If it falls within
the mandate,
the PIBC
allocates it to
a manager to
begin screening
as part of the basic
assessment process

4 Applications
that pass the
basic
SKY’S THE LIMIT Phillip Majali, a director of Boschpick Engineering PHOTO: ELIZABETH SEJAKE assessment Agroprocessing
Building review to one and agriculture
process are
forwarded for

of the 13
strategic business units (SBU's)

COMPONENTS OF THE infrastructure Metals and

Industrial
mining
ECONOMY

Chemicals New
industries
An engineering firm in Newcastle is run by two black industrialists who know

what a difference they can make in the area, writes Riana de Lange

ctober last year marked the start of a busy time for After the Peens brothers approached Khumalo about buying into
business partners Phillip Majali Majali’s advice for the business, he approached Majali.
and Bongani Khumalo, two The two have known each other for more than six years and
rural lads-turned- entrepreneurs worked on several projects together, with Majali being involved in Textiles Automotive and
entrepreneurs who procuring, supply chain and logistical support within the mining and transport
Owere eyeing a stake in In sector. clothing equipment
an engineering manufacturing “As an entrepreneur, you are always chasing two or Majali says: “In the business I had, you act as a buying house,
business in northern KwaZulu- partnership three opportunities, but my advice would be that, from then mark-up and sell. A lot of components and parts the industry
Natal. the time you receive a letter of intent (like we did is looking for are in the line of manufacturing. We realised
In May, Majali and Khumalo, with the from the IDC), you need to focus. eventually that we would have to get into real manufacturing.
through their black-owned “Park other opportunities for the time being. The When the Boschpick opportunity presented itself, we said: ‘Let’s
industrial investment company process is intense and you must maximise your time. give it a try.’ It was a natural transition.”
Lipsobex, acquired a 70% stake in IDC It requires a lot of documentation that has to be Both of them were keen on the transaction as it would also
Boschpick Engineering, a family- provided to the financier, but, with this, you have the bring change to the Newcastle area.
owned business founded by Fred opportunity to absorb a lot of information about the “Engineering industries in the area have been slowly dying. For
Peens Sr more than 30 years ago. business, systems, financials and operations. This way, you the IDC to say it was keen on investing in this area was exciting Heavy Media and
Khumalo (34) a junior miner in the get to understand everything. for us as we could start reviving the engineering industry in an manufacturing audiovisual
Newcastle area, is now chair of Boschpick, “Maximise your time, be hands-on. If you lose track, there area where a lot of mining companies are situated.”
and Majali (36) is a director. The remaining 30% is will be frustrations.” Because both of them grew up in rural areas – Majali in Port St
still owned by the three Peens brothers – Fred, Carel and Johnny. Majali believes one is born to be an entrepreneur – a person Johns in the Eastern Cape and Khumalo in Vryheid in KwaZulu-
The deal was the result of the two aspiring black entrepreneurs willing to take risks. It does take its emotional toll, but it brings Natal – they know what a big difference they can make.
looking for a business opportunity in manufacturing, Boschpick satisfaction when you see the fruits of your labour. Majali divides his time between Newcastle and Johannesburg,
wanting to transform the business in line with South Africa’s BEE spending two weeks a month in Newcastle. When he’s in the City
requirements and the Industrial Development Corporation (IDC) . Phone Boschpick Engineering on 034 375 7281 of Gold, he visits clients in the province such as General Electric,
coming on board as financier with an amount of R27 million. or email phillip@boschpcik.com which has a contract with Eskom; mining equipment company
Of this, R20 million was to acquire the equity stake, R5 million Komatsu Joy; and Transnet Rail (Pretoria and Bloemfontein), and
was working capital and R2 million was for future expansion, IDC approved R16.7bn then Columbus Steel in Middelburg in Mpumalanga.
explains Majali. Although the economy has been tight, he believes the quality of Machinery Chemical
The funding is part of approvals towards supporting black in funding in 2017/18 Boschpick as a business, the type of clients it has, the stronger and capital products and
industrialists and in line with the department of trade and rand and the country pushing for localisation are factors that set equipment pharmaceuticals
industry’s Black Industrialist Programme. the company up to do great things.
According to Majali, Boschpick Engineering is now BEE Level 2 In the 2017/18 financial year, the IDC’s funding approvals They will focus more on localisation according to needs
compliant, which also contributes to its clients’ BEE scorecards. totalled R16.7 billion, an increase of 9% compared with the indicated by clients, and are talking to state-owned enterprises like
During a planned three-year handover period, the Peens previous financial year. Eskom and Transnet, which Boschpick has been supplying
brothers will still run their portfolios as before, while Majali and Disbursements increased from R11 billion for last year to indirectly for a number of years, says Majali.
Khumalo will concentrate on familiarising themselves with the R15.4 billion. The transaction process was quite quick. According to Majali,
different parts of the business. The annual report states that the bulk of the funding – 72% part of the reason the deal was concluded so fast was because of a
“Once we are comfortable, we will start transforming and off- this year – is directed towards capacity expansions, projects and hands-on approach from the buyers, the sellers and the IDC.
loading some of the current workload,” says Majali. start-ups, in line with its mandate to create industrial capacity The willing buyer, willing seller mind-set must be a big drive in
Over the past two months, the focus has been on marketing, development. these kinds of transactions, he believes. It also helped that the Light The
and on meeting Boschpick’s suppliers and clients. Last month and In the past three years, the IDC has focused a significant Peens family went to great lengths to understand the department manufacturing rest of
this month, all the tier one clients did audits on Boschpick’s portion of its funding approvals on supporting black industrialists. of trade and industry’s BEE requirements and how to structure and tourism Africa
operations, infrastructure, capacity, systems and compliance. This year, the support amounted to R7.9 billion. such a deal.
Majali is pleased to say that 90% of them gave Boschpick the In his foreword in the IDC’s annual report, Economic “We didn’t use consultants. Our deal maker at the IDC was very
thumbs-up. Development Minister Ebrahim Patel said: “With two years good. I will go back to the IDC for any transaction based on its
“Now that they know us, we can start focusing on getting more remaining for a five-year target I set in 2015, the IDC has now lending principles. It is focused on the business, your plans and 5 The SBU undertakes a due
work,” he says. approved 67% of the R23 billion that I directed it to provide to capabilities, rather than just the balance sheet,” says Majali. diligence process. If the plan
Boschpick manufactures a wide range of mechanical parts, black industrialists.” Signing on the dotted line was a proud moment, he says. meets all the requirements,
spares and components for several industries. It consists of a This year has also seen a significant increase of 67%, or “As an entrepreneur, you take pride in your achievements. For the money is transferred
foundry, has machining capabilities and does maintenance and R7.9 billion, in 113 transactions (last year was R4.7 billion in 83 us, it was a proud moment showing the country has taken
refurbishments while serving the mining, rail and transport transactions) in funding approved for black industrialists. recognition of our achievements, saying they believe in us and
industries. Outgoing CEO Geoffrey Qhena wrote in the annual report that will support us.”
Steels make up about 70% of production, with the remaining this was a demonstration of the IDC’s intention to advance The satisfaction of seeing something you have built is always a
30% made up of cast iron, manganese and spheroidal graphite transformation towards inclusive growth and development. magic moment.
castings. Chairperson Busi Mabuza says the IDC’s approvals in the “Think about when, as a kid, you got Lego and then you built
Boschpick has just over 40 full-time employees, but the IDC has manufacturing sector, which is the anchor for jobs-rich something. How satisfying is it to see what you have built and
set a target of an additional 27 staff over the next five years. industrialisation, account for a larger proportion of the IDC’s completed. Sometimes Bongani and I look at trains and say: ‘See
Boschpick also provides training to artisans to fulfil its need for funding activity – 46%. those, they are using our components. That’s ours.’ Or we visit a
technical and operational requirements. mining site to see the machines using our components.” Graphics24