BEE Watch

Time to take a leaf out of book of Van Riebeeck’s people

Rev. J.D. (Vader) Kestell: “A nation saves itself”
Vader Kestell.jpg

As maturing big Black Economic Empowerment (BEE) deals frustrate in terms of anticipated results, it might be time to take a leaf out of the book of Jan van Riebeeck’s descendants.

Just last week financial services editor of Business Day, Phakamisa Ndzamela, wrote: “There are serious risks to SA’s transformation, especially at an economic empowerment level. It is increasingly worrying that shares worth billions of rand and earmarked for the previously disadvantaged are making their way back into the hands of previously advantaged entities.”

Ndzamela had it more specifically about multi-billion rand deals made about a decade ago in the banking and financial services industry. His complaint being that as those deals are maturing, “one has to wonder whether, 21 years down the line, it is correct for black people to reduce their hard-fought ownership in established JSE companies to just cash”, without delivering co-ownership.

Last month Mineral Resources Minister Ngoaka Ramatlhodi, in an interview with the same paper, based on similar experiences with BEE deals in mining, warned of "implications" for companies that fall short in the audit of black economic empowerment (BEE) targets set out in the Mining Charter.

What brings the issue of BEE deals into sharp focus now is that the audit is to be finalised at the end of March, while the charter required that mining companies should have had at least 26% black ownership at the end of last year. However, as the beneficiaries of the empowerment deals started cashing in their shares, effective black ownership seems to be on the decline.

Impossible situation

What seems to be happening is that the initiative, or intervention if you want, of BEE deals early in this century, is proving to have been too one-dimensional. Not enough though was given and processes put in place to ensure the follow-through of lasting, sustainable ownership.

It is probably way too late to, as those deals mature, start thinking about ways how to “hold everybody, those who have been empowered and those who are empowering or have been empowering, to the spirit of empowerment itself” – in the words of the minister.

He went on to say: “It has to do with making sure that blacks are seen to be part of the economy, that’s the essence, so whatever we do we must not lose sight of that."

The impossibility of the situation and the danger of enforcing a repeat round of BEE deals are well illustrated by:

·       The impossible wish expressed by Ndzamela in response to BEE beneficiaries giving up “ownership” for the cash from selling their shares: “…are there alternatives in which black participants can cash in while keeping their cash?” In other words, “having their cake and eat it”; and

·       The warning at last week’s international Mining Indaba by the top functionary of an important international investment house who cautioned that some potential investors in the country are waiting for certainty on, among other things “… issues such as BEE and the dilution that could cause if in fact, (black) holders of those shares are allowed to sell them, requiring further dilution. At the extreme case, if it were to roll four times, there’s no shares left to give. So we’ll have to wait and see how that is bottomed out before we make any investments in South Africa.”

Van Riebeeck’s people

The architects of the BEE share deal initiatives might have done better and avoided the present conundrum if at the time they had studied the history of Afrikaners on the economic front early in the 20th century after suffering a devastating colonial war against the British.

Political commentator Max du Preez was spot-on when in 2012 he wrote that “black South Africans need an AfriForum and Broederbond”.

Having been in a similar situation early in the 20th century to the majority of the black population when freedom came for them during the last decade of the same century, the Afrikaner’s equivalent of BEE was called “volkskapitalisme” (capitalism of the people).

Sure, especially after the Afrikaners secured political power in the 1948 election there was some government “hand-me-ups”, but “volkskapitalisme” was in the first instance a bottom-up self-help initiative as compared to the almost exclusively top-down approach of BEE.

For the Afrikaner the turnaround really started when a small group of them and a Scotsman decided to establish the South African National Trust and Assurance Company Limited (Santam) in late 1917. The next year the life assurance company South African National Life Assurance Company Limited (Sanlam) would follow.

Firstly, concentrating on the Afrikaner population, it not only developed into one of South Africa’s corporate giants, but its 2003 BEE deal – when it matured at the end of 2013 – delivered added value to its main empowerment partner in the order of R10 billion.

But that does not tell the full success story of “volkskapitalisme”. The concept really caught on during the 1930s on the back of a slogan coined and directed at Afrikaners by the civic-minded religious leader Rev. J.D. (Vader) Kestell: “’n volk red homself” – a nation saves itself.

Born out of the effects of the Anglo/Boer War, successive droughts and the depression of the 1930s, it culminated in the Economic People’s Congress (Ekonomiese Volkskongres) of 1939 aimed at allowing Afrikaners entry into the trade and industry sectors of the country.

It led to initiatives like the Reddingsdaadbond, based on a contribution of six pennies per month from each of its 70 000 members, two for administration, two for a life insurance policy or savings plan and two for the person responsible for collection. The fund would assist with the establishment of hundreds of Afrikaner businesses and the provision of employment for others.

In 1940 the establishment of Federale Volksbeleggings Beperk as a champion of Afrikaner business interests would follow and later Volkskas (now ABSA) and other economic giants of today.

Minister Ramatlhodi and black community leaders would do well to study this history when he talks about “a champion that is privately owned that is run by South Africans and is a successful enterprise. It must be broad-based but run as a business, not a charity".

Conclusion

The problem to date with black economic empowerment has probably been that it was treated as a once-off initiative - not properly thought through, as illustrated by what is now happening with BEE deals.

A strategy should have been in place for a follow-through to ensure sustainability of black ownership. Much of the blame, with a few exceptions, could probably be laid at the door of the first generation of beneficiaries.

Personal gain and ambition are the drivers of progress and innovation, but that should be tempered by a community spirit and a sense of being “my brother’s keeper”. I’m not convinced there is enough of that spirit around.

Maybe it is also time for those who were involved in, or has access to the historical records of organisations like the Afrikaner Broederbond should reach out to those in the black community who are now at the point where the Afrikaner community was 80-plus years ago in the wake of its own war against colonialism and the epic financial/economic crisis called the “Great Depression”. 

by Piet Coetzer

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