Let's Think

Avoid BEE mistakes in Black Industrialisation

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There are some promising signs that government’s emerging Black Industrialists Policy Framework can broaden and deepen the process of Black economic empowerment – turning it into something really substantive.

Most promising, emerging from government role players at last week’s Black Industrialists Indaba, are strong indications that the programme will rather be driven by incentivising and enabling than by regulation aimed at numerical targets.

There is no argument, it is in the interest of South Africa and all who live in it, that all groups of its highly diverse society work in as well as benefit from an expanding and growing economy.

What has strongly emerged in recent times is that the policy approaches to date with black economic empowerment have not achieved this goal. In fact there is a strong case to be made that some elements of that policy are in need of serious review.

It has led to tokenism and the enrichment of a small circle and has done very little to create a sense among the broader, especially black, community of having a personal stake in the economy and its fruits. The apartheid-era phenomenon of getting around an over-regulated economic and market environment by using so-called ‘nominees’ are back with us. In the days of group areas, white ‘nominees’ would be used by companies, in reality belonging to people of other races, to buy properties in areas designated for whites.

It is this phenomenon that is behind a few instances and is enriching people with unlikely background and experience who are acquiring huge contracts with the state and state enterprises, such as recently came to light at Eskom.

The failure of BEE to date is further illustrated by the present debate around the level of ‘Black’ shareholding on the Johannesburg Stock Exchange (JSE). While President Jacob Zuma and others stick to the view that only 3% is owned by Blacks, it is hotly disputed by, among others, the JSE itself.

Bringing factors like trusts and pension funds into the equation, the JSE calculated a combined Black ownership of 23% of which 10% is privately owned. This is one percent above the 22% white shareholding.

Illustrating that stock exchange shareholding is in the first instance not the playground of ordinary people, but of big investors, is the fact that the largest chunk of shares, 39% on the JSE, resides with foreign investors.

What the cold figures do not address is the more important psychological need to have as many citizens as possible experiencing a feeling of forming part of the economy.

In a previous article we argued that the Black component of the country’s population, and especially civic leaders, should consider taking a leaf from the book of the history of Afrikaner economic emancipation. It was built on the back of enterprises selling shares to ordinary people as part of a self-help movement.

It was that initiative that, to this day, engender a feeling with Afrikaners like myself of “that’s my people”, when companies like Sanlam, Naspers and even ABSA feature positively in the media.

The new drive

The new drive to get Black entrepreneurs involved in South Africa’s industrial landscape by promoting industrialisation and reindustrialisation in terms of the Black Industrialists Development Programme, first tabled in August last year, is to be launched within the next month. The first glimpses of a “very early draft” of a “policy framework” given at the indaba, were promising.

It promises to be not only holistic and incentive-based but also at arm’s length dealt with by government via development finance institutions (DFI’s), including the National Empowerment Fund, the Development Bank of Southern Africa, the Land Bank, the Industrial Development Corporation and the Public Investment Corporation.

This is an approach recently strongly advocated in an article by veteran economic historian David Meades.

He also pleaded for development of the country’s poverty-stricken rural areas, where large concentrations of marginalised blacks live. This just might be an important opportunity to also consider incentives on that front.

Above all, it is hoped that the aspiring new industrial entrepreneurs and civic leaders will also use it as an opportunity to incorporate the broad Black public into the modern economy by mobilising development capital among them via share offers.

by Piet Coetzer

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