The dynamics of black participation in corporate South Africa are complex as has been revealed in the past year, writes Meshack
As the past year saw political power shifting into largely black hands, 1995 saw gleams of what black economic empowerment may mean. The strident calls, the blinding euphoria and widespread upsurge of ventures covered by this term marked much of black efforts to enter mainstream business. And if the terms seem easy to understand the actual reality has been
There are mainly two separate but closely- related issues regarding the significant participation of blacks in the corridors of corporate power.
The one is the mere increase in the number of blacks in boardrooms, serving as directors of existing companies without calling for equity input. This is, strictly speaking, a version of “affirmative action”. On this score 1995 witnessed a significant increase of blacks in boardrooms with the commercialised parastatals leading the way; for example a third of Transnet board members are black.
Black economic empowerment, however, entails the formation of separate ventures. In this respect, the year was marked by both controversy and trauma. Two major black enterprises went through severe blues that, in the case of the African Bank, got it into the red. Even the government was partly shaken as Afbank was put into curatorship and cries were heard for the government to salvage it as part of priming or promoting black economic empowerment. Emotions released showed how steep the learning curve on creating or sustaining major black enterprises is.
Indeed this experience put the very term “black economic empowerment” to the test. Long before it became a fad or a war cry, going back two decades, the African Bank pioneered it.
With an historic irony Afbank got into trouble at the very moment when black empowerment had become a sort of official policy. With all the effort that went into making both shareholding and top management the major preserve of blacks, Afbank experienced a debacle that brought in a “white” institution, NBS Holdings, to the operational rescue during the very year in which calls for the promotion of blacks reached a crescendo.
Of course the paradox is not an argument against efforts to establish mainly black major ventures nor to slow down moves to get blacks through the upper rungs of corporate South Africa.
Indeed it was Dr Nthato Motlana’s New Africa Investments, (Nail), a black economic empowerment flagship and a major shareholder in Afbank, that brought the underlying problems to light. Furthermore, it was Nail that led in the rescue and restructuring of Afbank while both increasing its equity stake and keeping black shares in the majority. This showed how complex the dynamics are in efforts by blacks to play a role in mainstream corporate South Africa.
The saga of National Sorghum Breweries, (NSB), was a more bitter brew to swallow. Though it had survived its earlier mismanagement mess, it went on to join with India’s UB International, giving the latter a 30 percent stake and extensive management control.
On purely business grounds the tie up is apparently sound as UB runs a world renowned brewery, the producer of the award winning Kingfisher beer. However, the paradox of a company that began with a black majority shareholding and effective control evidently reducing black equity and executive dominance raised questions about the real content and direction of black economic empowerment.
The term itself has actually become controversial if not outright hackneyed. The exercise has been perceived as both co-option of a black elite and its enrichment with little real control by the very same. Whenever a black economic empowerment venture is announced the black directors would either be non-executive or chairmen while the whites take on the top operational roles. This is construed as tokenism and window dressing, carried out by major companies in response to pressures from both government and organised black groups. It is seen as a subtle means of legitimising continued white control of
Even though some trade unions and some black church groups have come on board by taking equity in some of these ventures, so giving the appearance of grass roots or mass black involvement, still it does not wash well. Unions and churches are corporate bodies and whatever dividends they may get would accrue to these entities and not ordinary members.
These bodies are run by the elite who stand to gain as their organisations prosper. And with unions their direct and deeper interests in shareholding may well temper worker militancy and militate against demands for radical corporate changes. This cynical view appears to have a grain of truth in it.
Yet there is also the feeling that no matter how symbolic these moves may be this is only the beginning. It is a genesis that would eventuate in blacks gaining a greater foothold, experience and substance as both the novelty wears off and lessons are learnt.
Indeed the complex financial engineering that brought these ventures into existence, particularly the pyramid structures epitomised by both Nail and Real Africa Holdings, (Rah) is a very important lesson in itself. it shows how much has been acquired in terms of knowing how to leverage big financial deals.
Motlana points to the growth of Afrikaner business which mobilised capital through pyramids. There is also the example of Thebe Holdings. A genuinely black established pyramid it has shown how, with a shoe string initial capital base, it has ballooned into a major conglomerate.
The year ahead may see the rise of middle- sized black ventures coming out of a more substantive economic empowerment process. This would come out of the awarding of contracts by big corporations to carry out some of their work. This outsourcing, a part of the corporate re-engineering, would bolster many black entrepreneurs who would actually be running their own ventures.
And as the state is set to sell off some of the parastatals, new opportunities would open up for medium-sized black groups to get a piece of the action.
And then there is the prospect of employee share ownership schemes, in which workers are sold shares of companies where they work. This would reinforce efforts at effective black mass participation in corporate governance. It would also mean dividends, when declared, would go directly into their pockets and provide real empowerment to the black masses.
All this could lead to more substance being put into black economic empowerment.