Black economic empowerment is taking place gradually, but a more holistic approach is needed, writes Madeleine Wackernagel
The buzz-word of 1996 was BEE – black economic empowerment, epitomised by the Johnnic deal. Later, there was JCI, sold to Mzi Khumalo’s Capital Alliance with far less fanfare, but no less significance.
The cynics would sneer that Anglo American was only doing what it had to do; in itself, two deals, albeit substantial in terms of the money involved, “empowered” only a few fortunate board-members. The man in the street, the worker, was no better off. Where was the evidence of a trickle-down effect?
Another criticism was that such deals merely replaced the white corporate elite with a black one. But as Jenny Cargill, director of BusinessMap, points out: “There are multiple cross-over directorships among white business leaders. While a few black directors may sit on a number of boards, most are only on two or three. Among whites that figure can extend to 20.”
In an ideal world, businesses would grow organically, from small roots to big corporations, fostered by generations of entrepreneurs. But the South African scenario is not ideal; with only a few white captains of industry in place, it is hardly realistic to expect a new breed of Motlanas to grow up overnight.
“To ensure a stable economic environment, we have to take short cuts. We don’t have the luxury of time to wait for the normal evolutionary process of business to take effect. The short cuts being taken are open to criticism, but they are unavoidable,” says Anglo director Michael Spicer.
Spicer highlights the role of small, medium and micro enterprises in providing the seedbed for developing entrepreneurs and the importance of corporate involvement in getting them off the ground. Anglo prefers partnerships and joint ventures with small business to the concept of unbundling.
“Our objective is to expand in South Africa and abroad through joint venture deals; we won’t be getting rid of any other parts of the business.”
Mashudu Ramanu, newly appointed director to the Johnnic board, is wary of laying too much store by the major deals done this year. “If we use only a narrow definition of BEE, then I guess you could say 1996 was significant. The problem is one of definition.
“I believe we should take a much broader perspective, encompassing meaningful participation in the labour market, with an emphasis on the quality of employment; then ownership, and the extent to which there is black involvement in managing and controlling the assets. This is addressed to a small extent in the restructuring of Johnnic.
“Finally, we must look at making the traditionally black areas, in the former homelands and townships, more economically viable. We must develop the infrastructure in such a way that blacks can start to play a more significant role in the economy, by themselves and for themselves.
“We have only just begun to address the infrastructure problems with housing; a great deal more needs to be done. On the labour issue, there has been no shift at all in terms of the transfer of skills.”
True empowerment, then, means skills. Tommy Olifant, a member of the National Empowerment Consortium, which bought the 35% stake in Johnnic, believes a mentorship programme is the best way to effect such skills transfers.
“We need people to work alongside the managers, getting to know the job, so that three to five years down the line they can take over, secure in the knowledge that they know how the business is run.
‘It wouldn’t make sense for us to make dramatic changes at Johnnic only to get it wrong.
“In the past, prominent blacks served as non-executive directors, without the opportunity to run a particular business. But there is a steep learning curve. Change won’t just happen overnight; people must realise that just because we are living under a new dispensation does not mean everything will fall into their laps. It will take hard work – and time. Within five years we will have competent people in charge.”
In the meantime, we need to broaden the base of ownership, says Philip Machaba, chief executive of the National African Federated Chamber of Commerce. “We need more consortia, made up of a greater number of players, to ensure ordinary people are involved. A major stumbling-block, of course, is finance – we need to find more creative ways to unlock capital.”
By including trade unions in such groupings, says Machaba, the workers are gaining some control. “The latest empowerment deals are significant by giving the labour force a stake via the unions’ investment company. So there is some trickle-down effect.”
He would like to see more, smaller deals in 1997, with a particular emphasis on small business and manufacturing. Apart from Johnnic and JCI, BEE has been most evident in the media but that should change next year with the transformation of state assets.
Thus far, BEE has taken place on an ad hoc basis; a more holistic approach is needed. But possibly the biggest problem, says Ramanu, is the lack of focus. “Our biggest challenge as we enter the next century is catching up with the rest of the world, in terms of skills and technological capabilities. We need to define how best to achieve those so that we can compete; we cannot do everything at once, our needs are too great. We must prioritise to achieve the greatest leverage further down the line.
“Any Tom, Dick and Harry can claim to have put together a BEE deal, but mostly they just empower the financiers. The real issue is skills and hands-on management.”