middle class
Black accession to the South African economy has come fast in the past four years. The value of the deals shifting ownership into black hands is quadrupling every year.
And black business has shown a talent for the game. For example: it took Afrikaner capital 10 times longer to achieve the level of listed corporate ownership that the new deal-makers have notched up in the past four years.
Riding on the coat-tails of this corporate flurry, in luxurious sedans and with attitudes that exude confidence and ownership, has been the black middle class. Such rapid class formation has changed the social landscape.
In Sandton City, the changing colour of money has excited the retailers of goods to the well- heeled and glamorous. At Nicci boutique, where faux fur jackets and diamante-encrusted shoes sparkle enticingly in the windows, a saleswoman who rings up till sales of an average R3 000 per customer describes her new clientele.
“The upmarket black woman has suddenly come out,” she says, snapping her fingers to underscore the rapidity. “They’ve got bucks, they’ve got cars. There’s no umming and ahhing. They want quality and there’s no schlepping.”
A better indicator of a growing black middle class is a shop like Diesel, where a single purchase costs “anywhere between R700 and R1 000”.
Its imported Italian industrial chic clothing adorns heroes like Wesley Snipes, Janet Jackson and Carl Lewis. It has won a following among the local ranks of the young, gifted and black, who make up half the customers in the trendy Rosebank store.
A Diesel sales assistant jabbers excitedly that “blacks like their bright colours. Orange. Red. They are a market that is growing very fast.”
Red carpets have been rolled out across cities to capture this class with a living-standard measure to die for. Land Rover, for example, is considering a new marketing drive to net even more of the buppies who prefer 4x4s to the BMWs which are becoming somewhat de rigueur among their ilk.
Society is changing as the newly moneyed move out of the townships and into the suburbs where their children change the hue of the mall gangs who play Mortal Kombat in the game arcades. This walking, twanging, “Simunye grooves” generation is reaping the post-apartheid fruits.
Political power cannot be transferred without economic power changing hands, as the African National Congress knew when its own accession was nigh.
In the early days, it deployed party people to parastatals (like Saki Macozoma to Transnet and Seshi Chonco to Denel) and helped to start businesses like the Thebe Investment Corporation that marketed its access to a “future ANC government”. At the time, Thebe’s blatant exploitation of its power networks was alarming.
Now The Network – an informal grouping of top black executives – is business as usual. The Network meets regularly to discuss business strategy and opportunity. It emerged from the shadows last year when it threw a bash to celebrate the appointment of party man Tito Mboweni as governor-designate of the Reserve Bank.
With its mix of political and economic power, it is easy to pick apart the genesis of deals and to spot the locus of power watching this network in operation.
Across provinces other than Gauteng and the Western Cape, successful black empowerment businesses reveal a similar connection with political power.
Social scientist Vibha Pingle has studied networks in many economies. In South-East Asia, she says, networks between political leaders and new business-people created a middle class very rapidly.
In many developing countries, the two have a symbiotic relationship because as the state gets smaller through privatisation and outsourcing, the government relies on the political and economic support of this class to keep the wheels of state turning.
There is an easy fluidity between the two: Cyril Ramaphosa moved out of the government and into business, as did Tokyo Sexwale. Macozoma may be given a Cabinet position in the next government.
The government has worked quickly to bolster the formation of this middle class. Its procurement policies have features like the 10-point plan, where black-owned companies get 10 extra points as they vie for lucrative contracts across a range of activities, from building roads to installing computer systems in hospitals.
A National Empowerment Fund will soon bankroll black participation in privatisation exercises, while counter-trade deals attempt to bolster small businesses.
Similarly, employment equity or affirmative action legislation should yank a sizeable number of workers into skilled, managerial employment – and into the middle class.
“Networks can influence policies,” says Pingle, who adds these can work in fully functioning democracies where well-organised businesses have relations with the executive arm of the government.
It’s less healthy where business has direct links with politicians. The BusinessMap consultancy warns that “interventions of this kind always open up space for tokenism, patronage, corruption. At issue is not whether the government should go this route, but what it should do to ensure that the potential downside to intervention is kept in check.”
Pingle says South Africa needs to expand its middle class by empowering a generation of entrepreneurs. A middle class can be conservative and self-concerned. It can also be positive.
“A growing middle class is an instrument for stability. It saves. It is an inherently conservative group, but it can be an agent for change which demands services from the state.” Pingle has discerned the growth in South Africa of an upper middle class and not an elite.
But at a recent Johannesburg gathering to launch BusinessMap’s empowerment report, it appeared that some at least would fit the description of an elite. In the parking lot of the Johannesburg Country Club, new money nestled next to old. An executive pulled up in the very latest model purple sports Mercedes Benz. He parked close to a friend’s Jaguar, and the two went inside to join the other new dons of business who had come to hear the annual BusinessMap report card.
Last year, the consultancy tallied 130 new black investments made in listed and unlisted companies to the value of R21-billion. This figure was up from the previous year’s total of R5-billion, which in turn was much higher than the first report, which counted just R1,6-billion in deals.
“The figure [R21-billion] may be an underestimate,” the report noted.
Suave, elegant, black and largely male, the new captains of industry have taken financial services, telecommunications and the media by storm, changing the complexion of these sectors fundamentally.
While it is still Nthato Motlana’s New Africa Investments Limited, Don Ncube’s Real Africa Investments Limited and Vusi Khanyile’s Thebe Investment which rule the roost, a new generation of black business leaders is making its mark.
Black companies are getting smaller and more focused. Increasingly, companies like Motswedi Technology, built from scratch by entrepreneur Jo Tsotetsi, and Cape Town’s Brimstone Investments are becoming popular. They bring their own money to the table and indeed, the days of institutions fully funding “capitalists without capital” are at an end.
Some financing schemes are showing their cracks because they are structured in such a way that ownership will revert to the institutions (bank economic empowerment, some call it) if shares do not perform at predetermined levels.
Instead, BusinessMap says that risk must be put back into the equation by making investors fund part of their deals on their own.
At the Johnnic group, bought from Anglo American three years ago by a broad base of black owners, chair Ramaphosa is leading a black economic empowerment commission which is doing a lot of soul-searching on how to grow the reach and depth of empowerment. His associate Gavin Pieterse comments: “Empowerment is not just financial transactions.”
Pieterse says they will start looking at how small businesses can be stimulated by encouraging corporations to give them contracts and also to look at placing black executives at the companies in which shares are bought (so that black owners are not just silent partners). They also want to persuade black businesses to buy a controlling stake of at least 25% of the shares in any company they invest in.
Increasingly, the message is emerging from the government and the top ranks of business that for empowerment to succeed the goodies must be shared a little more evenly.
More people will afford Diesel, a Land Rover perhaps, a bigger house, better schools and perhaps even a personal trainer. But if more can afford Woolworths, a Toyota, a house and school fees, that might be even better.
“The challenge,” says businesswoman and deputy chair of the National Council of Provinces, Naledi Pandor, “is to spread wealth. We have to create the ability to become prosperous.”