Despite many obstacles, there are great opportunities for black economic empowerment in the ITand telecommunications sector, reports Donna Block
The future of black economic empowerment in South Africa is wired. Not only do the information, communication and technology sectors offer opportunities for wealth creation in the form of apparently gravity- defying shares, but these industries have become integral to the economy as a whole.
According to consultancy BusinessMap, identifiable black empowerment deals in the information and telecommunications (infotel) industries were around R4,5- billion for the period 1996 to 1998. In its report, Empowerment 1999, BusinessMap said: “Given the high state-related infotel demand [both Telkom and the government itself], it is not surprising that this is a favourite sector in the empowerment arena.”
BusinessMap said that in January of this year there were 35 black- controlled firms on the Johannesburg Stock Exchange (JSE) which altogether had a market capitalisation of about 5,5% (R58,7-billion) of the JSE’s total capitalisation. There is a major black investor presence in electronics, “more specifically the hyped information technology stocks”, BusinessMap added.
Of the 70 companies on the JSE electronics and electrical board, the consultancy estimated that 16 have “sizeable black shareholders”.
Simon White, head of lobby group the Black Information Technology Forum (BITF), agrees that black companies are gradually making critical inroads into the infotel sector.
According to the forum, there are 125 black information technology and telecommunication companies that employ 700 people, mostly in Gauteng and the Western Cape. However, to make meaningful progress the BITF believes that the industry must be brought into the other provinces.
White said: “The IT/ telecommunications industry is without a doubt the fastest- growing sector in the economy and offers enormous opportunities. We have to make sure there is deliberate action to ensure that as many people as possible are involved in the sector.”
One of BITF’s many goals is to promote the sector as an alternative career opportunity for blacks in South Africa.
Increasingly, there have been doubts surrounding many black economic empowerment deals. Many empowerment arrangements have been of questionable empowerment value and have been criticised for being little more than get-rich-quick schemes for a small elite. There is a growing perception that blacks in upper management positions have little business experience and even less control over the companies they operate.
Questionable practices by empowerment groups hit home last week when New Africa Investments Limited – seen as the model black empowerment group – was taken to task by irate shareholders over a plan to reward its four MDs with share options worth in excess of R130-million.
According to the BITF’s IT and Telecommunications Handbook, there have been situations in the IT sector where rich black executives lend their blackness in exchange for a small amount of equity in a company. The problem is that these “token” black companies compete with real black infotel companies and often win tenders for contracts because of their financial and marketing strength. At the end of the day, the losers are genuine black IT entrepreneurs “who are operating in survival mode”.
“Empowerment deals that have a zero base net effect on employment, skills, and opportunities are a non-issue and those are the types of things we stay away from. Our members generally create jobs and create capacity for economic development,” said White.
For the BITF, black economic empowerment is all about “measurable skills transfer, significant black equity shareholding, operational involvement and blacks involved at senior decision-making levels”.
It is also about jobs and job creation. One of the biggest problems in getting blacks involved in the computer industry is the lack of information available and lack of understanding about the infotel sector. There is also much “techno-phobia”, with a need for people to be exposed to new technologies and be trained to use them. The more people understand IT/ telecommunications the bigger the opportunities and prospects.
But to get such an ambitious programme off the ground, the BITF needs what White calls “pioneers and champions” to help implement skills, training programmes, and infotel initiatives in the provinces. One of the most daunting challenges facing these pioneers is to co-ordinate local IT entrepeneurs and drive home the opportunities that are available to them in the provinces.
Other major obstacles they will have to overcome are the lack of infrastructure, electricity and phone lines. Adequate capacity is a national priority and these champions will have to lobby and pressure government to keep their promises of delivery in these areas. To date delivery of promised telecentres that would support these kinds of initiatives have been few and far between
Provincial MECs for economic development also have to change their focus from traditional projects like mining and be a part of the technological revolution. It’s going to take commitment and the will of senior people in the government and the private sector to make this revolution happen.
Nonetheless, despite all the obstacles, the BITF believes that at the end of the day Africa will be wired.