The advancement of black executives still has a long way to go, says a recent report into black empowerment
Johnny Masilela
A document aimed at triggering renewed debate around the otherwise controversial concept of black economic empowerment (BEE) is about to be taken on a countrywide roadshow.
Black Economic Empowerment: Myth or Reality? was originally a thesis for a master’s degree in business administration researched and presented to the University of Newport, United States, by emerging business leader Zixolisile Maxwell Fante.
Fante said in a recent interview that the document had sparked off such robust debate after being presented to a number of business seminars in Johannesburg and Pretoria that he plans to take it further afield to other centres such as Cape Town, Durban, Mafikeng, Bloemfontein and Pietersburg.
He also plans to publish the thesis as a book.
Fante, a BEE consultant who counts among his clients such respected institutions as the Reserve Bank and the Post Office, charges that many ”high-profile” black corporate directors have no real control whatsoever over their company operations.
”[In] a close examination of the BEE deals, the structure of dealmakership contributes to the downfall of BEE companies. As holders of preferred rather than common equity, who are heavily- indebted to lenders and have limited business experience, some high-profile black shareholders and directors appear to have no real control over their companies,” Fante argues.
White managers, he argues, continue to pull the strings in a scenario whereby blacks were recruited more often to open doors for government contracts or to score public relations points.
Of the 20 performing BEE companies on the JSE, few were run full-time by black directors. He cites New Africa Investments Limited (Nail), Real Africa Holdings, Adcorp Holdings and Johnnic as examples.
”[Also] Metlife happens to be the largest in terms of asset size. Its staff complement shows some relative empowerment of black employees.”
With this in mind, Fante quotes a senior black manager at Metlife arguing that the company might be black ”on paper”, but that whites were in absolute control.
Black business leaders interviewed for the thesis, among them Development Bank of Southern Africa analyst and strategist Mosebjane Malatsi, have expressed fears that ”the situation will remain so if no decisive measures are taken to rectify this lopsided legacy”.
Says Lot Ndlovu of the Black Management Forum: ”The limitation of business and management skills is a threat to the dignity of black business. The lack of business experience remains a major impediment for BEE.”
Eskom chair Reuel Khoza told Fante the empowerment agenda had been driven by corporations seeking deals with black people, along with an assortment of advisers and financiers who stood to benefit more from such initiatives than black people.
”Often black people bring to the table nothing more than the pedigree of [their] blackness and expect that to do the magic. Black people bring little by way of strategy, a [business] plan, capital or skills to the deals they get involved in,” Khoza pointed out.
Against this background, Fante argues that acquiring companies was not about accumulating them for the sake of ownership, ”but it is also a means of providing economic prosperity of the people for whom BEE is meant”.
Fante argues that the use of ”pyramids” to leverage the Dikgang Moseneke-led Nail into positions of influence was a fast- track solution, not one which had evolved over the years of accumulation and growth.
”The fundamental question about Nail is not how the deals had been done. The company has to develop to such an extent that it can approach deals using conventional funding mechanisms,” Fante argues.
He says since Nail is a holding company, it controls other companies. However, he argues, it was not easy to see whether Nail influenced the strategic directions of the holding companies.
”The core competencies of Nail for the past few years have been to make deals happen, in fairness. In the longer term, Nail must find a way of matching its political votes with economic votes of the group. Black shareholders have 50% control of Nail, but receive less than 5% of the economic benefits.
‘What BEE in this form has rewarded to date is the ability to do deals, to put finance together, to acquire but not to manage,” Fante writes.
Against this background, has BEE achieved its political agenda, namely of empowering the country’s economically disadvantaged, or has it merely turned a select group of individuals into instant millionaires?
Fante says while the visibility of transformation initiatives on the part of the government were evident in the form of, among others, the delivery of running water to rural areas, the BEE process has been found wanting.
To illustrate the latter argument, Fante quotes a study which found that the gap between the rich and the poor was getting wider.
Khoza’s view, according to Fante’s document, is that black business simply followed the dictates and agendas of ”others”. A lot of time, Khoza continues, is wasted watching each other and chasing the same deals or doing ”the damnedest” to emulate what other empowerment groups had put together.
As a way forward, Khoza calls for investment in the development of ”the real thing” – of blacks as principals of their own ventures, through the development of their true asset: black intellectual capital.