The government has proposed that at least 35% of the economy should be in black hands by the year 2014 –sparking fears in big business circles of a fresh round of market jitters.
However, the Department of Trade and Industry was quick to distance itself from the proposal yesterday. Deputy director general Lionel October said it was “quite old”, having been discussed at the Cabinet lekgotla some weeks ago and then given to business and labour for comment.
He said the emerging consensus in the government was that there should be industry-specific targets for empowerment, of the type that was being negotiated in mining, rather than an overarching benchmark.
The leaking of a draft government mining charter two months ago, also containing ambitious black ownership targets, shaved 12% off Anglo American mining stocks in a day.
The proposal of “at least 35% effective black participation” in the economy by 2014 appears in a department “discussion paper” tabled in the trade and industry chamber of the National Economic Development and Labour Council (Nedlac).
“Effective participation”, the document says, should be measured in terms of “increasing levels of black participation in ownership, control, skilled occupations, employment and income”.
“These targets should be viewed as providing guidance on a national level. Simultaneously, a quantitative system to enable measurement of the optimal rate of increase within industries, on the basis of reliable data, should be designed.”
Business sources said they understood Minister of Trade and Industry Alec Erwin would table the document, or a version of it, in Cabinet at the end of the month. It may provide the basis for the long-awaited policy statement on black economic empowerment, promised by President Thabo Mbeki in his February state of the nation address.
Business South Africa’s CEO, Ben van der Ross, said he was aware of the document, adding: “We sincerely hope it is a chopping block — we believe a one-size-fits-all figure is probably inappropriate.”
Business recognised that empowerment targets were inevitable. However, target-setting “should be the subject of a process that includes a wide range of inquiry, including stakeholder input, to understand the targets and what they imply”. Without this, there would inevitably be “extreme disquiet in investment circles”.
There is uncertainty in business circles about how the 35% figure was arrived at, how it would be reached and how compliance would be measured. “Would one, for example, look at how much of the JSE is in black hands?” one source asked.
In the blood-letting after the mining charter leak, investor anxieties appeared to focus on how black entrepreneurs would raise the necessary capital to buy 30% of a R750-billion industry over 10 years. Meeting the targets, they feared, would involve a massive knock-down sale of assets.
A target for black participation in the total economy raised the same question, but on a larger scale, sources said. The estimated market capitalisation of the Johannesburg Securities Exchange is R1,5-trillion.
On the financing of empowerment, the document says a new mechanism will be created incorporating the state small business promotion agency Khula, the National Empowerment Fund and “a one-stop facility to access incentive and grant schemes”.
Products would be developed to support the financing of empowerment deals, while the “historical neglect” of the micro-enterprise sector would be addressed “through new offerings”.
Significantly, the document reflects growing pressures on the government, particularly from its trade union and communist allies, to broaden empowerment beyond the enrichment of a few. It calls for “significant and quantified improvements in income levels and the reduction of absolute poverty”. Targets should be set for these, it says, probably “in the overall context of our targets to 2014”.
It emphasises as “central” the contribution of black economic empowerment to “the creation of new opportunities” and “the expansion and growth of the economic base”.
The document envisages the toughening of company and parastatal reporting on black economic empowerment. It calls for a regulatory framework allowing for of codes of practice that set “empowerment measurement indicators, definitions and guidelines”, and for a reporting system to gauge progress on empowerment in the government and the private sector.