Is the Oppenheimer family trying to encourage transformation without paying for it?
The debate around the Brenthurst Initiative has got off to a predictable and unstimulating start, with workers’ organisations rejecting its ideas and big capital welcoming them.
The Brenthurst Initiative is the name given to the Oppenheimer family’s attempts to stimulate foreign direct investment, grow the economy and make transformation an essential part of that growth.
Nicholas Oppenheimer said South Africa’s risk and reward ratios appeared to inhibit investment in the country and there needed to be clear transformation and black economic empowernment (BEE) targets.
Referring to the potential of BEE to inhibit investment, the Oppenheimers said last year’s leak of the draft Mining Charter, which proposed putting 51% of the mining industry in black hands within 10 years, had resulted in South Africa losing R11-billion in the following six months.
”This contrasts with the average foreign capital inflows of R19-billion over the previous seven years. We have now net capital inflows but have not recovered the inflows lost in the intervening period”.
The initiative aims to overcome South Africa’s perception as a high-risk destination for investment. It proposes tax incentives to companies that can demonstrate progress against established transformation targets. Incentives would provide the carrot to balance the stick of required charter and legislative compliance. Companies that transform would pay less tax and therefore have a greater ability to invest in growth and new projects, while those that fail to transform may find themselves paying more tax.
The initiative hopes that this could encourage investment and boost growth from the current 2% to 5%, which could help the government meet its targets of reducing unemployment from 30% to 15% by 2014.
Part of the plan would also be to raise R224-billion to ensure that 26% of equity on the JSE Securities Exchange is black-owned by 2014.
President Thabo Mbeki has welcomed the initiative for stimulating wider discussion and debate on the challenge to ensure the economic fruits of political transformation are shared by everyone in our society. But his partners in the tripartite alliance, the South African Communist Party and the Congress of South African Trade Unions (Cosatu), have already rejected most of the ideas.
Jonathan Oppenheimer, the dynasty’s rising star, said yesterday that while he did not know its political implications, he hoped the initiative would have a positive material impact on the future of the country.
The South African Chamber of Business (Sacob) said it was important to look at the ”spirit” of the initiative, which was to create national debate about the innovations necessary to stimulate growth.
”One can criticise the initiative and say we will not get those tax cuts but it will add to the debates from the Growth and Development Summit and, if we achieve growth, it will address some of the socio-economic issues that Cosatu complains so much about,” said Sacob CEO James Lennox.
Duncan Innes of the Innes Labour Brief and author of Anglo American and the Rise of Modern South Africa said it appeared that the Oppenheimer family realised the need for transformation but wanted to effect it without funding it themselves.
”They are saying: ‘If we fund BEE what is in it for us?’ They are therefore asking for tax relief in return. But my question is why should the public fund transformation within a company? Because if we give Anglo tax relief, we are effectively funding it to transform. But why fund only those companies that are transforming? What about a company that spends a lot of money on Aids prevention and treatment on its employees for example? Why should they not qualify for tax relief?” asked Innes.
He added that in the 1960s the Oppenheimers had responded to pressure from the Afrikaners, who were excluded from the mining industry, by selling them General Mining cheaply. ”In that way they enabled white Afrikaners to enter the market. Now they realise that blacks also have to enter, but this time they want something in return,” Innes said.
Political economist and BEE critic Moeletsi Mbeki said the initiative was based on a naive understanding of the South African economy.
”It does not take into account that blacks are already big economic players such as through the Public Investment Commissioners, which own assets worth about R200-billion in the JSE [Securities Exchange]. Most black professionals prefer to work for the government where there is less risk. You wonder where they are going to get all those people for the BEE companies. The professionals will not leave their jobs because Oppenheimer is offering tax breaks.
”They will end up going to the same politically connected group who run most BEE companies now. But these are not entrepreneurs, they are political agents. You will end with politicians running the private sector and that is a recipe for disaster. The plan will not make any difference to the millions of other poor South Africans,” Mbeki said.
The SACP said it was notable that ”once again the Oppenheimer family are choosing to make their own suggestions outside the established social dialogue structures”.
”The Growth and Development Summit emphasised the need for job creation, skills development and employment equity and any plan that does not fundamentally deal with these issues is inadequate.
”The Oppenheimers are linked to companies that have delisted here and invested off-shore without repatriating their profits back to the country. South Africa’s poor and the workers must focus on implementing the [Growth and Development Summit] agreement lest it be hijacked by other forces,” said the SACP’s Mazibuko Jara.
Cosatu said the proposals aimed to create a black capitalist class and are entirely inadequate to address deep-seated inequalities and massive unemployment.
”Real transformation requires much greater equity in ownership and incomes, based on much higher employment and expansion in labour-intensive sectors,” Cosatu said in statement.
Economist and leader of the Economic Freedom Movement Majaka-thata Mokoena said the proposals appeared to be intended to placate the African National Congress or to compensate for ”generational sins”.