The current model of black economic empowerment (BEE), focused on transferring equity rather than encouraging entrepreneurship, has created a culture of entitlement and dependency in the black middle class, says outspoken businessman Moeletsi Mbeki.
Mbeki says he has been making the point since the early 1990s, although perhaps not as publicly as he has in recent months.
The president’s younger brother, speaking at a BusinessMap Foundation briefing last week, said: “Black economic empowerment is an issue for the black middle class and big business. For us ordinary folks, it’s really not an issue.”
Executive director of the television production house Endemol Mbeki has been blasting BEE as a black elite buffer to protect white business and as a political, not economic, strategy.
Big business had designed empowerment “because they feared nationalisation when they realised political change was coming”, he told the packed BusinessMap briefing.
As far back as the 1980s South African companies were buying the local operations of disinvesting companies. “The departure of the multinational companies led to enormous concentration of wealth in a few hands. The companies that became these giant corporations have promoted BEE.”
These “created a culture of entitlement among the black elite … If you’re going to start donating bits and pieces of your companies to people with political connections, you create a politically powerful but dependent class.”
There has been a black middle class in South Africa since the 19th century, Mbeki said, which even the National Party could not suppress. “The notion that the government needs to give handouts to the middle class is not true. What we need, and the government needs to assist, is to encourage people who are able take risks.”
However, there was a sting in the tail: “The companies were hoist with their own petard — the mining charter. They said ‘We’ll give you this and that asset.’ The people they were giving assets to said ‘Okay, we want the whole cake.'”
A decade on “the poor are getting poorer and their number is growing. If BEE was really an engine for growth, how come unemployment is rising and the poor are getting poorer?” It was not a question of resources, Mbeki said. “The money we taxpayers are raising for [the] government is sitting there. Year after year it’s rolled over.”
There were two major challenges: “We don’t have entrepreneurs who can use the money. And the government hasn’t got skilled civil servants to spend taxes.
“Who needs empowerment? Not the black elite — it’s [the] government that needs empowering. We need to build capacity in [the] government so it can address issues like education. The scorecard will come to nothing if we can’t deliver quality education to the majority.”
On the mining charter — and the likelihood that its requirement that mining houses transfer 26% of equity to blacks in 10 years could be extended to other sectors — Mbeki said: “It’s more complicated than BEE legislation imagines.
“The JSE [Securities Exchange] has huge numbers of investors coming from outside. If you’re going to force them to sell 26% of their company, you’re driving a foreign disinvestment programme.”
Moreover, many local investors were pension funds. If required to disinvest from, say, Sanlam, “so some black individuals can invest in Sanlam, you must ask: Where will these funds invest? Offshore.”
Mbeki said management side of the scorecard was a pipe dream. “Where will I get managers and engineers if the school system isn’t producing what I need? We’re addressing the wrong issues.”
The Broad-Based Black Economic Empowerment Bill, recently approved by Parliament, provides for the minister of trade and industry to issue guidelines for stakeholders to use when drawing up transformation charters for their sectors, and empowers the minister to issue a strategy for broad-based BEE.
The balanced scorecard contained in the draft strategy outlined in March gave significant weightings to equity ownership and control, but also to the company’s record in supporting black-owned suppliers, employment equity and skills development.
A small percentage was set aside for corporate social responsibility and use of labour-intensive methods.