In debating empowerment charters and black economic empowerment legislation, a distinction should be drawn between transformation and development.
The transformation of large established organisations has taken centre stage in the empowerment arena. The size of the institution tends to raise its importance in public forums. Typically, also, empowerment initiatives centre on ownership.
The benefit of scale that larger institutions bring to transformation is clear. But we should not lose sight of the role smaller black enterprises play in co-creating the South Africa we all want to see. These smaller entrepreneurial black companies (SEBs) are more interested in the development debate.
Typically, SEBs are positioned alongside established companies in providing products and services. But they face unique challenges and provide important benefits to our economy.
Challenges include limited resources, capacity constraints, established relationships in their industries and a fixed mindset about how things are done. They are often pioneers that have to create a fertile space in which to operate.
Among the benefits they provide is the scope they allow for black individuals to create visions and work towards them.
As empowerment credentials are the rite of passage into this space, fast-tracking black leaders, managers and skilled professionals is normal business practice. This gives rise to a conundrum: SEBs are a prolific harvesting ground for skilled black people to fill the insatiable needs of established institutions paying top dollars for their piece of the empowerment pie.
Perversely then, SEBs provide an important benefit by supplying our economy with skilled black functionaries.
Since SEBs operate in a space where quality standards are already established and empowerment for empowerment’s sake is waning, there is no question of compromising on service excellence.
SEBs striving to build sustainable businesses automatically rely on creative thinking and innovation to survive. Improving on existing products and services, and building niches by identifying and responding to inefficiencies and gaps, helps to strengthen their sectors.
The most significant benefit SEBs provide is economic stability. Their visions are uniquely South African, created by citizens sensitive to the country’s transformation needs. Their destinies are inextricably linked to South Africa’s success. They complement international firms which are not tied to the country.
Despite this, the support SEBs receive from large institutions is fairly limited. Many in the established sector argue that enough points are accumulated on their charter scorecards, why not stick with safer, long-standing service providers? When support does arrive, it is often sporadic and inconsistent, rendering business planning impossible.
In this context, the challenge of remaining profitable, changing mindsets and developing services and products with limited resources can be too great. The option is to sell to a larger entity in need of ownership and critical mass to meet its charter requirements. It is the larger institution’s culture, vision, attitude and approach to issues that survives.
But where is the transformation in this? Are we not left with the status quo — or extremely slow transformation?
South Africa has a lower rate of successful start-up ventures than India. We must decide on the kind of country we want to see in 10 years’ time and take responsibility for creating it.
It is downright irresponsible to argue that help for SEBs enriches the few, or that there are so many empowerment companies it is hard to decide which to support. The large institutions should explore which SEBs are closest to their vision of what they want to co-create and support them consistently.
If we do not identify black South African entrepreneurs and provide tangible and responsible business support for them, in 10 years’ time we may find ourselves asking what went wrong. Giving prominence to the development debate in the empowerment arena is critical to energising this sector.
Heather Sonn is the award-winning CEO of Legae Securities, South Africa’s first black brokerage