The challenge to the government for the next 10 years will be to manage expectations of the new, sometimes already empowered, black middle class for radical redistribution of ownership.
In the context of a free market economy, black economic empowerment (BEE) must be about redistribution of opportunities not about redistribution of wealth, as the BusinessMap Foundation argued in its most recent annual review of empowerment.
Yet the government must at the same time ensure that its BEE strategy does indeed change the colour of a growing economy rather than sprinkling a few black millionaires on top of a white business sector.
Black wealth is conspicuous, both against the background of dire black poverty and of widespread white wealth.
Black money power has been growing steadily over the years, but according to figures from Unisa’s Bureau for Market Research, the yearly income per head of the white group was still almost seven times that of the black group.
Black people with real money, such as Patrice Motsepe and Mzi Khumalo, stand out. The BusinessMap Foundation has estimated actual direct black ownership of shares on the JSE Securities Exchange at 1% of the total.
Charges of BEE simply being ”black enrichment” are rebutted by prominent figures such as Saki Macazoma, who asks why it is wrong for black people to be rich. But they sting nonetheless. Individual black tycoons are pressed to show they care about their communities in a way white millionaires don’t expect.
But it has become clear that black-owned companies will probably be no more or less worker-friendly than white companies.
Hence the political pressure for ”broad-based empowerment”. Broad based when it comes to equity transfer, the big deals announced every other day, means involving a number of beneficiaries, to avoid charges of enrichment of the same old names.
Broad-based BEE, however, in its true sense of affecting as many black people as possible, has been given fresh impetus by the government’s new BEE strategy.
Simply put, the Broad-Based BEE Strategy outlined by the Department of Trade and Industry aims to bring more black people into the mainstream of the economy.
To do this uses a ”balanced scorecard” to evaluate empowerment in terms of equity transfer, skills development, affirmative procurement and affirmative action.
Importantly, the Broad-Based BEE Act, passed into law at the beginning of this year, aims to bring about these goals through ”soft” law, such as codes of conduct giving force to negotiated charters.
This must have been disappointing to many newly empowered BEE players, who hoped for stronger legislation to ”force” businesses to support greater equity transfer. Few spoke out publicly, but resentment simmers. Most recently Sandile Zungu, Denel chairperson and founder of African Vanguard Resources, criticised the widely praised Financial Services Charter as not supplying sufficient financing to encourage BEE — again focusing on equity transfer rather than the range of actions the financial services sector had agreed to, including extending banking to the unbanked and procurement and affirmative action targets.
The government has opted for more flexible legislation, not because of — to use the words of one commentator — ”economic appeasement”, but because it has enough regulation on its plate. It was clearly aware of the difficulty of producing specific economic outcomes through legislation.
Also, concerns about foreign investment must have been uppermost in the minds of the legislators. Swiss Reinsurers, the foreign-owned motor industry and some foreign-owned Information Technology companies have become increasingly vocal about not wanting to transfer equity in wholly owned subsidiaries. They say they embrace affirmative action and training, but corporate strategy often rules out anything other than complete ownership of subsidiaries.
South Africa does not attract the levels of all-important foreign direct investment we need to overcome years of economic marginalisation — not to mention simply covering persistent deficits on the current account of the balance of payments.
Hence the legislation is designed to shape the direction of BEE rather than force its pace, mainly through using the state’s enormous buying and licensing power.
The real force will come from growing political pressure, which is perceived as a threat of legislation. The advertising industry, thanks to parliamentary scrutiny, suddenly became aware of the need for BEE — without a formal charter or government buying muscle, though the latter must have played some role. Clever business people prefer to motivate for self-regulation.
Political pressure for more affirmative action and, crucially, for ownership patterns to change will not abate unless there is visible change.
Clearly the worst possible outcome would be a repeat of the Zimbabwe experience. There for 20 years only a small minority of well connected Zimbabweans benefited from the crony economy. When the beleaguered government was confronted with popular resentment it resorted first to budgetary profligacy and then to scapegoating the complacent, politically disengaged, prosperous and vulnerable white minority. The result is obvious to anyone who looks over the fence at the increasing desperation of ordinary Zimbabweans.
Reg Rumney is the executive director of the BusinessMap Foundation