Last week something remarkable happened in the empowerment arena. Technology group Spescom sold 25,4% of its equity to an empowerment partner, Vantage Capital Fund Manager.
The remarkable thing is not that Vantage Capital will pay R24-million cash for its stake, but that it had to raise its offer from R1 to R1,20 a share for 20-million new shares.
This is after Allan Gray fund managers, one of South Africa’s shrewdest and most reliable — and a 20% shareholder in Spescom — objected to the original offer as unfair to existing shareholders.
The price is still at a discount relative to Spescom’s Monday closing price of R1,50.
Thumbs up to Allan Gray for shareholder activism that refuses to be badgered into submission by the expedient need for a black partner.
Thumbs up, too, to Vantage for resisting the temptation to cry ”racism” and use skin colour as currency.
Here is an empowerment deal driven by commercial merit.
Although Spescom needed an empowerment partner because it has municipalities and parastatals as major clients, it also needed a partner who could inject cash into the operation, rather than ”strike a convoluted loan scheme” according to one report. In Vantage, it found one.
What a pity no one has trumpeted this tale of empowerment with a twist.
Trickle-down effect
In last week’s Mail & Guardian (”Election policies put poverty on hold”) Isobel Frye of the Black Sash correctly made the point that no political party has come up with ideas aimed at providing for the immediate needs of the poor.
That may be because, to cater for poor people’s needs, you first have to create wealth — and that has not happened on any significant scale in South Africa. For the most part, existing wealth has been redirected through such mechanisms as casinos, the lottery and black empowerment deals.
Poverty could become a real election issue in 2009 — if there is rapid economic growth in the intervening period and compelling evidence to show that only a few have benefited.
Frye also made the point that political parties are currently stuck with an apparent belief in debunked ”trickle-down economics”. Are they debunked? One could argue that ”trickle-down” is the channel through which wealth is shared and society moves forward.
If a woman takes a risk and starts a business, she has to reward the people who help her get it off the ground by paying interest on loans or providing returns on capital.
She has to pay those who make the business function — the workers, who are usually poor.
Finally, she has to earn a reward for entrepreneurial endeavour.
Her reward can range from a loss in one year to sizeable profit in another.
Trickle-down of this kind turns the wheels of the economy.
Without a system where entrepreneurs receive the greater reward, there would be less incentive to start businesses and fewer people would bother.
Then more of us would be poor.