The private sector is often unfavourably compared with the parastatals in meeting employment equity targets — Eskom, Telkom and Transnet have for the past decade put in place radical equity programmes and are largely black-led.
In response, business argues that the parastatals have been able to embrace transformation because, as monopolies, they don’t have to worry about profitability.
Now the losses and Transnet’s decade-long failures could serve as fuel for their arguments: black people and women may have reached giddy heights at Transnet, but at what cost? I don’t buy this argument for one moment.
After all, it has taken a woman — with strong political backing — to wield the scalpel at Transnet. Maria Ramos has a tough fight on her hands. A need for massive reinvestment, a corporate culture that puts the customer last, and unions that gang up with bosses to stop change are three “challenges” that spring to mind. She will have the help of the capable Dolly Mokgatle, Spoornet boss, in trying to change the organisation’s mindset.
We should look at affirmative action as urging bosses to consider a wider talent pool than before. Would Ramos or Mokgatle have made it in the private sector, I wonder? Would either be running a company with billions in assets? Or would they have smacked into a glass ceiling?
The flip side of not letting ingrained attitudes prevent a talent search among the previously disadvantaged is not to expect less. Ramos has made it plain she will not tolerate those flourishing the race card. Empowerment remains a priority at Transnet, but inefficiency will not be indulged.
A point missed is that, in cleaning up Transnet, Ramos will create new empowerment opportunities. The privatisation of non-core assets will put up for sale companies that may be run profitably by the private sector. The state will insist that privatisation encompasses empowerment. The downside is that Transnet’s exit strategy lands black economic empowerment (BEE) parties with dogs.
Enrichment of many
The Aveng BEE deal, announced last week, appears to take seriously the concept of “broad-based” equity deals. Aveng has sold 25% of Grinaker LTA and Trident Steel to Qakazana Investment Holdings for R496-million.
Fully 71% — taking into account the Tiso Foundation stake in Tiso — of the BEE consortium that owns Qakazana is broad-based. That sum will be paid off over seven to nine years through a preference share structure. Meanwhile, the consortium has voting rights and Tiso will be paid R1-million annually.
“Broad-based” here means a community trust, a women’s empowerment trust and a trust for employees and black business partners of the group.
True, the deal does involve the wheeling and dealing Tiso group, run by the low-profile Fani Titi. But Tiso only has 36% of the consortium, and will be expected to have some operational involvement — for which it will be paid R1-million a year.
Tiso itself has a broad-based element. According to Aveng, the Tiso Foundation, a public-benefit organisation, holds 20% of Tiso. Staff and management hold 56% and Investec 24%.
The deal aims to avoid the “enrichment of the few” criticism. Titi himself is an empowerment figure with a business rather than political background. He is not one of those personalities who sits on so many boards there must be precious little time to read board papers, let alone contribute to discussion. Yet the growing number of Tiso’s deals must put him under pressure.
In the coming years he will have to watch what happens to the other consortium members, given that Tiso votes 100% of Qakazana’s shares. It would be a pity if the broad nature of a deal again proves ephemeral.
It is certainly a good deal for Aveng. Like other construction companies, it has tended to introduce BEE at the operational level, though it has found this increasingly difficult to manage. So it has moved before its competitors to do a BEE deal at the top.
The driving force is not the pending Construction Industry Charter per se. Rather government construction work, as the state invests in infrastructure, and from companies who increasingly need to procure from BEE companies, is the real reason.
The company comprehensively disclosed the structure of the deal, raising questions about the conventional wisdom that fine details of BEE deals should be kept secret. Why?
And surely the real trick of empowerment is not the structuring of the financing, but choosing the right partner.