The recent attack by African National Congress secretary general Kgalema Motlanthe on black economic empowerment (BEE) should be seen as a call for established empowerment players to create opportunities for fledgling BEE firms.
So says Prince Booi, CEO of empowerment rating agency Empowerlogic, who described such assistance as “succession planning”. Booi was reacting to a speech given by Motlanthe through the ANC’s head of Presidency, Smuts Ngonyama, at a Black Management Forum function two weeks ago. The issues he raised will be on the agenda of the alliance summit to be held next month.
At the same time, CEO of the Mineworkers Investment Corporation (MIC), Paul Nkuna, has warned established BEE figureheads not to act as “gatekeepers” by excluding new players from sectors in which they have a stake.
Motlanthe called for a “frank and open” assessment of why progress on BEE had been slow. He identified the narrow base of beneficiaries as a key problem for empowerment.
The ANC leader also attacked empowerment players over the scourge of fronting, and called for “transformation” rather than “transfer” of BEE. “By transformation, I mean the creation of new markets, new investments and new drivers of domestic demand in the economy.”
He asked how empowerment could benefit from capital accumulation by the burgeoning black middle classes, housing provision and the government’s skills-development initiatives.
The most controversial feature of Motlanthe’s attack was his call to limit, either by number or total value, the BEE deals from which particular individuals could benefit.
Reacting, Booi said: “Why should we put a ceiling on black success?” He noted that Afrikaner empowerment had not done this.
The attack brought into sharp focus the activities of high-profile ANC figureheads Cyril Ramaphosa, Saki Macozoma and Tokyo Sexwale, who respectively head Shanduka, Safika Holdings and Mvelaphanda Holdings — all companies with interests across a range of sectors that frequently pop up in high-profile deals.
A criticism levelled at the three men is that they head conglomerates comprising a welter of different interests. Investors generally dislike such structures, deeming them unwieldy and unfocused.
Booi, however, suggested that the evolution of these companies required them to pass through a conglomerate phase. “In any new creation, you get pace-setters,” he said. To entrench themselves as a black business class, they might initially have to take up opportunities in various sectors.
However, Booi felt the established players could make a difference by having “succession plans”, which would encourage lesser members of empowerment consortia to become players in their own right.
An example would be Batho Bonke, Sexwale’s 50% partner in the Absa empowerment deal.
The MIC is another multiple-sector player that is trying to move empowerment to another level. Nkuna said the company had been content to be a passive shareholder until 1999, but had since pursued cash-generating investments in which it had influence or control.
In September the MIC took a 58% stake in textile distributing firm Mathomo, and was now seeking hands-on involvement by mentoring a CEO of its choice.
Together with the Women’s Development Bank Investment Holdings, the MIC holds 25% of BP South Africa, where it has jointly seconded two people to executive level. Nkuna said talks were under way on how best to acquire influence and control in BP’s operations.
The MIC also has a 7% stake and 23% of the voting shares in Primedia. By deploying or fast-tracking senior black staff it has installed black division heads in broadcasting, outdoor advertising and event management.
The MIC has also distributed R62-million to the Mineworkers Industry Trust over the past five years. Nkuna pointed to bursary recipients and retrained, retrenched mineworkers as the company’s broad base of beneficiaries.
Asked whether these companies had created new markets, Booi said it was too early to tell. “For me, they are still work in progress,” he said.
Motlanthe’s complaint that there are too few winners may ignore the reality that having a track record matters. At the recent launch of mining company Incwala Resources, chairperson Brian Gilbertson said that 60 groups had been interviewed.
The winning consortium comprises Mutle Mogase’s Vantage Capital, an established investment house; Ronnie Ntuli’s Andisa Capital, newly established but with a solid base; and Dawn Morole’s Dema group, with investments in Kumba Resources, among others.
Nkuna does not blame asset-sellers for preferring established empowerment actors, “because you need someone with money or able to raise it”. He sees entities lsuch as the Industrial Development Corporation (IDC) as being responsible for bridging the gap for new players.
The IDC — frequently criticised for a spread of risk that too closely resembles that of the banks — has ironically invested in Incwala. Vic van Vuuren, chief operations officer of Business Unity South Africa, said business should “reach out a bit more” to the groups that complain of being shunned because they lack a high-profile figurehead.
Some analysts argue that established firms are not without blame either. Wits University researcher Neo Chabane pointed to the Rembrandt Group, an Afrikaner conglomerate that has retained its influence across a range of sectors, while being a key facilitator for Sexwale’s Mvelaphanda Holdings. The Rupert family empire sold Mvela stakes in Northam Platinum and the diamond miner, Trans Hex.
Rembrandt also connected Mvela with its subsidiary, Absa, and, through the backing of another subsidiary, Medi-Clinic, Mvela bid for Afrox Healthcare.
Hope for new empowerment players lies in sectors such as the cellular- phone industry, but even there, they will find the Rembrandt group present through Venfin, a Vodacom parent.