South Africa seems to be so fixated on BEE that the unprecedented white economic empowerment taking place is either not noticed, simply assumed to be natural, or denied. The fact that it makes for an uncomfortable acronym probably doesn’t help either.
When FNB recently released a breakdown of the country’s most wealthy individuals, one headline read: “Many of SA’s super-rich are black.” But the most interesting facts were tucked away: 74% of the richest South Africans are business owners whose ranks are being swollen by “white former government employees turned entrepreneurs”.
This is intriguing because, by implication, white economic empowerment is directly caused, or at least driven, by BEE.
The theory goes something like this: in government as well as in corporates, white managers perceive their career opportunities to be closing down because of affirmative action. For the first time they are considering starting their own businesses as a serious option. In many families they are the first generation to think this way. They leave the corporate comfort zone, struggle — as all small business owners do in the beginning — live frugally and plough all they have into their business just to make it survive. After a few years, their now stable businesses allow them to return to some kind of comfort zone — this time not only earning at least what they used to in their corporate jobs, but also building up capital as the value of their businesses increases. The result is unprecedented white capital accumulation.
Most observers and academics report a gut feeling that whites are starting out in their own businesses like never before, and T-sec economist Mike Schussler backs it with data from the Labour Force Survey from March this year, which showed that 25,5% of the 1,16-million white males are self-employed, compared with 21,1% in 2001. There has been an even bigger increase in self-employed white women — from 8,8% in 2001 to 14,7% this year.
Schussler believes that white business formation is largely in the formal sector and is reflected in the huge increases of CC and company registrations over the past two years, as well as increases in businesses registering for VAT at the South African Revenue Service.
Occasionally, there is an angry denial of this trend, usually from someone who perceives the question as an attack on the BEE movement, and who argues that the economy is growing so fast that corporates are employing all managerial skill — black and white.
A placement agent in the financial services sector, who does not want to be named, strongly disagrees with this stance. “We’ve had positions where we’ve begged our clients — I mean literally begged them — to consider white candidates, and they will not. They say ‘well, if we can’t hire we will wait’, and they wait for nine, 10 months.”
Greg Zuccarini of the headhunters’ research company Rainmakers Research says: “People with general management skills [as opposed to specialist skills] — the white guys — are going out there and creating their own business, definitely, in a big way. They have to. I mean, to be pale and male and more than 40 years old … it’s a huge problem.”
Economist Sampie Terreblanche, author of the book A History of Inequality in South Africa, says: “Black economic empowerment and affirmative action both have certainly made it necessary for whites to move out [into their own businesses]. They were, after all, hugely entrenched in a comfort zone. In the Seventies and Eighties, all the students here [in Stellenbosch], if they didn’t find a job at a bank or at Sanlam or Old Mutual, then they found one in government.”
According to Schussler, research in the late 1980s showed that 29% of all economically active white males in South Africa worked for government.
But because white males no longer have the same negotiating power for posts, “many have had to make a plan. The comfort zone is gone,” says Terreblanche. He believes that the growing economy offers a “fair number of opportunities” for whites starting their own businesses. This, together with the fact that about half a million skilled, professional whites have left the country, places the remaining professionals in such high demand that whites have never had it so good.
Terreblanche, while acknowledging the existence of 200Â 000 to 300Â 000 poor whites and troubles in the agricultural sector, says that the Sixties were generally known to be the best decade for the Afrikaner economically, but now, having more capital at their disposal, “I wonder if the past 12 years have not been the best in their entire history.”
But observers agree that leaving the corporate comfort zone is painful.
Gideon Maas, head of the South African chapter of the Global Entrepreneurship Monitor, says many whites starting out in business have some speciality, but fall short when it comes to basic, broad skills needed in business, such as financial management. “They have skills, but do they have all the right skills? If I’m not good at financial management, what does a corporate manager do? He goes to the finance division. In a small business, you can’t.”
Another factor that makes life difficult for former corporate employees in their own businesses are their low levels of innovation — they prefer to copy overtraded concepts such as guest houses and restaurants. Furthermore, their networks lack diversity and age quickly, and South Africa suffers from a culture of old-fashioned, silo-style management and lacks proper small business support, says Maas.
Anton Roelofse, regional manager at the small business finance house Business Partners, stresses that he does not have empirical evidence to back up his gut feeling, but he reckons that in at least three out of 10 cases, the new business owners are worse off than they were in corporate life, four do just as well and three do better.
Says Zuccarini: “They’re struggling. I think one of the problems with being over 40, you know, many of them had been in corporate life for 15, 20 years. They’re used to the daily continuity and assurance [of corporate life]. Their adaptability to the stress of running a small business and setting it up — it’s a mind shift for many of them. But they’re doing it, and some guys are doing really, really well.”
Of course, not all business owners make it. Theoretically, at least, an upsurge in entrepreneurial activity leads to an increase in wealth. “I think in the long run you do [make more money in your own business], but in the short run, which could be six, seven years … I mean, I’m an entrepreneur and it’s taken me a long time to get going. I haven’t been able to pay myself the salary I had at FBC [his previous employer],” says Schussler.
The release of such entrepreneurial energy, however forced, is probably good for any economy. But in South Africa, unless it is matched by a similar black entrepreneurial surge, it holds the danger of an even more perverse inequality in the future.
Going it alone
It took 40-year-old Alan Verwey about four years to work his way back up to the salary he was earning when he was retrenched from his senior-level IT account manager job in 2001. This excludes the value he would realise should he one day sell his three Cape Town-based Kauai franchises. After retrenchment, he had the option to work on a contract basis and take up other jobs, but the changes in the industry had made him “miserable”.
Deciding to start his own business was difficult, mainly because of the uncertainty, “but once I took it, it was easy”. He says the long hours he had to work in the beginning were hard, but the work was more straight-forward than his corporate job.
Would he go back to a corporate job? “I think I would if the money was right, and I’d go back differently — more on a contract basis where I’d be my own boss. I think if I go back into it, it would be overseas. I can’t see myself getting a large contract in the businesses here.”
He estimates that he would probably make as much money in the corporate world as he does from his businesses, but that there is more security in running his own show. “In corporate business at the moment, they can pay you big money, but there’s no real security. It’s completely changed. I know 10 or 20 guys who I’ve worked with that are bouncing in and out of jobs [with] companies changing hands and retrenchments going on. You don’t know where you stand in the corporate world, whereas maybe 10 years ago the corporate world was the only place where you knew where you stood.” — Barrie Terblanche