Equity transactions are not a major factor in the rise of the black middle class in South Africa, a new study on black economic empowerment (BEE) has found.
More important contributors included skills development, enterprise development and preferential procurement, researchers Khehla Shubane and Colin Reddy said on Friday.
The study found that very few BEE companies, including Mvelaphanda, Shanduka and Safika, accumulated considerable money through participation in equity transactions.
It said BEE critics who disputed the existence of the black middle class argued that the equity element had benefited a few with connections to the African National Congress.
The critics concluded that these few companies had hoarded every transaction made available.
The study found that the black middle class were not direct participants in the process of empowerment in the sense which equity participants were.
”Their participation derives from the fact that they are employed in companies that are obliged to comply with BEE laws or are entrepreneurs,” the study revealed.
It said reasons that led to people believing that equity explained black middle class were that transactions, which had been in the media, represented an impressive amount of money.
”Because companies that have done deals are listed, even if they sell 10% of their shares to black groups, this represents a huge amount of money; certainly a figure that is unlikely to be made in a short time by many people.”
However, this amount often did not represent a benefit to the black parties involved.
The study found that type of occupation, salary and education skills determined middle class.
Three top occupations — legislators, professionals and technicians — were identified as middle class.
”At the higher reaches, the first two categories employed in the private sector can accumulate sufficient money not to need to work once they leave their employment.”
Although skills development had contributed in the rise of black wealth, its shortcomings were that it was focused on people already employed, therefore not solving the skills problem.
The general poor education in the country did not prepare pupils for the training offered at the workplace.
”Nor does it prepare them for basic skills such as communicating effectively, reading simple instructions on operating reasonably simple machines that are in everyday use in workplaces.”
Black people were the main recipients of this poor education.
Shubane and Reddy found that both the public and private sector had made contributions in enterprise development.
Anglo American and South African Breweries (SAB) were mentioned as major contributors in promoting black entrepreneurs.
”The SAB programme where they help their former drivers buy their own trucks to use for distribution is a good example,” Reddy said.
He said there were people who were part of Anglo American programme Zimele who had gone beyond middle class.
Although the public sector had been the focus of preferential procurement, the private sector also played a role.
Government uses preferential procurement to secure compliance with empowerment.
Many companies, including those that think the measure is ill-advised, had complied with it anyway.
”Amounts spent by various companies on preferential procurement are growing steadily with listed companies tending to spend more on procurement from BEE companies.
Reddy said government projects required black suppliers and this led to black people gaining confidence in starting businesses.
The study also found that critics accepted measures to promote women and people with disabilities and not race-based programmes.
”White people, as a group, still remained the least affected by unemployment compared to any group.”
It found that Black people dominated the ranks of poor and unemployment.
”They are the least skilled and represent a minority of any racial group in top management in South Africa.”
A lot had been achieved but patterns of employment established during apartheid remained in place. — Sapa