How much is black economic empowerment (BEE) political patronage rather than a rational political programme to redistribute assets? Two recent BEE deals have thrown the issue into stark relief.
One is the pending R7,5-billion Vodacom BEE deal.
It has been reported that former National Prosecuting Authority boss Bulelani Ngcuka, husband of the deputy president, was sidelined from a consortium bidding for the stake in Vodacom. The reason cited was political pressure from the new power centre around African National Congress president Jacob Zuma.
We must be careful here, because we are in the realm of unnamed sources and off-the-record briefings, which always makes me uncomfortable.
It would be natural, however, for Zuma and those around Zuma to exact revenge on Ngcuka for initiating the process of prosecution for corruption that threatens to end Zuma’s political career.
It has also been reported that Vodacom has intervened to have Ngcuka reinstated as a member of the consortium that excluded him.
That political pressure can play a role is not unexpected, but it gives the lie to the idea of BEE being a rational, transparent economic programme. Looked at through the prism of political pressure, BEE is an attempt to buy influence. How is this different from corruption?
It is true that the BEE consortium that eventually wins the bid — the strategic partners in Vodacom’s words — will be only part of a much bigger BEE deal. A quarter of the BEE deal will be reserved for an employee share-ownership plan for Vodacom’s local workforce. There will also be a retail scheme to sell shares to the public.
However, Vodacom’s BEE deal is pretty standard in having big names attached. Nat Kekana, former chair of Parliament’s communications portfolio committee, is one.
A much smaller BEE deal shows this problem of political patronage in greater focus.
This is the reported firing of the BEE consortium that had been granted 35% of Imuniti, on the grounds of not delivering on promises made to secure the shares.
Imuniti produces, among other things “wellness packs” to boost the immune system.
The consortium comprises Kopano Ke Matla Investment Company (wholly owned by the Congress of South African Trade Unions, or Cosatu), Malibongwe Women’s Development (a non-profit organisation, wholly owned by the ANC Women’s League) and Star Choice Trading (owned by members of the Tambo family).
What the BEE consortium is said to have failed to do was to get letters of support from Cosatu and government departments for Imuniti’s wellness packs, and take measures to boost sales of the pack by 100 000 units a month within a year.
What should concern us is the letters of support from government departments.
No government department should make decisions based on a BEE deal. The government should decide to endorse a product only in the public interest — if indeed it should be endorsing any product. Why would the BEE consortium be in a better position to get such endorsement of products than the company itself? Is Cosatu in the business of endorsing products?
Political connections are often supposed to “open doors” and I have often wondered to what extent this represents corruption, if those doors are closed to ordinary, unconnected business people.
With Imuniti the matter is moot, because the BEE parties reportedly did nothing anyway. The principle remains, however, that the line between politics and business was blurred.
Added to general unease about the link between politics and business is the increasing perception that BEE has been used as a ploy to extract money from the private sector to fund the ANC secretly. The exposing of Chancellor House as an ANC-owned BEE entity has brought this to the fore.
The matter needs to be put into perspective. The focus on the involvement of the politically connected has declined from the early years of BEE. The Broad-Based BEE Codes of Good Practice de-emphasise ownership to some extent, though for big deals the political element is hard to ignore.
It could also be argued that it would be hard to find a prominent black business person in South Africa without some sort of tie to the ruling party.
And did the political connections of the people in the big BEE deals really open doors in the past? Was this perhaps an excuse? From a left-wing perspective, BEE could be seen as an attempt by a company not to buy influence but as a move by far-sighted capitalists to buy off the revolution.
In any case the government has tried to broaden the idea of BEE. The BBBEE Codes are a laudable attempt by the government to introduce a policy with flexibility and certainty, as well as de-emphasise ownership.
Yet ownership remains important and there are lingering niggles about the political aspect of BEE deals. We have seen few true broad-based equity transfers. There have been relatively few retail schemes, for instance, and no deals based entirely on this form of empowerment.
There are usually lead partners and there is usually a political connection between the “lead partners” of consortia, however broad-based, and the ruling party.
This was the case with one of the broadest-based early BEE deals, that of the transfer of 35% of Johnnic Holdings to the National Empowerment Consortium, which was headed by Cyril Ramaphosa, who has gone on to become one of the richest men in South Africa, thanks to a string of subsequent BEE deals.
The codes are now in place and should be working to ensure more ordinary black people thrive in South Africa. The question is whether the codes will have the desired effect or BEE will continue to be based — possibly reinforced under the influence of the new Zuma-inspired ANC populists — on political patronage.