/ 1 March 2010

Gunning for tenderpreneurs

Gunning For Tenderpreneurs

In my last column I suggested that new ideas were needed on empowerment.

Government, in the form of Deputy President Kgalema Motlanthe, seems to be thinking along the same lines.

Since I wrote that column, Motlanthe and Trade and Industry Minister Rob Davies have been quoted saying that BEE is not working.

Actually, Motlanthe said empowerment has effected some change, but not enough, and not broadly enough, and he called for BEE to go beyond business deals and shareholding in companies.

‘We have to think creatively about ways in which, to quote from the BBBEE Act, we can increase ‘the extent to which communities, workers, co-operatives and other collective enterprises own and manage existing and new enterprises and increase their access to economic activities, infrastructure and skills training’.”

Motlanthe made his comments at the first meeting of the Broad-Based BEE Council in Pretoria, standing in for President Jacob Zuma, who launched the council in December.

He called for the focus of the next few years to shift from racial change at the top levels of the economy to decent jobs, skills training, small business and ownership of arable land. He emphasised there was nothing wrong with black people being wealthy, but was ‘proposing prosperity for all rather than for a few”.

Coincidentally, United States President Barack Obama declared the theme of African American History month, this February, to be Black Economic Empowerment.

This is Obama’s vision: ‘Overcoming today’s challenges will require the same dedication and sense of urgency that enabled past generations of African Americans to rise above the injustices of their time. That is why my administration is laying a new foundation for long-term economic growth that helps more than just a privileged few.

We are working hard to give small businesses muchneeded credit, to slash tax breaks for companies that ship jobs overseas and to give those same breaks to companies that create jobs here at home. We are also reinvesting in our schools and making college more affordable, because a world-class education is our country’s best roadmap to prosperity.”

Notice the similarities and the differences. Both policy statements focus on jobs, small business and opportunities for more than the privileged few. Both do not emphasise race.

But Obama specifically mentions basic and higher education in the context of empowerment of African Americans. That was left to Pravin Gordhan in the budget and whether enough money has been set aside for higher education is highly debatable.

To turn to the trade and industry minister’s reservations: Davies was quoted saying BEE is not working, but he was speaking about preferential procurement not functioning as it should.

Fin24 quoted Davies describing three types of ‘malpractices” in procurement. One is simply what some call ‘fronting”. This is straightforward misrepresentation.

The company is white-owned but pretends to be black-owned. The other two that Davies is quoted mentioning are the ‘tenderpreneur”, the BEE outfit that does nothing but get tenders on the basis of race and then outsources to white business, and the BEE outfit that imports from abroad to meet a tender, destroying jobs in South Africa.

It will be interesting to see how government tackles these ‘malpractices”, particularly the tenderpreneur problem.

ANC Youth League leader Julius Malema, according to reports, is just such a tenderpreneur.

I have argued that the more sophisticated forms of ‘fronting” are not an easy target and that BEE and fronting are sometimes hard to tell apart. For instance, tenderpreneurs are like agents and agencies are not illegal or unusual.

Yes, it seems obvious if the agent adds no productive value to the transaction the transaction is suspicious. But then what do broadbased black shareholders add to a transaction, other than being black?

I’m not talking here about deals where black beneficiaries ‘earn” shares according to performance agreements, just broad-based transactions.

I’m also not talking about deals where BEE management are incentivised by shareholding. And I’m not quibbling for the sake of quibbling, or opposing the need for BEE in some form or other.

I broach the issue because it raises problems of conflicting aims in policy. Government policies seem to me often to start life streamlined to achieve a few simple things and end up limping along weighed down by a host of objectives.

Broad-based BEE legislation is a case in point. BEE began as a plan to kick-start black business, but broad-based BEE policy now hopes to bring about affirmative action, skills training and share transfer in every company and increase black management and create enterprises, as well as encourage corporate social investment, mostly but not only through preferential procurement.

A switch in emphasis away from procurement as a tool to redistribute tender money to procurement to preserve and create jobs is a shift away from the purely racial emphasis of BEE policies to date.

I’m pleased the noises coming from government seem to show that the Zuma administration is turning its attention back to our critical economic problem, unemployment.

Reg Rumney is director of the Centre for Economics Journalism in Africa at Rhodes University