The transformation debate is heating up again, in a week that has seen the release of the Mining Charter review, a progress report to Parliament on the Liquid Fuels Charter and the release of Cosatu’s economic discussion document, which is deeply critical of the economic power white South Africans are still seen to retain.
But while the progress of black economic empowerment is hotly debated, various often contradictory analyses reflect dramatically different pictures. The Mining Charter review painted a bleak picture of change within the industry.
At ownership level the review noted that aggregated BEE ownership of the mining industry has, at best, reached 9%, against targets of 15% by 2009 and 26% by 2014. The review was deeply critical of the fact that much BEE ownership is concentrated “in the hands of anchor partners and [special-purpose vehicles] representing a handful of black beneficiaries”.
It went on to argue that the funding models used in transactions “resulted in the actual ownership of mining assets intended for transformation purposes being tied in loan agreements. Accordingly, the net value of a large proportion of empowerment deals is negative, due to high interest rates on the loan and moderate dividend flows, compounded by the recent implosion of the global financial markets.”
The charter made it clear that if companies do not achieve compliance, they risk losing their mining rights. The provision has, however, been criticised by experts who argue that it could face a constitutional challenge.
The review has come hot on the heels of a number of controversial rights deals, not least of which was the award of prospecting rights over the Sishen Iron Ore Company to Imperial Crown Trading, linked to Jacob Zuma’s son, Duduzane. Similarly, the rate of transformation within the liquid fuels industry had a lukewarm response in Parliament this week.
In its assessment of the achievements on compliance with the charter, department of energy chief director Zingisa Mavuso noted that strides had been made but that they were uneven across the fuel value chain. Historically disadvantaged South Africans had achieved ownership of 26%, while representation by black people on boards and in top management had reached 36% and 41% respectively.
Procurement levels from BEE companies had reached 42%, while the total representation of black employees had risen to 71% — with senior management level at 37%, while black specialists and middle managers had risen to 55.5%. But Mavuso noted that if state oil company PetroSA was excluded, the figures of black representation on boards and in top management positions were likely to be lower.
In addition, he said, when it came to the procurement level of 42% from BEE companies this excluded crude oil procurement, which constituted 70% of procurement by oil majors. There were fewer than 10 BEE companies in crude trading and procurement might well be at around 10% or less, he said.
Meanwhile, in the run-up to the ANC’s national general council next week Cosatu released its discussion document on economic policy. Amid recommendations for radical economic change the union federation was deeply critical of the economic inequalities that remained entrenched along racial lines.
It said that the rate of participation of Africans in the labour force was 52%, while for whites it was 68%. “Because of the continued structures of domination and exclusion, it will not be wrong to conclude that most Africans do not participate in the labour force because they are the least absorbed in employment,” it stated.
“Among Africans of working age (between 15 and 64 years), only 36% are absorbed into employment, while 65% of whites of working age are absorbed into employment.” Income inequality remained racialised, Cosatu argued, and had deepened.
According to its research, from 2007 the average African man earned in the region of R2 400 a month, while an average white man earned around R19 000 a month; white women earned about R9 600 a month compared with African women, who earned R1 200 a month. Cosatu said 56% of whites earn at least R6 000 a month compared with 81% of Africans, who earn no more than R6 000 a month.
But other research has painted a picture that is not as bleak.Recently, the JSE released its findings about the growth of black ownership in the top 100 listed companies on the exchange. It revealed that 18% of available share capital — or some 44% of all share capital in the top 100 companies — was in black hands.
The JSE stripped out of its calculations shares held by, among others, mandated investments such as pension funds, investments held by the state, treasury shares or shares that a company owns in itself, as well as foreign operations or operations owned by a company outside South Africa.
According to the JSE the study included only people it could establish as being black and excluded black economic interests in mandated investments. It noted at the time that it was likely that further analysis would indicate more extensive black shareholding of companies on the JSE. Meanwhile, research from trade union Solidarity, a known critic of affirmative action policies, showed significant growth in the number of black professionals and graduates in recent years.
According to the Solidarity Research Institute, the number of black South Africans — or African, Indian and coloured people — registered with the South African Institute of Chartered Accountants (Saica) increased by 248% between 1994 and 2008. It found that the number of registrations of black professional engineers increased by more than 111% in the same period, while the information technology industry saw the number of black graduates rise by 507.6% between 1996 and 2005.
Black attorneys admitted to the Bar increased by more than 78% between 1999 and 2008, the research found, while black medical practitioners increased by more than 30% between 2007 and 2010. A report from the Centre for Development and Enterprise revealed that the proportion of black people making up the higher middle classes had tripled between 1994 and 2008, while the black share of the working and lower middle classes had doubled during the same period.
It emphasised, however, that intragroup inequality (among black people, for instance) was rising and inter-group inequality (between white and black people) was falling. It said economic growth did not reduce the inequalities between rich and poor. Since the rich benefited even more from growth than the poor, and while overall wealth grew, so inequality worsened.