4 burning issues facing black entrepreneurs

2014-10-06 06:00

Some tough talking and soul-searching defined the Black Management Forum conference last week. Mamello Masote was there and identified the top themes that permeated the debates and discussions, nearly all of which included frustration at the slow pace of economic transformation

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Bheki Sibiya, the interim chief executive of PPC and chief executive of the Chamber of Mines, took aim at the Industrial Development Corporation (IDC), saying it needed to do more to fund emerging black industrialists.

Sibiya said sometimes black industrialists fail because they have limited or no access to funding despite South Africa having various developmental institutions. “I think the IDC can do more than it has for emerging black industrialists,” Sibiya said.

Philisiwe Mthethwa, the chief executive of the National Empowerment Fund (NEF), who is also on the IDC board, said while the role of development finance institutions is to provide support for inclusive growth to support black entrepreneurs, they too have limited capital.

“The JSE had a market capitalisation of R11.15?trillion as at March 7 2014, and black ownership stands at 3.9%,” she said, citing research by Who Owns Whom.

“In order to reach 25% of black control, it requires an additional 21.1%, and if we value it at today’s market value, black people still need about R2?trillion. Collectively, the IDC, NEF and SEFA [Small Enterprise Finance Agency] receive, on average, capital of R3?billion a year, and this falls short of the R2?trillion needed to bring blacks to the JSE.”

She also said development agencies have to walk with black entrepreneurs a lot more and sometimes have to use interventions that normal financing institutions such as banks shy away from.

“We also need venture capital, which is a riskier type of financing for black entrepreneurs; so it’s not always about the money, it’s about the type of financial instruments that we use to allow black entrepreneurs to be involved,” she said.

She referred to the R100?billion investment government was making into renewable energy and how few blacks were involved, and that riskier type of financing instruments might allow black entrepreneurs to get involved.

Employment equity

Employment equity is a failure, particularly at top management, where all the decisions are made, according to speakers at the conference.

The 14th Report of the Employment Equity Commission showed that just 20% of South Africa’s top management positions were occupied by black Africans. Whites dominated top management positions at 62.7%, while Indians made up 8.3%, coloureds 5.1% and foreign nationals 4.1%.

Loyiso Mbabane, who chairs the Employment Equity Commission, promised that with the new amendments to the Employment Equity Act, which became effective on August 1, the department of labour will be a lot tougher on noncompliant companies.

“Previously, section 42 made it hard for the director-general of labour to enforce compliance, but now all of that bureaucracy will be done away with,” he said.

He said companies could be penalised between 2% and 5% of turnover for noncompliance.

ANC secretary-general Gwede Mantashe called the private sector approach to employment equity “malicious compliance”.

Mbabane said progress in employment equity since the dawn of democracy has been disappointing.

“We must be careful not to glorify the small business sector, as though black people no longer have a place in corporate. We must still target black people to become executives,” he said.

Mbabane said that “employers have a taste for discrimination and it’s costing the country”.

Industrial policy

Commenting on whether the country’s industrial policy supports the black industrial movement, Sibiya said although the trade and industry department does a good job, it should do better.

“Black industrialists have to be liberated from the spiderweb of legislation; if the rules are so many that compliance takes so much energy from your entrepreneurial role, it’s a problem, and black industrialists need to be relieved of some web of control,” he said.

“We are delaying now with issues of the national minimum wage. What happens if you are a small industrialist and you cannot afford the national minimum wage, whereas we need to say let’s have wages and salaries that are appropriate for the job at hand. Would we rather have people unemployed on dole from the government or have people self-employed or employed by others even if it’s not at the high wage they desire?”

Gloria Serobe, a founding member of investment company Wiphold, said her experience with government policy as an entrepreneur has been positive. She said when her company recently signed a R1.6?billion deal with Chinese cement company Jidong, the trade and industry department offered support of R450?million in the form of incentives.

Sibiya said government had huge buying power and should be focused on supporting black industrialists on a longer-term basis.

“And you may find that the government does support [entrepreneurs] and that the entrepreneurs do a lot of work and do it well, how about government pay them accurately and on time?” he said.

He said the private sector is also guilty of starving entrepreneurs for cash.

Mthethwa cautioned against black industrialists missing out on opportunities with the Chinese.

“Several mines have been restructuring and selling their assets and I have recently looked at five transactions, and all the assets were being sold to the Chinese. The Black Management Forum needs to look at that because I am concerned that black people are missing out again.”

Skills development

South Africa needs to tackle how it produces skills, and a closer relationship is needed between academia and industry to ensure the skills churned out by academia can be effectively consumed by industry, according to Pearl Munthali, the group executive of business development at the Passenger Rail Agency of SA.

“Twenty years later, we have labour cases such as the Comair case, where the airline had the audacity to advance to the court that [its] lack of promotion and [its] lack of appointment of people in the designated groups was because there is a lack of skill and a lack of a pool of talent,” she said.

“But we should not fall into that trap that it is due to a lack of talent. I don’t understand how, as professionals, we can still accept statistics that tell us that there is a lack of talent. There are structures government has set up to deal with skills development and committed corporate leadership?...?there can be many corporate schools of excellence that can be set up for this shortage of skills in the country,” she said.

Nedbank chairperson Reuel Khoza said: “Only 12.6% of black management is African, while 69.5% is white. This is against ratios of 75.2% in the economically active population grouping for black Africans and only 10% against white South Africans.”

He said the deteriorating education system has done much to limit the available pool of black talent.

“If education is a key qualifying factor, it helps in explaining much of the anomalies at the top management and senior corporate strata,” he said.

“Amazingly, only 5% of the population have degrees, and for black Africans, it’s a tiny 2% versus 20% where whites are concerned. Frighteningly, only 11% of black Africans older than 20 have a matric exemption.”

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