After years of reluctant compliance with black economic empowerment (BEE) policies, big business finally appears willing to embrace the notion of deracialising the South African economy.
Business Unity South Africa (Busa), seen as the voice of large corporates, in June this year published an 18-page document titled Business Approach to Black Economic Transformation, which details the business sector’s thoughts on how it sees our country attaining inclusive growth.
More than three months after the publication of this document, there has been little public reaction from government, black business lobby groups, trade unions and civil society to the Busa proposals.
The lukewarm reception is disappointing given that the failure to deracialise the South African economy has been one of the most complex and divisive challenges facing our country over the past 20 years.
For me, one of the most interesting revelations in the document is the admission by big business that it has failed to commit whole-heartedly to transformation.
However, this admission is as interesting as the proposals outlined in the document, which are premised on pro-growth economic transformation as opposed to wealth-redistributive transformation.
Busa’s version of black economic transformation (BET) appears to be a counter-policy proposal to radical economic transformation (RET), whose supporters within the ruling ANC are clamouring for increased access by black people to state procurement, the expropriation of prime land without compensation, and the nationalisation of mines and banks.
In its BET document, Busa says the business sector aligns itself with the definition of RET as articulated in government’s Medium-Term Strategic Framework (MTSF 2014-2019), which calls for the acceleration of growth, increased employment, and the promotion of investment in a competitive, export-orientated economy.
Put differently, Busa wants BET to be anchored in the reduction of racialised inequality, with greater attention given to developing black-owned enterprises, and not merely redistributing existing wealth.
Part of the reason why transformation has been slow in SA is that BEE has focused on redistributing the equity of JSE-listed companies to a few politically connected people.
Busa argues that the over-emphasis on ownership has largely failed to deliver meaningful control and value to black people, given that shareholdings are generally insufficient to exert direct influence on the strategic direction of investee companies.
Further, the lobby group argues that ownership redistribution is costly and limited to a concentrated number of established businesses.
Other challenges associated with transferring equity include the over-reliance on highly geared funding structures and complex third-party funding mechanisms, which may have contributed to the slow pace of transformation.
The lobby group proposes a shift in how we approach transfor-mation if SA is to achieve a truly deracialised economy, which it refers to as “the desired end-state”.
In the paper, Busa lists five crucial shifts that are required to deracialise the economy. The influential lobby group proposes that:
- Business needs to drive significant growth of black business by providing access to markets, capital, and skills to support entrepreneurship and the creation of black-owned and black-controlled businesses.
- Business should work with government to enhance the success and scale of programmes such as the Black Industrialist Programme.
- Business needs to interrogate and contribute to solutions to better structure broad-based BEE transactions in a manner that is cost-effective and stimulates value generation for black investors.
- As opposed to the sale of shares, business should place greater emphasis on asset sale transactions, resulting in either the sale of part of a business or the establishment of a new black-controlled business.
- Business needs to seek innovative forms of financing BEE transactions including vendor funding to assist black investors to attain value from their investments.
The proactive stance being taken by big business in embracing BET should be welcomed.
The private sector accounts for approximately 80% of SA’s total production and employment. Therefore, it is better placed to solve some of our country’s challenges, instead of what it has done in the past – withdrawing and leaving the government to carry the can alone.
If the private sector and the government don’t work hand in hand, we are unlikely to see inclusive growth and employment generation in our lifetime.
The government must eliminate corruption, improve service delivery, and create a climate that allows the private sector to do what it does best – create wealth and jobs.
Andile Ntingi is the chief executive and co-founder of GetBiz, an e-procurement and tender notification service.
This article originally appeared in the 2 November edition of finweek. Buy and download the magazine here.