Entrepreneurship, Whiteness and a Work Ethos

2016-04-11 09:53

A recent News 24 Voices blog raised the question of poor black representivity in the entrepreneurial sector of the economy. The author raised a number of valid issues, but hinted also at privilege and “whiteness” as contributing to the problem. It is always easy to put a racial spin on such arguments because we are so conditioned to it. I too reacted negatively to the title, which belied the contents which were mainly sound.

In such matters the proverbial devil is always in the detail and an example from a learned source makes that point.

Professor Thomas Sowell (US economist, social commentator and philosopher) drew attention to this by refuting arguments that claimed discrimination and bias when comparing populations with differing age profiles. Specifically, some had argued that blacks were under represented in sectors of the US economy or under remunerated relative to whites - so he compared the age profiles of both groups. What he found was, with hindsight, very predictable.

He observed that more youthful population cohorts earn considerably less on average and enjoy less seniority in the workplace than do those older. And because the black population in the US is younger than whites, it shows in the numbers. It is hardly rocket science but it is does demonstrate how easy it is to jump to conclusions if you don’t think things through and look behind the numbers.

That happens a lot in this country and it is similarly easy to draw inaccurate conclusions from bland numbers in South Africa’s statistics because of a similar age variable. Successful entrepreneurs – essentially, those who survive in business for themselves - are likely to be older. And because blacks got into the game later (since the early nineties let us say) and are likely to have a lower median age they will be fewer - both proportionately and numerically.

Secondly, the nation’s governing ethos has supported values in direct conflict with those supporting entrepreneurialism. There are a number of factors at play here.

For me one of the balls that Nelson Mandela dropped as president was that he failed to lead from the front in terms of frugality and hard work - for his stature was such that people would have followed his every example. If, for example had he driven a Toyota Cressida to work and exhorted people to work hard for its own sake - as many in the orient do (rather than to expect or feel entitled to more and be “owed a living”) - I am convinced we would have seen a notable difference in our national work ethic and the performance of our economy.

Instead the gravy train pulled out of station New South Africa and moved ahead at full speed. As a result we have a national value register that speaks for itself.

But it is not only about the quality of leadership.

Entrepreneurialism is in part both cultural and opportunistic. Some examples:

For no obvious reasons, Lebanese traders used to prosper in West Africa, Jews were key to the UK rag trade, the English tended to dominate banking, Italians the restaurant trade in the US, Germans played a key role in establishing Russian agriculture and Chinese merchants succeed across the globe. The predisposition of potential entrepreneurs and the needs of target markets are both random and cultural by nature. Outcomes are thus difficult to predict.

Importantly, necessity and the urge to survive play key roles.

Jews have been persecuted for centuries, resulting in their success in many cultures (from not bring favoured for employment) – probably the best example being the USA. Chinese citizens in Malaysia – noted for their success and achievements in many avenues of life - were harassed by the Malay majority after decolonization and subjected to discriminatory laws (e.g. affirmative action against them), causing them ultimately to secede and establish political independence. Singapore has since proved to be an economic phenomenon built on little more than hard work, human intelligence and a near total absence of natural resources.

Locally and in similar vein, it is interesting to note the adaption of white Afrikaner in the new South Africa.

Afrikaners had been favoured politically and economically since the National Party came to power in 1948 and D F Malan promised to help uplift them following their impoverishment and humiliation at the hands of the British during and after the Anglo Boer War.

Thus half a century ago your typical Afrikaner was a civil servant, financial services employee, state enterprise artisan or farmer. Entrepreneurs (in the classical sense – and as distinct from farmers) were rare. But come 1994 the apron strings of government support were cut.

With his security and government backing removed, the Afrikaner has had to reinvent himself - for not only was it near impossible to find government jobs any longer, but legislative coercion has narrowed his options in the private and agricultural sectors as well.

So what has he done?

Few will be unaware of how many small businesses have sprung up over the past 2 decades in their suburbs, towns and neighbourhoods. Many startups – from plumbers, electricians and garden services to IT and internet service providers - are predominantly white, and often noticeably Afrikaans in character. They had to make a plan.

For many, necessity dealt them a good hand and - although it did not seem like it at the time - the cold shoulder of rejection gave their lives new meaning - and often, decent bank balances.

Paradoxically, the South African state has blunted the hunger for economic success among incipient black businesses notwithstanding the nation’s pervasive poverty.

Firstly, the barely adequate, but nonetheless still perceptible grant payments made to millions make their plight less desperate and diminish their motivation. Eking out a living is still possible with very little work.

Secondly, the societal motivation to make things happen is largely absent. A strong entitlement ethic fills that gap and government has encouraged dependence on both the ruling party and government institutions in yet another manifestation of its patronage.

Thirdly, setting up business has become an obstacle course. From mandatory returns to government departments, registering for tax, bureaucratic compliance certification and the difficulties involved in opening accounts and getting credit, to licensing requirements – courtesy of the so called “Department of Trade and Industry” - all cards are stacked against the aspirant entrepreneur.

Finally, part of the governing party’s liturgy has been to extol “equality” and condemn “inequality”. Apart from making for political rhetoric, the notion of equality is vacuous and negative because it can only be achieved by confiscating from creators of value – the engine of the economy – and handing it over to those incapable of or unwilling to do so; thus there is little motivation to excel and succeed.

In other words, the philosophical bedrock for entrepreneurial success is absent. In its place there is a spider’s web of government inspired legal hurdles and a quicksand of problems associated with self actualization and achieving things on your own.

The notion of “collectivization” rules and the lowest common denominator always trumps excellence and ambition. Until these societal values are buried, any number of good intentions, private initiatives and well meaning NGO efforts as expressed in nicely written treatises and academic papers will mostly come to nothing.

The system and its underlying values need to be fixed, and that starts not only with a new legal and ethical framework, but with leadership – the prospects of which look dire. For once Zuma goes – hopefully soon – it seems probable that Ramaphosa might inherit the crown.

And Ramaphosa’s recent utterances betray his urges to seize equity from white owned businesses and “equalize” rewards. These are unwise sentiments in an environment where entrepreneurialism is to be encouraged and merit should be a sine qua non. And once again we see the toxic phenomenon of entitlement – with Ramaphosa himself having been gifted billions of rands worth of equity in “BEE” largesse – warping any real hope of sound value appreciation on his part.

Considering that he was no more than a union boss, his new wealth – granted free of any proven business merit but awarded to him because of his role in “the struggle” – would have made him like a kid in a candy store. So answer me this - do you know of any kid who has entrepreneurial values – or, for that matter, knows anything about business?

In closing, some truths –

• You cannot legislate the poor into prosperity by legislating the wealthy out of prosperity

• What one person receives without working for, another must work for without receiving

• Government cannot give to anybody anything that it does not first take from somebody else

A grasp of these facts needs to precede any improvement in the economic fortunes of our nation – which can only realistically result from a strong work ethic and entrepreneurial spirit. And until such values are established, our unfortunate aspirant entrepreneurs will be pushing water uphill.

Perhaps it is better to first work for political change - and on that front, it seems to me that things might have to get worse before they get much better.

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