MAYBE NATION BUILDING AND NOT B-BBEE COULD DELIVER ECONOMIC TRANSFORMATION

2015-05-18 07:31

“…We must in action, assert our will to do so. We must in action say that there is no obstacle big enough to stop us from bringing about a new African Renaissance.”  Nelson Rolihlahla Mandela

From the moment my eyes opened up to the greatness of this wonderful country I have felt blessed to call myself South African. It is also for that reason that I have remained optimistic about the country’s future and how carefully timed events may direct the country the right way. I have hesitated in the past to criticise any technocratic process with heavy time and capital investment. Also when it comes to Broad-Based Economic Empowerment (B-BBEE) there seems to be a dichotomy that would suggest any criticism means I am standing for an opposite side, and there is no middle ground.

B-BBEE in its previous form and in the new format will never deliver jobs nor will it grow the South African economy. When you design the whole empowerment Act around access to opportunities, and you do not pause to consider how those opportunities are created or grown, you are in trouble. This is perhaps the biggest reason why transformation has been delayed from the masses in the population.

Pause before commenting on B-BBEE below as institutionalised racism or evidence of ineptitude on the part of government. Allow me to explain the rationale behind the Act and build a case on how nation building is key to Industrial development in South Africa. This is even more important today with the R 23 Billion black industrial fund proposal. By the same token I do not profess to know better than the technocrats behind the ideas, so I implore proponents on the other side to also pause.

B-BBEE is premised on observations that equal access to economic opportunities has four barriers preventing, previously marginalised people (PMP) from accessing the economy. The first one is the Poverty barrier, where the observation is that poor people without support or access to basic needs like food have no chance to enter the mainstream economy. The second one is the Skill barrier, where the observation is that through employment and on the job training, skills can be delivered to PMP. The third one is the Business barrier where the observation is that if big business added small businesses to their supply chain and invested in their development, the PMP’s SMME sector will grow. The last one is the Opportunity barrier, the most controversial one, where the observation is that to diversify ownership of businesses there should be voluntary transfer business equity to PMP.

In most of our debates we agree that being altruistic with how we treat our poor is both noble and commendable. We also agree that on the job training is key to skill transfers and thus creating learning opportunities through internships and learnerships is one of the gains of the past 21 years. We also are happy to accept that diversifying our work-spaces is not at all a bad idea.

However with the mentioning of Employment Equity and Ownership, all B-BBEE is demonised. The contracting economy, the emergence of the black middle class and the exclusion of other racial groups has created a three pronged criticism. Firstly those that remain outside the economic loop feel they have a new oppressor is black elitism. Secondly there are those that feel incompetence has surpassed them in a career ladder. Finally those like me feel that B-BBEE has eroded confidence in black people excellence, competence and innovation to drive economic development in South Africa (the idea that all black success is sponsored is also misleading).

New National Pride

The foundation to transforming the economy and building a winning nation, I maintain is rooted in how we build our national pride. Nelson Mandela’s social experiment was that South Africans have what it takes to turn this nation into a winning nation. Thus as written before the foundation to transformation begins with us tabulating our national psychology on issues that make transformation necessary (Inequality between citizens, common future across racial and ethnic lines, commitment to growing the economy until we are all on equal footing, work ethics as a people and commitment to building South Africa).

Apartheid was a sociological design and the biggest challenge even after 21 years remains, “How do you reconcile a people with no previous history of conciliation?”  Today race relationships are not built on equal people with equal contribution and equal benefit. This is becoming a new illusive dream, with each racial group still loyal to the well-being of its own. The common sense of National Pride within South Africa, is lost to the doldrums of an imaginary rainbow nation, that very few are working on building.

Economic Access

There are a number of ways to describe productivity the map above uses a technical definition which is output per worker. The fundamental definition however is creating more from available resources – such as raw materials, labour, skills, capital equipment, land, intellectual property, managerial capability, and financial capital. More, being the magic word! South Africa needs to lift productivity by smartly combining different resources to produce goods and services others wish to purchase. When the right combinations of choices are made higher production, higher value and higher incomes can be achieved for every hour worked. This is also where the debate between Capitalism and Socialism also comes in, which one delivers more productivity? I am with Mandela here, “It does not matter if the cat is black or white, just as long as it can catch mice”

Government has macroeconomic responsibility to deliver a literate population to the process. Multiple literacy (ML) unlike literacy (ability to be numeric, read or write), includes three more dimensions required by our youth today. How does what I learn in books, at school or the internet help me understand myself, the world and my role in the world. If the education system delivers young people with a sense of purpose and driven to succeed, that level of empowerment will revolutionise the country.

Private Sector participation

Now if you believe in a small government, the jobs a productive economy would be creating would come from the private sector including SMMEs. Thus the third level would be articulating what is good Corporate Citizenry in South Africa, parallel with how do we improve the local business environment. If the private sector articulated its skills needs, critical lags, capacity to develop talent and areas where they may require government partnerships and their concessions against labour actions it would be progressive. I have shared at length before the need for a social contract between organised labour, government and business to end strikes and any productivity hindering actions in favour of the economy.

Equally government has a role to play in the creation of information, intelligence or education necessary for the creation of skilled citizens, especially black ones, without the benefit of international travel and vocational exposure. This is called a, "Knowledge Economy". Knowledge Economy is an economy in which growth is dependent on the quantity, quality, and accessibility of the information available. Our nation needs a broad and rapid skills development programme.

Industrial Development

The Final Level is the Industrial Development and Economic development tier. In my view the current flaw with B-BBEE ownership tier is that it proposes sharing existing business equity in South Africa. It laments lack of black ownership of listed entities and so forth. My proposal is to have an intense Entrepreneurship development programme to assist entrepreneurs exploring the business world daily. This means  exploring youth entrepreneurship as a career option for the youth and career guiding the youth the direction of business. It also means making the process of starting and managing a business simple.

There is noted empirical evidence of a relationship between Research and Development with Industrial development. Researchers in R&D are involved in the conception or creation of new knowledge, products, processes, methods, or systems. Thus South Africa’s management of production of new insight is important to the innovation the country will take to the world. Black Industrial development should in earnest start with the production of black PhDs, but South Africa is facing a broader challenge in the production of PhD in general.

 SA produces 28 PhD graduates per million of the population while UK =288; US = 201; Australia=264; Korea=187; Brazil = 48

 World Bank says SA has tripled R&D investment since 1994, but the total number of Full-time equivalent (FTE) researchers increased by only 33%. SA has approximately 1.5 FTE researchers per 1000 employed; countries with similar ratio of R&D to GDP expenditure like Portugal = 4.8 and Italy = 3.6

 Current PhD graduates per annum is sitting at 142

I pause here, Be Inspired South Africa!

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