BBC: Is Black Economic Empowerment working?

Original Post Date: 2003-11-19  Posted By: Jan

From the News Archives of: WWW.AfricanCrisis.Org
Date & Time Posted: 11/19/2003 11:37:27 AM
BBC: Is Black Economic Empowerment working?

[Note. Take note of an important paragraph below showing that GDP per capita levels in SA have fallen in 10 years to what they were 30 years ago and that unemployement has doubled in 10 years. Millions of blacks have lost their jobs after the new government came in because of its socialist policies.

Black Empowerment in South Africa so far is a massive failure. What happens mostly is this: Black Companies go out of business within a short period of time because they are normally badly run and lack the experience of established businesses. But due to the legal requirements FORCING all companies to have black participation, what often happens is these empty shells of failed companies are bought up by existing “white dominated” companies so that they can then claim to have a “black partner”. There is a new black elite in South Africa who become multi-millionaires OVERNIGHT – simply because they have a black skin. They get offered huge portions in existing companies simply to be there. They don’t need any capital. They get given the capital and are made instant shareholders.

Examples I know of are: A black oil company called TEPCO was bought up by Shell. TEPCO was falling apart and it was snapped up by Shell not only so that it could claim to have a black partner but also because Shell could use TEPCO’s losses as a tax write-offs. I know about this because a friend of mine worked in the management of TEPCO.

Another friend of mine works for a rapidly rising advertising company. The owner recently gave a 26% shareholding to a relative of Winnie Mandela just so as to have a black partner.

When companies tender for Government contracts they are excluded if they do not have the right racial makeup. So it makes business sense to find someone black and team up with them.

The following article from the BBC tells it pretty much like it is. Jan]

When South Africa held its first democratic elections in 1994 the balance of political power finally turned.

Since then the challenge for the country has been how to transfer economic power from a white minority to the black majority without destroying the economy itself.

That question is at the heart of the movement known as Black Economic Empowerment, or BEE, which has been a key but controversial policy of the ANC government.

At a recent conference in Cape Town, wine industry executives discussed how to bring black empowerment to what is one of the country’s oldest industries.

Although wine making is one of South Africa’s best established industries, it is also seen as a bastion of white influence and affluence.

Less than 1% of wine producing companies are owned by black businessmen.

“Ten years after South Africa’s liberation, transformation in this sector has been non-existent,” Gavin Pieterse, the chairman of the South African Wine Industry Trust (SAWIT), told the conference.

For more than 300 years this industry has failed because it has not transferred skills to the majority

John Platter, a SAWIT trustee, said the conference was not just about recognising this.

“We have been keen not to do things for show. Our intention is to get a new body of well-educated people in place for the future,” he says.

“We all realise that something more than just window dressing has to happen.”

The conference delegates were keen to endorse the rhetoric but are they embracing black empowerment by choice or necessity?

More stick than carrot?

“Many farmers still see black economic empowerment as a threat to their own existence,” says Mohammad Karaan, a lecturer at Stellenbosch University.

“But their senses tell them that the future for white people in South Africa will be based on their ability to constructively engage with black people.

“So maybe it is a bit of a stick but the carrot is that the government can provide things to encourage them.”

One such carrot is EU funding of about $15m for BEE.

When a charter for the mining sector was leaked, it caused alarm among investors and shares prices tumbled

Jabulani Ntshangase is one of South Africa’s few black wine producers but he says he is not a supporter of black empowerment per se.

“We should not just throw black people into the industry without the proper skills and education,” he says.

“After the elections in 1994 many black-owned companies went onto the Johannesburg stock exchange and many of them went out of business almost straight away.

“For more than 300 years this industry has failed because it has not transferred skills to the majority. It is all about education but it won’t happen overnight.”

Too radical

SAWIT is producing a charter targeting 10-15% black ownership in the wine industry within five years.

Charters have already been introduced for finance and mining companies, but not without a few bumps along the way.

As long as the ANC focuses on transferring equity from one small group to another, its empowerment strategy will remain a myth for those who need it most

When the initial draft of a charter for the mining sector was leaked last year, it caused alarm among investors and shares prices tumbled.

The experience seemed to indicate that the changes envisioned were too radical for big investors to stomach and the government later negotiated a less demanding target of 26% black ownership within 10 years.

Criticism of black empowerment has also come from outside the investor community.

Most South Africans believe something must be done to increase opportunities for all but they still view BEE as problematic.

Some regard it as a form of discrimination, even “reverse racism”.

“I think it is immoral and obscene that people will qualify for top positions because they are black,” says Mark Lowe, trade and industry spokesman for the opposition Democratic Alliance.

He thinks the government has made the mistake of empowering from the top down and “playing the race card”.

Lionel October, government industry spokesman
“As long as the ANC focuses on transferring equity from one small group to another, its empowerment strategy will remain a myth for those who need it most,” he says.

Even the president’s brother, the businessman Moeletsi Mbeki, says the current brand of BEE is really a political rather than an economic strategy that is enriching an elite of black businessmen close to the government.

He says it is doing little for the national economy. And the statistics suggest that he may have a point.

Duma Gqubule, an economist who has studied BEE, says that in the 10 years since BEE’s creation, GDP per capita has dropped to the levels of 30 years ago and unemployment has doubled to eight million.

But one of the prime movers behind BEE, Lionel October, the deputy director general of trade and industry, says the government has responded to the criticism by widening empowerment.

He says BEE now entails not merely transfer of ownership but also participation in management and development of skills.

And both the government and the private sector are putting up cash to fund it, he says.

He also denies that BEE benefits only the well-connected.

“There is no form of crony capitalism here,” he says.

For a country that has endured staggering racial inequality in the past, it is not surprising that its majority-elected government wants to see a greater slice of the cake for that majority.

But the government need look only as far as Zimbabwe to see how an ostensible attempt to redress past inequalities can lead to economic chaos.

It knows it has to tread carefully if it is to avoid provoking the sort of turmoil that was so miraculously avoided a decade ago.

Souce: BBC
URL: http://news.bbc.co.uk/2/hi/business/3262123.s…br>

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