SA’S eco­nomic model for Africa

Some newly in­de­pen­dent coun­tries are util­is­ing our BBBEE pol­icy as a guide­line for lo­cal em­pow­er­ment

Business Day - Business Law and Tax Review - - BUSINESS LAW & TAX REVIEW - SÉBASTIEN THOUVENOT

HIS­TORY is con­stantly re­peat­ing it­self and hopefully with each cy­cle we cor­rect at least some mis­takes of the past. This can be seen in the case for eco­nomic em­pow­er­ment poli­cies in Africa.

The is­sue of state par­tic­i­pa­tion, indi­geni­sa­tion and what has come to be known as eco­nomic em­pow­er­ment was raised as African states gained in­de­pen­dence, mainly in re­sponse to their colo­nial his­tory and re­sult­ing eco­nomic sys­tems, such as apartheid in South Africa that saw eco­nomic par­tic­i­pa­tion de­ter­mined along racial lines. To­day this topic re­mains at the heart of many African eco­nomic poli­cies.

State par­tic­i­pa­tion can be de­fined as an obli­ga­tion that pri­vate com­pa­nies that op­er­ate in cer­tain sec­tors re­serve a share­hold­ing for pub­lic en­ti­ties. This par­tic­i­pa­tion is gen­er­ally es­tab­lished at the cre­ation of the com­pany and can­not be di­luted. State par­tic­i­pa­tion can also be de­cided at a later stage through na­tion­al­i­sa­tion, pro­vid­ing the right to in­dem­ni­ties.

Eco­nomic em­pow­er­ment, in this con­text, refers to the goal of restor­ing eco­nomic power to sec­tions of the pop­u­la­tion that so­cial dis­crim­i­na­tion pro­cesses had pre­vi­ously ex­cluded from de­ci­sion-mak­ing based on race and gen­der, among other fac­tors.

Indi­geni­sa­tion is a mech­a­nism whereby gov­ern­ments may seek to achieve eco­nomic em­pow­er­ment. It can be de­fined as the in­crease of lo­cal par­tic­i­pa­tion in, or own­er­ship of, es­tab­lished en­ti­ties. Indi­geni­sa­tion has proved to be one of the most pop­u­lar mea­sures for im­ple­ment­ing eco­nomic em­pow­er­ment for the pre­vi­ously dis­ad­van­taged through ei­ther grant­ing shares to na­tional, in­di­vid­ual or en­ti­ties in a com­pany, the obli­ga­tion to re­serve some em­ploy­ment for na­tion­als, or to re­serve cer­tain com­mer­cial or in­dus­trial ac­tiv­i­ties for na­tion­als.

Many states in Africa have tried to im­ple­ment one or sev­eral of the above mea­sures and to­day some of them seem to tend to­wards a new model in­spired by South Africa’s broad-based black eco­nomic em­pow­er­ment (BBBEE) pol­icy.

In the past indi­geni­sa­tion has been ex­pressed as a re­turn to African iden­tity, as well as the idea of restor­ing the eco­nomic power taken from African peo­ples by their colonis­ers. This was the case in Zaire (Demo­cratic Repub­lic of Congo) through “Zairi­sa­tion” and in Côte d’Ivoire through “Ivoiri­sa­tion”. The re­sult was not much more than a se­ries of na­tion­al­i­sa­tions, giv­ing birth to huge state-owned com­pa­nies.

Apart from a few ex­cep­tions, th­ese state-owned com­pa­nies did not have enough ex­pe­ri­ence to meet the eco­nomic chal­lenges of the ’90s suc­cess­fully, and this led to sig­nif­i­cant re­struc­tur­ing, liq­ui­da­tion or pri­vati­sa­tion. To this ex­tent, there­fore, th­ese poli­cies failed and gave birth to a sit­u­a­tion that is, at best, the op­po­site of their orig­i­nal in­ten­tion.

It ap­pears that state par­tic­i­pa­tion, indi­geni­sa­tion and eco­nomic em­pow­er­ment are still ap­plied in var­i­ous parts of the con­ti­nent in a man­ner dis­tinc­tive to each re­gion, pos­si­bly as a re­sult of the dif­fer­ent his­tor­i­cal back­grounds of the coun­tries in which they are im­ple­mented. As a gen­eral over­view, indi­geni­sa­tion does not seem to ex­ist in Fran­co­phone Africa and more gen­er­ally in West and Cen­tral Africa. In coun­tries in th­ese ar­eas state par­tic-

It ap­pears that state par­tic­i­pa­tion, indi­geni­sa­tion and eco­nomic em­pow­er­ment are still ap­plied in var­i­ous parts of the con­ti­nent in a man­ner dis­tinc­tive to each re­gion

ipa­tion seems to be manda­tory only for com­pa­nies cre­ated for the op­er­a­tion of min­ing projects. This is the case for all mem­ber coun­tries of the West African Eco­nomic and Mon­e­tary Union, where the state must have a share­hold­ing of 10% — Benin, Burk­ina Faso, Mali, Niger and Sene­gal. This is also the case in Guinea, where this share­hold­ing may be as much as 35%, 5% for the DRC or 15% for the Cen­tral African Repub­lic.

Indi­geni­sa­tion and eco­nomic em­pow­er­ment ap­pear to be a trend in the south­ern and east­ern parts of Africa, and although sev­eral colo­nial in­flu­ences ex­ist in th­ese re­gions, the An­gloSaxon and Por­tuguese her­itage re­mains a com­mon fea­ture, as does the fact that colo­nial­ism lasted far longer in this re­gion than else­where on the con­ti­nent. As a re­sult, th­ese states faced se­vere and po­ten­tially desta­bil­is­ing dis­par­i­ties of wealth and re­sources be­tween rich and poor when they at­tained in­de­pen­dence from colo­nial rule, which, be­cause of the eco­nomic poli­cies of colo­nial­ism, was based on the colour line. This has been the case in South Africa and Zim­babwe, but also to some ex­tent in Namibia, Botswana, and An­gola.

Indi­geni­sa­tion, such as in Zim­babwe, aims at giv­ing a “con­trol­ling in­ter­est” of not less than 51% of the shares or in­ter­est in an en­ter­prise to black in­dige­nous Zim­bab­weans. Ev­ery com­pany in re­spect of which 51% of the shares, or a con­trol­ling in­ter­est, is not held by in­dige­nous Zim­bab­weans, and whose net as­set value is above cer­tain thresh­olds (de­pend­ing on the in­dus­try), must sub­mit an indi­geni­sa­tion plan de­tail­ing how and when a con­trol­ling in­ter­est of its busi­ness will be trans­ferred.

Indi­geni­sa­tion in other coun­tries has been a rel­a­tively smooth process. In An­gola, the “An­golani­sa­tion” pol­icy seeks to en­sure pref­er­en­tial treat­ment of An­golan busi­ness­men and stip­u­lates that com­pa­nies must con­form to a ra­tio of 70% na­tional work­ers to 30% for­eign work­ers.

In Botswana the government proac­tively en­cour­ages cit­i­zen busi­nesses and en­trepreneurs. Cer­tain cat­e­gories of ten­ders are re­stricted to cit­i­zenowned com­pa­nies only, and cit­i­zenowned or ma­jor­ity cit­i­zen-owned com­pa­nies en­joy pref­er­ence dur­ing ten­der eval­u­a­tions. Cer­tain man­u­fac­tur­ing ac­tiv­i­ties are also re­stricted to ci­ti­zens and cit­i­zen-owned com­pa­nies. The government has set up the Cit­i­zen En­tre­pre­neur­ial Devel­op­ment Agency to pro­vide fledg­ling cit­i­zen-based com­pa­nies with tech­ni­cal, fi­nan­cial and man­age­rial as­sis­tance.

Other coun­tries tend to ap­ply this pol­icy for very spe­cific and strate­gic sec­tors. This is the case in the DRC, where land con­ces­sions for agri­cul­ture are only granted to Con­golese in­di­vid­u­als or com­pa­nies hav­ing the state or Con­golese in­di­vid­u­als or com­pa­nies as share­hold­ers.

The more so­phis­ti­cated poli­cies ap­pear to be Namibia’s new eq­ui­table eco­nomic em­pow­er­ment frame­work, which aims to pro­vide a clear over­ar­ch­ing pol­icy frame­work for pro­mot­ing trans­for­ma­tion in busi­ness through the pil­lars of own­er­ship, man­age­ment con­trol and em­ploy­ment eq­uity, hu­man re­sources and skills devel­op­ment, en­trepreneur­ship devel­op­ment and com­mu­nity in­vest­ment; and of course SA’s BBBEE.

We will con­tinue to keep an eye on the evo­lu­tion of the eco­nomic em­pow­er­ment pol­icy in Tan­za­nia and Zam­bia’s cit­i­zen eco­nomic em­pow­er­ment, which seem to be in­flu­enced by the South African sys­tem.

Th­ese trends are a good sign and show that states have learnt quickly from the past, seek­ing to amend poli­cies to take cog­ni­sance of pre­vi­ous suc­cesses and fail­ures else­where on the con­ti­nent. In any case, the rise of African states will go hand in hand with re-ap­pro­pri­a­tion of their economies.

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