To my mind

Finweek English Edition - - Hospital Pass To My Mind Companies In This Issue -

IT CAME AS NO SUR­PRISE last week when Pres­i­dent Kgalema Mot­lanthe reaf­firmed Gov­ern­ment’s com­mit­ment to af­fir­ma­tive action. His pro­nounce­ment came in re­sponse to con­cerns voiced by Pi­eter Mul­der, leader of the Free­dom Front Plus, about the coun­ter­pro­duc­tive na­ture of af­fir­ma­tive action, which stands in the way of many able young white South Africans’ de­sire to con­trib­ute to this coun­try’s de­vel­op­ment.

It was equally un­sur­pris­ing that in jus­ti­fy­ing Gov­ern­ment’s po­si­tion Mot­lanthe turned to the kinds of statis­tics pro­vided in the labour force sur­vey.

In 2007, 30% of black South Africans were un­em­ployed, as op­posed to just 4% of whites. Re­search data re­leased in Septem­ber last year, showed 5,5% of black grad­u­ates couldn’t find work while the fig­ures for other pop­u­la­tion groups were neg­li­gi­ble.

As ad­di­tional ev­i­dence for the ne­ces­sity of af­fir­ma­tive action, Mot­lanthe re­ferred to the break­down of man­age­ment po­si­tions in the pri­vate sec­tor ac­cord­ing to pop­u­la­tion groups: namely, 54% white, 29% black, 9% In­dian and 7% coloured.

How­ever, he also said those “strange things” to which Mul­der re­ferred and which oc­cur in the course of ad­dress­ing and re­dress­ing the in­jus­tices of the past, “should be dealt with con­cretely”.

That kind of lev­el­headed ap­proach is now also needed in deal­ing with black eco­nomic empowerment as­sets, which the global eco­nomic cri­sis has sub­jected to con­sid­er­able risk.

Due to a lack of black cap­i­tal, empowerment trans­ac­tions have thus far been al­most ex­clu­sively debt fi­nanced. More­over, such trans­ac­tions have been con­cluded on the as­sump­tion share prices would keep ris­ing.

In SA’s min­ing in­dus­try empowerment deals were closed, which gave black in­vestors ac­cess to cash flow or div­i­dends that would have en­abled them to fi­nance the debt in­curred in at­tain­ing a 26% share in min­ing com­pa­nies.

How­ever, the re­cent slump in min­ing share prices, re­sources prices and min­ing earn­ings has led to a very dif­fer­ent re­al­ity. In some re­spects it re­minds you of the sub-prime cri­sis that orig­i­nated in the United States, where eco­nomic ac­tiv­ity was widely based on the as­sump­tion the up­ward trend in house prices would con­tinue in­def­i­nitely.

At the re­cent Min­ing Ind­aba in Cape Town voices were raised in favour of pre­vent­ing empowerment bank­ruptcy and safe­guard­ing the long-term vi­a­bil­ity of such share­hold­ings. The sug­ges­tion was made that high-risk empowerment en­ti­ties de­pen­dent on the fi­nan­cial sup­port of their min­ing part­ners should be tossed a cor­po­rate lifeboat. Such in­ter­ven­tion would be needed to en­sure that the­o­ret­i­cally black-owned min­ing com­pa­nies still meet their empowerment re­quire­ments.

Yet if black eco­nomic empowerment were to be car­ried through to its log­i­cal con­clu­sion then its ben­e­fi­cia­ries, who have the­o­ret­i­cally been em­pow­ered by the ar­ti­fi­cial trans­fer of wealth and own­er­ship, should also ac­cept the full risks borne by com­pa­nies in the face of un­pre­dictable mar­ket forces and eco­nomic cy­cles.

The time might now be ripe to re­con­sider the ex­tent to which the ben­e­fi­cia­ries of empowerment should con­tinue to re­ceive pref­er­en­tial treat­ment. This doesn’t mean af­fir­ma­tive action or empowerment should be abol­ished. But it may be high time, in light of cur­rent eco­nomic re­al­i­ties, to in­tro­duce a mea­sure of nor­mal­ity into a sys­tem geared to­wards re­dress­ing the ab­nor­mal­i­ties of the past.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.