It was not the private sector that broke BEE
A star of corporate SA reflects on lags in transformation as he quits the salaried life to strike out alone
THE outgoing CEO of FirstRand, Sizwe Nxasana, says that if anyone is to blame for the disappointing level of black ownership of the economy it is the government, not the private sector.
President Jacob Zuma accused the private sector of failing to transform when he told parliament that black ownership of JSE-listed companies was only 3%.
Nxasana says that in so far as Zuma is correct — and he does “not necessarily agree” that his 3% figure is a true measure of transformation — this is the consequence of a misguided BEE policy that emphasised equity ownership by a well-connected few rather than broad-based empowerment.
“The country did not pay enough attention to making sure there was more broad-based ownership of the economy. But I don’t think you can blame the private sector for that. I think you can blame, with hindsight, some of the laws, regulations and policies that were put in place.”
The JSE has argued that if trade union investment funds, pension funds such as the Public Investment Corporation, and corporate share ownership schemes are taken into account, there is 23% black ownership of JSE companies.
Nxasana says he doesn’t necessarily agree with this either, but believes there has been more financial transformation of the private sector than is generally recognised.
“There is a need to increase direct black ownership, but I think we are making progress.”
He cites a BEE transaction by FirstRand that created R23-billion in value for 12 500 black staff members and thousands of broad-based beneficiaries of various trusts.
Nxasana, who is one of South Africa’s most highly respected business leaders, recently released an impressive set of results that again underscored how effective his understated but firm leadership of the finance group has been.
At the age of 57, he is leaving well before his due retirement date in 2017, but says this has nothing to do with the punishing schedule that comes with the top job.
“I typically work a 15-hour day, but this is absolutely not why I am getting out.”
He reckons he still has 25 years of “active work” in him and wants to start a few new businesses.
“I’m probably going to be working even harder. I know what it takes to start a new business, I’ve done it a few times before.” One of those times was when Nxasana, a chartered accountant, started the first black-owned au- diting firm in KwaZulu-Natal.
He says he wants to take advantage of the “many opportunities” in South Africa and the rest of Africa.
“We still import a whole lot of things we should be making here, including solutions to a lot of our problems.”
He won’t be financing entrepreneurs so much as “our own operations”, he says, referring to his wife, Dr Judy Dlamini, who runs businesses in real estate, medical supplies and surgical instruments. They’ll be working as a team to exploit the exposure she has in the services and retail sector.
After so many years of having his schedule dictated to him, he wants to “be my own boss”. Apart from that, it’s a response to the desperate need for more black entrepreneurs to build businesses and create jobs.
The reason this hasn’t happened is because for so many years BEE focused on equity ownership and less on enterprise development and encouraging entrepreneurship, he says.
He does not agree with black business legends such as Sam Motsuenyane, Richard Maponya and Herman Mashaba that BEE has actually disincentivised people from starting their own businesses.
“But it has not created enough incentives,” he says.
“As a country we have not spent enough time, effort and resources on driving entrepreneurship. Why do we have people coming into this country every day, from the continent, who have very little, and they start businesses and today dominate certain business sectors starting from spaza shops and going right up?”
He says the government, business and labour must share responsibility for the failure of local entrepreneurs.
“We’ve been talking about developing the small and medium enterprise sector for 20 years, but we haven’t done enough. We could have dealt with the unemployment challenges we have, as well as poverty, to a very large degree if we had sorted this issue out.”
Nxasana believes a lack of trust continues to hamper progress.
“There is still very deep-seated mistrust between business and government both ways. There is still a huge amount of mistrust between business and labour both ways.”
He says he experienced this even as the CEO of Telkom, which he was for eight years.
“You would think I and the company would have had a closer relationship with government because we were state-owned. The answer is we didn’t.”
He recalls how local business leaders, including of state-owned enterprises, were largely ignored by Thabo Mbeki’s government while it gave “business luminaries from around the world” who were members of his international advisory council its undivided attention.
“They would come here and spend at least three days with government, receiving 100% of its attention, talking about our economy and how it could be improved.
“I always used to sit, as the CEO of one of the largest state-owned enterprises in the country, if I cracked an invitation, and think: ‘No one from government has ever come to us, local business leaders, and asked us what we think about the economy and what needs to be done.’ ”
Local business leaders were lucky to get a two-hour meeting three or four times a year “where we exchanged niceties and never discussed real issues”.
Says Nxasana: “That to me was a classic indication of a very bizarre arrangement.”
It has changed “somewhat”, he says, but not enough.
“Simply working on projects with government such as World Cup 2010, the power crisis and water crisis and education crisis is not enough.
“There needs to be an engagement that talks about what kind of relationship as a country that has adopted a mixed economy do we want to have between business and government, and between business and labour.”
There is still very deep-seated mistrust between business and government