It’s time to open up value chains to black en­trepreneurs

The Star Early Edition - - OPINION & ANALYSIS - Xolani Qubeka is the chief ex­ec­u­tive of Small Busi­ness De­vel­op­ment In­sti­tute. His e-mail ad­dress: xolani.qubeka@sbdi.org.za Xolani Qubeka

BUSI­NESS Unity South Africa (Busa) re­cently un­veiled its po­si­tion doc­u­ment un­der the head­ing “Busi­ness ap­proach to Black Eco­nomic Trans­for­ma­tion for In­clu­sive Growth”. But first thing first. I wish to con­grat­u­late Jabu Mabuza, an ex­cep­tional in­di­vid­ual whom I de­fine as a fam­ily friend whose friend­ship I cher­ish, for the hon­orary doc­tor­ate be­stowed on him by the Univer­sity of Wit­wa­ter­srand last week, “in recog­ni­tion of his achieve­ments in en­trepreneur­ship and con­tri­bu­tion to­wards the growth of the South African econ­omy”.

In shar­ing his ac­cep­tance speech with me, Jabu also sent me a few photos of him and a few friends taken at the cer­e­mony, and these are in­di­vid­u­als that them­selves contributed im­mensely to eco­nomic trans­for­ma­tion dur­ing apartheid un­der the aus­pices of var­i­ous for­ma­tions as af­fil­i­ates of Fab­cos.

Of course it was Mabuza who re­cruited me back in 1988 when I was pres­i­dent of the Afro Hair­dress­ing & Beauty As­so­ci­a­tion of South Africa (Ah­basa), to af­fil­i­ate Ah­basa with Fab­cos, an in­vi­ta­tion I do not re­gret, and for Fab­cos then was “the Har­vard of Hard knocks”. Many of us, in­clud­ing Eskom act­ing group chief ex­ec­u­tive Johnny Dladla, ploughed our en­tre­pre­neur­ial skills there.

Through Fab­cos, we were able to achieve a lot of what has eluded many since the ad­vent of democ­racy. One of the ma­jor achieve­ments then was the cre­ation of the sec­ond black bank af­ter African Bank, Fu­ture Bank, a joint ven­ture be­tween Fab­cos and Wes­bank, un­der­writ­ten by what was then the R300 mil­lion South African Black Taxi As­so­ci­a­tion (Sabta) Book. Sabta was led by the late en­trepreneur of note, and Mabuza’s men­tor, James Ng­coya, who was also the pres­i­dent of Fab­cos.

Be­sides Fu­ture Bank, Fab­cos also owned an in­sur­ance com­pany, Af­sure, a chain of ser­vice sta­tions in part­ner­ship with To­tal South Africa at the back of the taxi in­dus­try, a Sabta branded minibus taxi in part­ner­ship with Nis­san, the list is long.

I re­call what I deemed to be an or­di­nary day when Mabuza in­vited me to his then home in Waterk­loof. He took out what was his spe­cial bot­tle of whisky that he had put aside for the day his bank bal­ance reached a mile­stone set for him­self of a R1 mil­lion. I can­not re­call the brand name but I re­mem­ber shar­ing that spe­cial mo­ment with him.

So­cial part­ners

A few weeks ago I com­mented on, among oth­ers, rad­i­cal eco­nomic trans­for­ma­tion (RET) and the role all Ned­lac so­cial part­ners could play in de­bat­ing this no­tion.

I said “Jabu Mabuza must use his pow­er­ful of­fice as pres­i­dent of both Busa and BLSA to lead his con­stituency in de­bat­ing RET as a pol­icy im­per­a­tive, in­stead of sec­ond guess­ing it”.

I am pleased that, of course, Busa had al­ready em­barked on the process of de­vel­op­ing its po­si­tion on eco­nomic trans­for­ma­tion, and the po­si­tion pa­per al­luded to ear­lier is a re­sult of that process. It is there­fore proper to com­mend Busa for the ef­fort, and for shar­ing this con­cept doc­u­ment pub­licly, and to so­licit com­ments and de­bate.

The doc­u­ment is elab­o­rate, but I will ex­tol within it what it terms four el­e­ments which are tab­u­lated be­low as fol­lows:

En­able trans­for­ma­tion cul­ture in busi­ness with sys­tem­atic ini­tia­tives and de­vel­op­ing a re­search base that demon­strates the eco­nomic value of di­ver­sity.

En­ter­prise de­vel­op­ment sup­port, in­clud­ing how to scale and sup­port the Black In­dus­tri­al­ist Pro­gramme, in­dus­try de­vel­op­ment pro­grammes with sec­tors and lever­ag­ing the SME Fund.

Skills de­vel­op­ment for cur­rent and fu­ture needs, in­clud­ing lever­ag­ing the Ikusasa Stu­dents Fi­nan­cial Aid pro­gramme, and im­ple­ment­ing a wide­spread men­tor­ship pro­gramme.

Em­ploy­ment pro­mo­tion, par­tic­u­larly of youth, in­clud­ing the YES ini­tia­tive and other sys­tem­atic con­trib­u­tors to sus­tain­able em­ploy­ment.

The con­text of the doc­u­ment is to be wel­comed, and I wish to share a few ob­ser­va­tions.

First, the doc­u­ment rightly tack­les the is­sue of cor­rup­tion, but seems to take aim at the pub­lic sec­tor. It is silent in deal­ing with col­lu­sive and mo­nop­o­lis­tic be­hav­iour of large com­pa­nies.

If it is se­ri­ous about in­clu­sive growth it needs to demon­strate a bal­anced ap­proach to deal with cor­rup­tion.

Sec­ondly, it has in­tro­duced new terms and seems to be shy­ing away from ac­cept­able terms that form part of govern­ment pol­icy, such as “Black Eco­nomic Trans­for­ma­tion” in­stead of Black Eco­nomic Em­pow­er­ment, and “Racial Eco­nomic Trans­for­ma­tion” in­stead of Rad­i­cal Eco­nomic Trans­for­ma­tion.

This is a wor­ry­ing as­pect of this doc­u­ment and the think­ing be­hind it. It would be wor­ri­some if big busi­ness is bent on tak­ing a neg­a­tive stance of prop­a­gat­ing against govern­ment pol­icy on this par­tic­u­lar mat­ter, and there­fore tak­ing an emo­tional po­si­tion op­posed to the rul­ing party’s ter­mi­nol­ogy.

It talks to what I ear­lier termed “sec­ond guess­ing the term Rad­i­cal Eco­nomic Trans­for­ma­tion as a nar­ra­tive”. Not­with­stand­ing the cur­rent po­lit­i­cal pos­tur­ing from all an­gles, the no­tion of rad­i­cal eco­nomic trans­for­ma­tion was adopted dur­ing the Man­gaung con­fer­ence and there­fore forms part of govern­ment pol­icy.

The role of the pri­vate sec­tor is there­fore to de­bate and build con­sen­sus around it and to har­monise all strate­gies and ac­tions that seek to find in­clu­sive so­lu­tions from an eco­nomic and busi­ness point of view.

As busi­ness we can­not af­ford to play pol­i­tics. But we can strengthen di­a­logue so as to not con­fuse the masses out there, these are des­per­ate times that re­quire strong and bold lead­er­ship.

Busa’s as­ser­tion is that the word “racial” in its con­text of eco­nomic trans­for­ma­tion seeks to de­ra­cialise the econ­omy. Granted! But it should desist from cherry-pick­ing and go on with it! We can­not af­ford petty no­tions that be­come self-serv­ing pos­tur­ing with the po­ten­tial to har­den at­ti­tudes on all sides. There is dan­ger of turn­ing trans­for­ma­tion into a racial is­sue, which it is not. It is about eco­nomic equi­lib­rium.

We all agree that the apartheid eco­nomic ar­chi­tec­ture has to be dis­man­tled, and re­placed by a more in­clu­sive, dy­namic econ­omy with the po­ten­tial to in­sti­gate ac­cel­er­ated eco­nomic de­vel­op­ment that be­fits all.

The is­sue of own­er­ship re­lat­ing to pur­chase of white owned as­sets by black in­vestors as cen­tral strat­egy of BEE re­mains con­tentious, and comes at a much greater cost for black en­trepreneurs.

Di­vested

We have seen how most of these trans­ac­tions re­sulted in black in­vestors hav­ing di­vested early from some of these trans­ac­tions, some­times at a greater loss, and with orig­i­nal own­ers re­tak­ing con­trol and re­vert­ing to his­tor­i­cal own­er­ship pat­terns.

Whilst it is im­por­tant to de­ra­cialise the econ­omy, the more prac­ti­cal and ef­fec­tive strat­egy for me will be to cre­ate and sup­port emerg­ing busi­nesses that are 100 per­cent black owned and con­trolled, and for them to be in­te­grated into the ma­jor value chains of large, es­tab­lished busi­nesses.

I there­fore con­cur with Busa’s po­si­tion on own­er­ship, and hope that busi­ness will desist from any ac­tiv­i­ties that seem to con­tinue with box tick­ing and fronting ex­er­cises as it seeks to ac­cel­er­ate en­ter­prise and sup­plier de­vel­op­ment.

In agree­ing, how­ever, it does not mean con­tent­ment with the sta­tus quo, it means ef­forts to in­crease black own­er­ship of the ma­jor sec­tors of the econ­omy must be in­ten­si­fied. How­ever, we need new innovative and cre­ative ways of achiev­ing it, rather than throt­tling as­pi­rant black in­vestors with huge debts that would take longer than for­ever to ser­vice or yield div­i­dends.

The ar­chi­tects of the orig­i­nal BBBEE frame­work, in my view, had a jaun­diced view of eco­nomic trans­for­ma­tion, and would have known bet­ter of the un­in­tended con­se­quences of plac­ing the type of bur­den­some com­pli­ance mech­a­nisms, know­ing that very few black com­pa­nies could meet those thresh­olds.

In fact I am left with the view that points to a col­lu­sive de­lib­er­ate strat­egy to keep the eco­nomic own­er­ship pat­terns in­tact, per­haps I am wrong. Twenty-three years later we are still grap­pling with the same is­sues, with most of those lim­ited gains be­ing hugely re­versed.

I there­fore wel­come Busa’s as­ser­tion on the need to ac­cel­er­ate en­ter­prise and sup­plier de­vel­op­ment, and for es­tab­lished big busi­ness to play a much more piv­otal role in open­ing up their ma­jor value chains to 100 per­cent black owned com­pa­nies.

To this end, we need to see in­creased ac­tiv­ity aimed at plac­ing enor­mous re­sources to­wards sup­port­ing and scal­ing up and bridg­ing the ca­pa­bil­ity gap of SMMEs by large busi­nesses, and dis­man­tle con­trol of ma­jor sup­ply chains by “old boys club” sup­pli­ers.

I hope that busi­ness will desist from any ac­tiv­i­ties that seem to con­tinue with box tick­ing and fronting ex­er­cises.

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