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