Plac­ing sub­stan­tial re­sources to­wards fu­ture growth

The Star Early Edition - - OPINION & ANALYSIS - Xolani Qubeka

IN ONE OF my ear­lier ar­ti­cles I made a point that “it takes a lot of money to make lots of money”. The is­sue of cap­i­tal has taken un­prece­dented promi­nence in the re­cent past with ar­gu­ments border­ing around white mo­nop­oly cap­i­tal or mo­nop­oly cap­i­tal.

For­mer Pres­i­dent Thabo Mbeki also brought up the sub­ject dur­ing his re­cent Power FM live in­ter­view, bring­ing an­other slant on the nar­ra­tive with a very aca­demic ar­gu­ment us­ing some tech­ni­cal jar­gon.

How­ever, the vest­ing ques­tion re­mains, how do we en­sure that sub­stan­tial eq­uity of the econ­omy vests in the hands of the ma­jor­ity of South Africa’s indige­nous cit­i­zens?

For­mer pres­i­dent Man­dela, dur­ing his ad­dress at the ANC Na­tional Con­fer­ence in 1997 in Mafikeng, North West, said the fol­low­ing: “The wider and crit­i­cal strug­gle of our era is to se­cure an ac­cep­tance and ac­tu­al­i­sa­tion of the propo­si­tion that while cap­i­tal might be owned pri­vately, there must be an in­sti­tu­tion­alised sys­tem of so­cial ac­count­abil­ity for the own­ers of cap­i­tal.

“In this con­text, it may very well be that the suc­cess of our strat­egy for black eco­nomic em­pow­er­ment will ad­dress not only the ob­jec­tive of the cre­ation of a non-racial South Africa. It might also be rel­e­vant to the cre­ation of the sys­tem ac­cord­ing to which the own­ers of cap­i­tal will, will­ingly, un­der­stand and ac­cept the idea that busi­ness suc­cess can no longer be mea­sured solely by ref­er­ence to profit.

“Ac­cord­ing to this the­sis, to which we must sub­scribe, suc­cess must also be mea­sured with ref­er­ence to a sys­tem of so­cial ac­count­abil­ity for cap­i­tal, which re­flects its im­pact both on hu­man ex­is­tence and the qual­ity of that ex­is­tence”.

Let’s use the phrase “own­ers of cap­i­tal” for now so as not to sound op­por­tunis­tic or slo­ga­neer­ing, af­ter all Tata’s ra­tio­nale seems to find res­o­nance across all sides of cur­rent ar­gu­ments.

uTatu’Man­dela had an ex­pec­ta­tion that the own­ers of cap­i­tal, while profit ori­en­tated, such ori­en­ta­tion would not be solely that. That in recog­ni­tion of the huge dis­par­i­ties of the past on the one hand, and the sub­stan­tial his­tor­i­cal wealth on the other, there would be recog­ni­tion of the re­spon­si­bil­ity on the part of the own­ers of cap­i­tal that it is not sus­tain­able to re­tain the his­tor­i­cal lev­els of dis­par­i­ties with­out steer­ing a rev­o­lu­tion.

Th­ese lev­els would, if not bro­ken down, di­min­ish the prospects for suc­cess of the BEE strat­egy that Rolih­lahla en­vis­aged.

The fact is that the eco­nomic sys­tem in its cur­rent form is in­im­i­cal to the par­tic­i­pa­tion of new en­trants at all lev­els, be­cause of huge bar­ri­ers to en­try. The key is to open up key mar­ket seg­ments and value chains and to en­able par­tic­i­pa­tion by black peo­ple, not just as con­sumers, but as part of the en­tire eco­nomic sys­tem as en­trepreneurs.

Saki Ma­co­zoma was quoted in the Fi­nan­cial Mail in De­cem­ber 2000 as say­ing “Black peo­ple must use the re­source they are be­gin­ning to com­mand to pro­mote pro­grammes aimed at tak­ing the ma­jor­ity out of poverty and on to a de­vel­op­men­tal tra­jec­tory. If poverty and dis­ease dec­i­mate the ma­jor­ity SA will con­tinue as an en­clave econ­omy, its abil­ity to at­tract in­vest­ment will di­min­ish be­cause SA will have no skilled labour or con­sumers”.

This is a ques­tion ma­jor BEE ben­e­fi­cia­ries in par­tic­u­lar should be ad­dress­ing. Are we in­vest­ing or do­ing enough to em­u­late what Naspers, San­lam and oth­ers did in de­vel­op­ing the Afrikaner eco­nomic hege­mony? How do we use our newly-gained re­sources to bring oth­ers in to the sys­tem?

It goes much fur­ther, and talks to those black peo­ple in state-ownened com­pa­nies, in the 3 tiers of the gov­ern­ment, and who com­mand re­sources, and in­flu­ence those poli­cies and key de­ci­sions with the ma­jor im­pact on pro­cure­ment of goods and ser­vices. But it also talks to those black peo­ple who sit in boards and ex­ec­u­tive man­age­ment of large com­pa­nies in the pri­vate sec­tor.

The ex­pe­ri­ences of many young and old em­ploy­ees of some of the com­pa­nies that are black con­trolled, with black chair­per­sons and chief ex­ec­u­tives is not pleas­ant. The ex­pe­ri­ences of black pro­fes­sional com­pa­nies such as lawyers and ac­count­ing firms is not pleas­ant, with th­ese com­pa­nies still procur­ing ser­vices from white au­dit and law firms.

Or­gan­ised black busi­ness and en­trepreneurs alike are not win­ning be­cause of lack of try­ing. Many at­tempts have been made in pur­suit of con­tribut­ing to­wards the de­sign of a pol­icy en­vi­ron­ment that en­sures the cre­ation of an in­clu­sive eco­nomic sys­tem. The week­end of the Oc­to­ber 31 to Novem­ber 2, 1993, has sig­nif­i­cance in the jour­ney to­wards de­ra­cial­is­ing South Africa’s econ­omy.

Co­in­ci­den­tally, a group off about 230 in­di­vid­u­als rep­re­sent­ing or­gan­ised black busi­ness that in­cluded Naf­coc, Fab­cos, the BMF con­verged in Mopane, Kruger Na­tional Park, where they held an ind­aba with a 60-strong ANC con­tin­gent led by the late stal­wart Wal­ter Sisulu, Nkobi Hold­ings, Saki Ma­co­zoma, Tito Mboweni, Trevor Manuel, Popo Molefe, Andile Ng­caba, to quote but a few.

On the other side of the coun­try­side, 30 in­di­vid­u­als that in­cluded Ash­ley Mabo­goane, Seth Palatse, Jabu Mabuza, the late Lot Ndlovu, con­verged at the lux­u­ri­ous Phinda Lodge where they en­gaged with for­mer pres­i­dent Thabo Mbeki, and I am un­aware of any other ANC rep­re­sen­ta­tive.

I was part of the Mopane dé­tente, in the com­pany of es­teemed lead­ers and en­trepreneurs that were in­spired by Wil­lie Ramoshaba, and in­cluded David Mosha­palo, Gaby and Nana Mago­mola, Cawe Mahlathi, Dupree Vi­lakazi, Les­lie Mampe, Danisa Baloyi, late Joas Mo­gale, the list is long.

Th­ese two en­deav­ours were aimed at charting a com­mon agenda be­tween black busi­ness and the ANC which at the time was ready­ing it­self to gov­ern.

The out­come of Mopane was the his­toric Mopane Me­moran­dum of Un­der­stand­ing, which was even­tu­ally signed at Shell House. Its essence was to form a so­cial com­pact that would en­gen­der a com­mon agenda that would en­able the cre­ation of a new de­ra­cialised eco­nomic or­der.

One of the ma­jor out­comes, among other key ones, of the me­moran­dum was the cre­ation of what was then termed Na­tional En­abling Fund (NEF), an en­tity that would be at the cen­tre of mo­bil­is­ing much needed fund­ing to fi­nance black owned com­pa­nies in the process of de­ra­cial­is­ing the econ­omy.

The ex­pec­ta­tion was that the NEF was go­ing to be sub­stan­tially re­sourced through funds gal­vanised through the pub­lic purse ini­tially, but that more funds would be raised in the pri­vate sec­tor, lo­cally and in­ter­na­tion­ally, but the gov­ern­ment was to be the key fa­ther-in-law. To­day that fund­ing agency is the Na­tional Em­pow­er­ment Fund, which I must say has been the step child that at times al­most looked like go­ing through tough love.


In 1998, in­spired by the res­o­lu­tion of the BMF, the then Black Busi­ness Coun­cil (BBC) es­tab­lished what is his­tor­i­cally known as the Black Eco­nomic Em­pow­er­ment Com­mis­sion which was chaired by now Deputy Pres­i­dent Cyril Ramaphosa. One of the ma­jor rec­om­men­da­tions was the cre­ation of a Na­tional BEE In­te­grated Strat­egy, with var­i­ous strate­gic ob­jec­tives some of which are:

A na­tional Pro­cure­ment Agency lo­cated within the Depart­ment of Trade and In­dus­try (dti) aimed at trans­form­ing the pub­lic and pri­vate sec­tor pro­cure­ment en­vi­ron­ment. A Na­tional Black Eco­nomic Em­pow­er­ment Act; an en­abling leg­is­la­tion aimed at cre­at­ing uni­for­mity in the pol­icy and es­tab­lish­ing the nec­es­sary in­sti­tu­tional sup­port and in­stru­ments with which to drive the BEE strat­egy, etc.

An em­pow­er­ment frame­work for the pub­lic sec­tor re­struc­tur­ing that out­lines em­pow­er­ment prin­ci­ples to be fol­lowed.

Rec­om­men­da­tions on the stream­lin­ing and co-or­di­na­tion of pub­lic sec­tor fund­ing ini­tia­tives through a Na­tional Em­pow­er­ment Fund­ing Agency.

You will note that con­sis­tently the role of an NEF type in­sti­tu­tion was placed at the epi­cen­tre of de­liv­er­ing what to­day is termed rad­i­cal eco­nomic trans­for­ma­tion. Fund­ing re­mains fun­da­men­tal to the de­ra­cial­i­sa­tion of the econ­omy and it can­not be down­played.

The ele­phant in the room, how­ever, is ac­cess to sub­stan­tial cap­i­tal by black en­trepreneurs and en­ter­prises alike so that they are able to cre­ate sus­tain­able busi­nesses with depth, and at­tract com­pe­tent peo­ple that are able to build the ca­pa­bil­ity nec­es­sary to build the de­sired core com­pe­ten­cies.

Of course, the gov­ern­ment is be­gin­ning to re­spond more de­ci­sively with a marked de­par­ture from the past, but much more is needed if we are to make a ma­jor im­pact.

One ma­jor in­ter­ven­tion by the dti is the en­act­ment of the Black In­dus­tri­al­ist Pol­icy that re­sulted in the cre­ation of the Black In­dus­tri­al­ist (BI) Fund, which has be­gun to gain trac­tion. The an­nounce­ment by Trade and In­dus­try Min­is­ter Dr Rob Davies is the col­lab­o­ra­tion with FNB in ex­pand­ing the BI fund­ing which is a wel­come de­vel­op­ment, and should be broad­ened across the pri­vate sec­tor.

It is also note­wor­thy that the ef­forts of the depart­ment of eco­nomic de­vel­op­ment (EDD) in open­ing up ma­jor value chains of large com­pa­nies are be­gin­ning to make an im­pact on the de­vel­op­ment of sus­tain­able mar­kets for SMMEs.

EDD has been con­sis­tent in en­sur­ing that for­eign di­rect in­vest­ment does not only vest in share trans­ac­tions, but that th­ese in­vestors should com­mit to de­vel­op­ing and sup­port­ing black com­pa­nies to be­come ma­jor sup­pli­ers of th­ese lo­cal com­pa­nies where in­vest­ment is made.

An­other ma­jor de­vel­op­ment is the en­act­ment of the Pref­er­en­tial Pro­cure­ment Pol­icy Frame­work Act (PPPFA)reg­u­la­tion 2017 that in­tro­duces set asides for SMMEs.

Of course this is a mod­est start by the Na­tional Trea­sury (and thanks to fore­sight by for­mer chief pro­cure­ment of­fi­cer Ken­neth Brown), and the to­tal re­peal of the PPPFA and its re­place­ment by the new Pub­lic Pro­cure­ment Act (PPA) would go a long way in ush­er­ing a new more em­pow­er­ing piece of leg­is­la­tion. In this re­gard, the Depart­ment of Small Busi­ness De­vel­op­ment (DSBD) played a piv­otal role to en­sure the 30 per­cent set aside is in­te­grated in the process, while the PPA is be­ing con­ceived.

The gov­ern­ment must use the set aside pro­gramme to drive lo­cal eco­nomic de­vel­op­ment (LED) with SMMEs as the key driver, with the pri­mary pur­pose of plac­ing SMMEs at the epi­cen­tre of LED and to po­si­tion them to ac­cess sig­nif­i­cant op­por­tu­ni­ties at lo­cal level and to re­spond to the re­spec­tive In­te­grated De­vel­op­ment Plans (IDPs).

The vex­ing ques­tion is how do we cre­ate re­gional value chains as part of eco­nomic de­vel­op­ment and lo­cal job cre­ation us­ing en­ter­prise and sup­plier de­vel­op­ment?

Through Salga lo­cal au­thor­i­ties should iden­tify those key things nec­es­sary to drive de­vel­op­ment that sup­ports and caters for the needs of small en­ter­prises at lo­cal level, in­clud­ing de­vel­op­ment of poli­cies and by-laws that pro­tect cer­tain as­pects of trade by ring-fenc­ing spec­i­fied prod­ucts and ser­vices for lo­cal en­ter­prises. The 30 per­cent set-aside reg­u­la­tion pro­vides an ideal in­stru­ment to pro­mote SMMEs at lo­cal level.

The DSBD should be at the cen­tre of the de­vel­op­ing in­dus­trial in­fra­struc­ture, through util­is­ing grant and in­cen­tive schemes and in­flu­ence the Trea­sury and the SA Re­serve Bank in in­tro­duc­ing a spe­cial tax­a­tion dis­pen­sa­tion through mon­e­tary and fis­cal stim­u­lus.

We should de­lib­er­ately tar­get the cre­ation and sup­port of at least 100 000 en­ter­prises in spec­i­fied high growth sec­tors and pro­vide them with steroids and long-term con­tracts. We need to in­crease the num­ber of wealthy black peo­ple many folds.


The de­lib­er­ate cre­ation and sup­port for the de­vel­op­ment of wealthy black peo­ple is cen­tral to the ex­pan­sion of the broader buy­ing power nec­es­sary to ex­pand the fis­cus, rev up eco­nomic growth through cre­at­ing real jobs, ex­pand con­sump­tion, and prop up per­sonal sav­ings us­ing in­creased dis­pos­able in­comes.

How­ever, it can­not oc­cur in a vac­uum. It re­quires a new eco­nomic trans­for­ma­tion epoch en­gen­dered more by the pri­vate sec­tor rather than through or­gans of the state only. The pro­cure­ment spend of the pri­vate sec­tor is much larger than that of the pub­lic sec­tor, there is scope and lat­i­tude on the pri­vate sec­tor where there is a much larger pool of older en­trepreneurs whose mar­ket sell-by date is on due date.

Some of th­ese en­ter­prises may be af­fected by non-com­pli­ance to BEE pro­vi­sions and are good can­di­dates for joint ven­tures and ac­qui­si­tions.

There is also scope to en­cour­age joint ven­tures with white-owned com­pa­nies, es­pe­cially Afrikaner-owned ones who would bring a lot of home grown value to such part­ner­ships with a lot of IP and ex­per­tiseIn facilitating ac­cess to sig­nif­i­cant fi­nan­cial re­sources, the gov­ern­ment should re-as­sign the man­dates of DFIs and redesign lend­ing mod­els.

The time is now! Xolani Qubeka is the chief ex­ec­u­tive of Small Busi­ness De­vel­op­ment In­sti­tute. xolani.qubeka@

We should de­lib­er­ately tar­get the cre­ation and sup­port of at least 100 000 en­ter­prises in spec­i­fied high growth sec­tors


For­mer South African pres­i­dent Nel­son Man­dela waves to the au­di­ence with his suc­ces­sor Thabo Mbeki be­fore the start of the 4th an­nual Nel­son Man­dela lec­ture at Wits Univesirty in Johannesburg mon July 29, 2006. Man­dela said that cap­i­tal must have so­cial ac­count­abil­ity.

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