How real BEE can help ordinary folk

Black economic empowerment, one of the most wasteful, costly and ineffective redistribution strategies devised in any post-colonial society since the end of

World War 2, should be scrapped.

With about R1-trillion transferred in the form of BEE deals since the early 1990s, the strategy has benefited only a handful of politically connected black political capitalists, a select group of whiteowned big businesses and an assortment of whiteowned transaction brokers, financiers and law firms.

It has created and empowered a select group of political fixers, frontmen and women, and go-betweens posing as genuine entrepreneurs, who get paid to link political capitalists and white-owned big businesses to government contracts or commodity licences.

These BEE beneficiaries have injected little value into the economy and have not created new businesses or new markets. No country can afford this wastage.

BEE has taken mostly two forms: white companies giving slices of their businesses to blacks, and black businesses getting preferential state contracts. The BEE strategy since 1994 has been focused on fostering an elite group of black tycoons.

Sandile Zungu, a beneficiary of BEE, accurately described the objective of BEE when he said: “We want to create our own GT Ferreiras and Christo Wieses. You are not going to create those through broad-based ownership.”

Successful empowerment strategies elsewhere focused on supporting existing entrepreneurs, creating new industries and promoting export growth to create new markets.

Given the scarce resources in developing countries embarking on empowerment programmes, supporting new entrepreneurs already with business experience reduces the risk of wastage.

Creating new industries provides growth that spurs more broad-based development. Focusing on export growth compels businesses to seek new markets and produce world-class competitive products that can compete in these new markets.

BEE in SA has focused wrongly on giving slices of existing, traditional white-owned businesses to selected blacks and does not create new industries. This does not grow the economy or create new

BEE in SA has focused wrongly on giving slices of existing traditional white-owned businesses to selected blacks

industries, neither does it create new markets.

In the South African context it would be catalytic to the economy if BEE had focused on the 5-million real black entrepreneurswho have been running their own micro, small and medium-sized businesses since apartheid, whether they were running taverns, spaza shops, butcheries or taxi companies.

In the new SA, this group, not connected to the ANC, has been excluded from influencing economic policy-making, BEE, and state finance and training supposedly now available to blacks.

These existing black entrepreneurs, with business experience and skills, should have been given access to finance, helped to transition to manufacture and produce new products and services the country does not have and that the world needs.

By focusing on empowering political capitalists, BEE has killed legitimate black and white small and medium-sized businesses, and discouraged existing and potential black entrepreneurship.

A new, revised empowerment policy must be centred on at least five new pillars. It must be based on employee economic empowerment (EEE), whereby employees are empowered through company shareholding and profit-sharing.

Companies must provide employees with housing, funding for education and health insurance. They must provide industrially relevant vocational and technical training to employees and their families. Established big businesses in the same sectors could pool together to establish vocational and technical training colleges open to non-employees.

Companies could give communities close to mines and factories shares in those companies. Such communities could form social enterprises in which each community member has a share. These community social enterprises will then become the BEE shareholders in these white-owned companies.

Companies must compensate former employees, or their surviving families, for outstanding employee contributions not given during apartheid. Employees who lost out on benefits during apartheid should get priority in shareholding as BEE beneficiaries.

Private and public companies must bring genuine black, small and medium-sized businesses into their supply chains to provide goods and services.