BEE's glass slipper
As we head into a new decade I get the sense that it has finally dawned on enough people that new thinking is needed about transformation. Are we, I wonder, seeing the sunset of the BEE big deal?
People are beginning to ask: “What’s next?” There is talk of “a new conversation” about BEE. The Zuma administration supports BEE, and the legislation is in place, but I don’t get the feeling there is as much enthusiasm for it as there was under former president Thabo Mbeki.
Government’s broad-based BEE strategy, released in 2003, was supposed to chart a new course for BEE. It was supposed to be the turning point.
The resulting Broad-Based BEE Act and Codes of Good Practice were meant to reduce the emphasis on BEE deals and bring about fundamental change in businesses. BEE was to be broadened, not just by spreading ownership to many but also by asking businesses to do a range of things besides transferring equity, including creating businesses and giving employees skills.
It hasn’t worked out that way. Somehow BEE has remained about the deal - transfer of equity and high-profile positions and windfalls for the politically connected. Although not necessarily corrupt, BEE has at times been a mask for corruption, most notoriously in the arms deal.
Vested interests will want BEE to continue as it is. But they have become the butt of satire and a catalyst for disgruntlement. Popular culture gives us a view of how ordinary people view the way in which empowerment is panning out. A particular type of pointy shoe is called a “BEE shoe”. One look at the silk tie I bought from the Polo shop (on sale) was enough for former gym-goer Loyiso Bala to recognise a “BEE tie”.
Plays and sitcoms send up BEE “players” as whisky-drinking, Armani-wearing, behind-the-scenes deal-makers. Most of all, being a BEE beneficiary is seen as the equivalent to winning the Lotto. The idea that business success goes hand in hand with hard work or climbing the corporate ladder is absent.
BEE has contributed to changing the colour of the economy, and there is now a nucleus of wealthy black individuals who form a new centre of power.
Yet we need to cast our minds back to when it all started to see how it could have been different. When 1994 and the prospect of an ANC victory rolled around, an intriguing suggestion was put forward by the editor of Finance Week (now Finweek) magazine, Alan Greenblo, on behalf of an unnamed businessman who later turned out to be Standard Bank chief executive Jacko Maree.
The idea was of a magnanimous gesture: all South African companies listed on the JSE and above a certain size would issue new ordinary shares equivalent to 5% of their total ordinary shares in issue. These would be put into a trust for viable projects, aiding wealth redistribution and stimulating economic growth.
The proposal didn’t galvanise either government or business, although, according to Greenblo, it did lead to the founding of the Business Trust in 1999 “to help to create jobs and build capacity while enhancing trust and building cooperative relationships between business and government”.
The crucial difference is size. The Business Trust has received about R1,2-billion from various businesses since 1999.
Greenblo calculated that the rough value of the money that could be raised from listed companies back in April 1994 would have been about R24-billion. Using Greenblo’s method now gives a figure of R183-billion. The JSE market capitalisation (the number of shares multiplied by share prices) has risen to more than R5-trillion from about R727-billion in 1994.
I mention this idea not to bring it back from the grave, but simply to try to get us all to think in different ways about change. What could have been done with R183-billion, which, unlike the Public Investment Corporation’s investment pot, would be free of the burden of having to be preserved for state pensions?
And I wonder what would have happened if it had been possible in 1994 to focus on job creation, on sincere efforts to reinvigorate the management of big companies, a dual-logic economy, with big businesses linking with a vast number of new small businesses, along with a purposeful and massive drive to improve education? Instead we had BEE deals on the one hand and on the other the shifting of the head offices of our biggest companies to London, with a growing resentment of the enrichment that BEE deals seemed to represent.
One definition of madness, the saying goes, is to do the same thing over and over and expect different results. It’s time to think more deeply about a new departure.
The ugly alternative
The ultimate supposed alternative, which BEE was supposedly designed to fend off, is nationalisation.
In theory the government can arrange things in the companies it owns as it sees fit, according to the political imperatives of the ruling party and the needs of the state. In practice this might also mean funnelling some cash to party coffers, but that is another issue. The idea is that if the government dominated the economy, it could change the economy.
On racial transformation government and the parastatals cannot really be faulted; but on efficiency and boosting the economy they often are at fault. The punishing effect of Eskom’s intended electricity price hike is on all our minds right now. Yet not so long ago Eskom was held as a global example of how a state-owned entity could be supremely efficient.
Nationalisation can be justified in specific instances. It has been used to foster young industries or bail out troubled but important companies. But using it for transformation misses the point of BEE, which is all about the private sector, not about government. Nationalisation, though, is a stale idea, when we need to start on a new and inventive path.
Reg Rumney is the director of the Centre for Economics Journalism in Africa