By John Sutcliffe
Published: May 2 2006 20:00 | Last updated: May 2 2006 20:00
South Africa’s drive to bring the long excluded majority of its people into
the mainstream of its economic life is paying healthy dividends. It is
pushing the growth rate – nearly 5 per cent in 2005 – on to a higher
trajectory. It has helped the 12-year-old democracy move ahead of India as a
destination for foreign direct investment. It was a factor in the 47 per
cent total return on equities traded on the Johannesburg Stock Exchange last
year.
Broadly defined, the black economic empowerment (BEE) strategy hammered out
between government and business is helping fuel an economic and social
revolution as millions start to enjoy disposable income and upward mobility
for the first time. This is making South Africa an exciting place to do
business and one that holds the promise of long-term stability.
How real is the transformation? Consider this. Just over 20 years ago, South
Africa’s most famous newspaper, the Rand Daily Mail, closed because its
readership was increasingly black and of no interest to advertisers. Today,
its most successful newspaper is the Daily Sun, a three-year-old start-up
targeted at the black working class. Its circulation is 450,000 and rising
and advertisers are clamouring for space. Nearly half a million black adults
moved into the middle income bracket last year, according to the South
African Advertising and Research Foundation. The number of black people in
the upper brackets grew by 30 per cent and the proportion of blacks in the
top income bracket is now 20 per cent, up from close to zero a decade ago.
The rise of black consumers can be seen in surging sales of consumer goods,
financial services, property, cars and tourism. This is strongly tied to
empowerment. Factors driving it include the rapid increase of black people
in white-collar public and private sector jobs and the growth of black-owned
business.
There has been understandable criticism that BEE in its narrowest form – the
incentivisation of business to put a more representative share of ownership
and control in black hands – has in some instances simply served to enrich a
small elite. This was perhaps inevitable as businesses scrambled to find
what they considered to be bankable and “connected” partners as a new era
dawned. Naturally, some of the brightest black brains, who would have had
few other choices other than to embrace the political movement for change
during the apartheid era, later might be attracted into business once the
opportunities arose. The threat of so-called crony capitalism is being
replaced with the promise of building an entrepreneurial culture.
Government’s recently published BEE codes are a step forward. The corporate
sector is also climbing the learning curve.
The private sector likewise has a responsibility to ensure that BEE really
does undo the horrifying distortions left by apartheid so that a just and
prosperous future can rise from its ashes. Empowerment deals such as the
ones announced by De Beers, Merrill Lynch and my own company over the past
year are increasingly the norm. Beneficiaries will own a growing stake in
these companies’ South African subsidiaries. They include employees,
customers, emerging businesses as well as strategic black business partners
who bring real bottom-line value to the table and are rewarded accordingly.
The authorities deserve credit for deliberately avoiding a prescriptive
approach to empowerment. Having set broad objectives, they left it to
industry sectors to work out how to achieve them. Consultations continue on
the details of the scorecard system government proposes to use in awarding
contracts, licences and mineral rights.
Under the system, companies will earn points for meeting equity ownership
targets, appointing black people and women to management positions,
developing skills and talent and procuring from small business. The
government is sensitive to reservations some foreign companies have about
selling equity in their South African subsidiaries and is willing to
consider awarding points for “equity equivalents” that advance the common
objective.
BEE is a shared endeavour. What we are trying to achieve is difficult. There
are no perfect models to follow. But even with the mistakes we have made the
rewards of getting it right are already manifest in our dynamic economy. And
we will get it right. South Africans are pragmatic problem-solvers who
listen and strive to build consensus as the foundation for lasting
solutions. That is one very good reason anyone wanting to do business in
South Africa would want to find local partners – they add real value.
The writer is chief executive of Old Mutual
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