of the 15th anniversary of Thebe Investments
28 September 2007
"Another Blanket" is an old Sotho migrant labourer's song. This is a
translation of one of the verses:
In crossing the river I become a new man,
Different from the one I was at home.
At home I was secure
But now that I am on the other side
I am in a place of danger,
Where I may lose my life at any time
So prepare me for my death
I choose this verse because, for me taken literally or metaphorically it
captures so simply but yet so brilliantly, a history of black peoples
experience of the modern development of the South African economy.
I also choose this verse, because I am concerned that the recent discourse
on black economic empowerment (BEE) in South Africa has become peculiar.
Currently, this discourse is dominated by people who clearly seek to undermine
the process of economic transformation, not promote it. This discourse is
skewed and the interesting aspect of its peculiarity is the silence of black
voices. When we are being inundated by reports that broad based black economic
empowerment (BBBEE) is akin to the worst type of market intervention that it
will inevitably distort the market and therefore doomed to failure, why do we
respond with silence?
In this discourse, why do the practioners and entrepreneurs do not make the
simple point in response that the process of transformation is not a
distortion, on the contrary it is in fact the process of correcting an existing
distortion? This matter of silence, I will leave to you as a question mark this
evening but I would like to address a number of other issues related to the
current state of empowerment and economic transformation.
Specifically, I believe there are three very important processes underway
that will determine the extent, quality and character of the outcome of our
economic transformation journey. The first relates to the progress made in
entrenching empowerment efforts and especially the impact of the Codes of Good
Practice.
Secondly, it relates to the structural changes necessary to accelerate
industrialisation and post-industrialisation growth. Thirdly, we must continue
to be extremely vigilant that economic growth can entrench marginalisation and
so, support to the micro, small and medium entrepreneur becomes as important to
our future as any other empowerment initiative. So, in relation to the codes,
the process of developing and arriving at the set of codes provides a
remarkable counterpoint to critics.
In this regard the process was rigorous and included all the relevant
stakeholders. Thus civil society, labour, big business and small business, both
white-owned and black-owned, national and multi-national, participated and made
significant contributions in the shaping and final outcome of the codes. The
drafting of the codes was not a laboratory exercise on the contrary; it was
intensely consultative and iterative. This is the reason why the final set of
codes has laid to rest the debate about what we mean about BBBEE, in terms of
how it is to be interpreted, understood and practiced. The critical issue now
is to focus on the practice and whether the codes are making an impact on the
initiatives that are underway across the economy.
So, in terms of the extent of impact, the most recent measurement of
progress is contained in the Baseline Research Study. However it has to be said
that this is measurement over a period in which South Africa. Inc did not have
the comprehensive articulation of BBBEE, which the codes provide. This
initiative emanated from one of the Presidential Black Business Working Group
meetings and involved the participation of The Presidency, the Department of
Trade and Industry and the Presidential Black Business Working Group. Phase one
of the study has been completed and was based on a proportional sampling all
nine provinces, all sectors, Johannesburg Stock Exchange (JSE) listed
companies, AltX listed companies, non-listed companies, and medium and small
enterprises.
The results indicated that transformation in the Community, Social and
Personal Services as well as Wholesale and Commercial Sectors seems to be
progressing at a much faster pace than the other sectors. Significant progress
is being made in the area of electricity, gas and water supply. It is further
evident that economic transformation in Limpopo and Mpumalanga is well underway
and the North-west province has made most progress.
The results also indicate that transformation in the three largest provinces
(Gauteng, Western Cape and KwaZulu-Natal) is slow. The results of any survey
depend on a variety of factors. Among which would be methodology, sample size,
the questions asked and the response rate. It therefore has to be understood
that as we move forward with further research we shall have to examine
methodological issues.
The limitation of this base-line research study is that it excludes the
public sector and thus a process is currently underway and phase two of the
study, regarding transformation in the Public Sector is due to be released
before end of the year. These findings will then provide a complete picture of
the overall performance in Broad-Base Black Economic Empowerment.
Ladies and gentlemen, it is however fair to say that at this stage, the
results show that we are indeed far from where we want to be. But we are also
very far from where we have come and the momentum is accelerating shifting. In
the past few months there have been developments worthy of note. And I think
most of these are directly related to the release of the codes. For instance
Aveng, South Africa's biggest construction and engineering company, sold 45,
(65%) shareholding in cement producer Holcim South Africa for R7,4 billion.
Italtile sold R400 million worth of shares to empowerment groupings, which
includes trust-based beneficiaries and staff members. Grindrod, the listed
shipping and logistics business, announced the sale of 18% of its subsidiary,
Grindrod Bank, to three independent black economic empowerment (BEE)
entities.
And South African retailer Woolworths unveiled a BEE deal, whereby
Woolworths' employees will acquire approximately 10% of the group's ordinary
issued share capital. The result is approximately 17 000 employees will
participate in the transaction, of whom 90% are black and 85% are women. Santam
is set to begin implementing its R915 million BEE scheme whilst another
significant development was the first "equity equivalent" investment by a
multinational company as an alternative form of BEE Hewlett-Packard's
commitment to set up a skills development institute to train 1 800 people over
seven years.
And finally, investment management firm Allan Gray has sold off just under
19% of its shareholding in a BEE deal regarding this deal I noticed a report
where the company said that as a token of their appreciation for the
contributions of everyone at Allan Gray, Gray had undertaken to pay for the
school and university education of children of all staff earning less than R250
000 a year. I think the HP Packard deal and this last anecdote on Allan Gray,
is illustrative of the deepening appreciation of what is meant by deep
transformation and empowerment.
It is important that the process of broad based black economic empowerment
does not degenerate into a compliance based tick box exercise. The critical
issue for South Africa Inc with regard to all of these initiatives will be
whether they truly respond to all the elements of BBBEE as encapsulated in
codes and whether these initiatives will be sustainable and contribute to
achieving our vision of fundamentally changing the participation of black
people in the economy. In this regard the role of the public sector broadly and
the parastatals in particular will be crucial in providing leadership, as it is
already doing. It should do by first staying the course, it must always be a
challenging contrast to the private sector in terms of empowerment,
transformation and generally, in its way of doing things.
Programme Director, I said earlier that there are three very important
processes underway that will determine the extent, quality and character of the
outcome of our economic transformation journey. The impact of the codes is the
first; the second is the structural changes necessary to accelerate
industrialisation and post-industrialisation growth. In this regard we recently
completed a National Industrial Policy Framework. This Framework marks a major
achievement in terms of the approach, scope and depth of understanding in terms
of where we are in relation to industrial development. Time precludes going
into even cursory details of this significant work but I wish to encourage all
of you to engage with this document and to join the journey that has now been
mapped out. In the end, as we further industrialise and work to deepen the
content and quality of growth, we must ensure that the new opportunities
created, new sectors that emerge, the expansion of existing sectors, all
contribute to achieving the objectives of transformation.
Thirdly, I mentioned that we must be acutely aware of the marginalising
tendencies of growth. Support for small, medium and micro enterprises (SMMEs)
therefore becomes more important than ever before in ensuring a balanced take
up of the opportunities that are now becoming evident. Indeed it can be posited
that in the short term, that beside equity, other elements in the codes such as
management, procurement, enterprise development and employment equity are more
important than the equity element in putting economic assets, in the hands of
black beneficiaries.
We remain concerned that the reduction in the entrepreneurial base among
black people and the reduction in their economic assets was a major constraint
in the country's growth. We therefore remain committed that a huge range of
companies, including small and medium-sized enterprises, rural communities,
trade unions and workers be included and benefit from empowerment. So, in
relation to enterprise development in particular, we are accelerating support.
Khula has successfully launched the first ever South African Start-Up Fund
specifically for the benefit of black first time entrepreneurs at an initial
capital amount of R150 million. Khula has also significantly expanded its
footprint through a range of partnerships as well as expanded the scale of
funding to small business in the recent past.
The NEF has increased its level of disbursements in support of BB-BEE, after
many years of dysfunctionality. More recently however, the Asonge Scheme marked
a major advance in the National Empowerment Fund's (NEF) role of supporting
empowerment and putting economic assets in the hands of ordinary people and
savings groups. In this regard we shall be calling on government to ensure that
the transfer of the shares set aside for the NEF, from governments
restructuring of state assets.
The Industrial Development Corporation (IDC) has in the past year, approved
a total of approximately R1 billion in loans to small to medium enterprises
(SMEs) and R597 million in approvals will directly benefit townships.
Specifically, BEE accounted for 68% of the total number of approvals and 58% of
the total value of transactions.
On another front, the Small Enterprise Development Agency (seda),
responsible for implementing governments integrated small enterprise
development strategy, has begun setting up provincial and local offices and now
has a National footprint for the first time and is steadily increasing the
level and quality of its support. Another important new development was the
establishment of the South African Micro-Finance Apex Fund (SAMAF) created in
2005/06 to address sustainable access to affordable financial services for the
poor. The Apex Fund now also has its footprint in all provinces and has 62
Partner Organisations spread throughout the country. Off course across all
these initiatives, given the rapid expansion and in the heat of implementation,
we will experience challenges but the car is on the road, so to speak and it is
beginning to pick up speed.
Indeed these are exciting times and it makes the current discourse of
negativity, the all more peculiar. I do however want to conclude by quoting
Moeletsi Mbeki, who puts forward this confrontational but thoughtful challenge
he says:
"BEE is not a development model. It is a wealth redistribution model. But
the problems of South Africa are not wealth distribution, but wealth creation
and job creation in particular. BEE handicaps entrepreneurship, in my view. It
takes the brightest amongst the black people who-instead of devoting their
energies to creating new companies; to creating new products, to providing and
creating employment- tend to spend most of their time, if not all of their
time, looking for the redistributing mechanisms to get shares in existing
companies. So what you are actually getting is that the best and brightest
black people in this country, instead of creating wealth, building up their own
companies, are becoming second-fiddle players to existing companies. My core
criticism is that we need to be focusing our energies on entrepreneur
development."
Whether we accept these arguments or not, it does make a point. I am
therefore grateful that I could be here tonight to celebrate your 15 years. In
your ups and downs, your set-backs and successes, you have proven that you are
entrepreneurs. If therefore the BaSotho migrant labourer's song was an appeal
to prepare me for "my death" the success of Thebe is an assertion that as an
African entrepreneur, I am here, I am alive and I am growing!
I thank you
Issued by: Department of Trade and Industry
28 September 2007
Source: Department of Trade and Industry (http://www.dti.gov.za)
