Programme director
The chairman of the National Empowerment Fund, Mr Ntuli
The Chief Executive Officer of the National Empowerment Fund, Ms Buthelezi
Distinguished guests
Ladies and gentlemen
All protocol observed
We wish to express our sincere delight at being part of this historic occasion where we are launching a programme that will, undoubtedly, open opportunities for our people to play a meaningful role in the economy of our country in general and of our province in particular.
Programme director, we believe that from the outset we need to pay tribute to the National Empowerment Fund (NEF) for the role it has played in ensuring that Broad- Based Black Economic Empowerment (BBBEE) does only become part of our economic lexicon but is indeed a critical economic tool to level the economic landscape in our country.
Thanks to the role that has been played by the NEF to facilitate funding for our people, today we have a number of black people who are participating actively in the economy of our country because of the sterling work that has been done by the NEF since it was started in 1998.
Indeed, programme director, the NEF has not only been a catalyst for the acceleration of the implementation of the BBBEE but we have a number of our people who today own shares in blue chip companies, something that was completely inconceivable 15 years ago. Today is, therefore, an important day in the evolution of the implementation of the BBBEE, for we are witnessing another milestone in our quest to ensure that our economy is transformed and that our people play an important role in this regard.
We have no doubt that the Business Planner and Mentorship programme being unveiled today will not only remove the obstacles that are faced by budding entrepreneurs in our province but will ensure that BBBEE will become a critical pillar on which to transform the racially skewed nature of our economy.
Programme director, as a department that has been entrusted with the responsibility to drive the implementation of BBBEE in order to improve the economic fortunes of our people, we are fully aware of the challenges faced by black entrepreneurs. While accessing funding, by and large, remains the biggest barrier to entry in the business world for black companies, we have also noted that even those businesses which have been able to take off face a number of challenges such as the dearth in business management, financial, marketing and technical skills, which threaten the sustainability of their businesses.
A number of businesses have collapsed because of the chronic shortage of these requisite skills. It is for this reason that we applaud the initiative of the National Empowerment Fund, for it will go a long way to ensure that small medium and micro enterprises (SMMEs) in our province are able to survive the rigors of the cut-throat world of the business environment.
The reality programme director is that conceptualising a business idea, sourcing funding and starting the business is one thing. Sustaining it and ensuring that it becomes a viable business venture is another thing. This programme will therefore ensure that we hold the hands of budding businesses while they are negotiating the early stages of the evolution of their businesses and that we don’t leave them up the business creek without a paddle.
Programme director, a number of studies over the world have shown that SMMEs are critical not only for stimulating economic growth but for creating employment opportunities. Therefore if we invest in creating an enabling environment for our SMMEs to prosper, we are contributing directly in boosting the economic fortunes of our country. As all of us are aware, over the past fifteen years our country has travelled a long road in our quest to ensure that the freedom that we attained in 1994 is translated even in the economic arena.
One of the critical tools that has been used by our government in its arsenal of measures to achieve equity in the economic field, is the BBBEE. While many successes have been scored in this regard, however the reality is that there is still a lot that needs to be done in to completely break racial barriers in the economy of our country and ensure that there is meaningful participation of black people in the economy of our country.
What is heartening about the evolution of the BBBEE is that the focus no longer lies solely on acquiring equity stakes in white owned companies while the DNA of the company remains unaltered. Over the years, BBEEE has evolved into a tool of economic redress which takes into account a gamut of critical issues such as ownership, control, skills development and preferential procurement to mention just a few.
In spite of this, programme director, there are still a number of challenges facing the implementation of the BBBEE, chief among these the issue of fronting. As the government of KwaZulu-Natal we have made it clear that we will leave no stone unturned in exposing acts of fronting. We believe that fronting is not only morally reprehensible but makes a mockery of the whole concept of BBBEE. We find it particularly affronting that those who benefited from an iniquitous system that sought to keep our people on the outer fringes of economic activity have now resorted to cheating the very system which is aimed achieving at economic equilibrium.
It is for this reason that we have committed ourselves to uprooting all acts of fronting and prosecuting all those who are responsible for it. Our monitoring mechanism will be tightened further to ensure that there are no weaknesses in the system and that the pace of empowerment of youth, women, people with disabilities and rural communities is accelerated.
Programme director in assessing the journey that has been travelled in the implementation of the BBBEE we believe that we should be honest and frank so that we can collectively deal with the challenges. In this regard programme director; we have observed that some of the beneficiaries of this critical economic tool have not quite understood the strategic goal behind this economic intervention.
Instead of viewing BBBEE as an avenue to create economic opportunities and to transform the underlying structural pillars of our racially skewed economy, some of our people have looked at BBBEE as a quick ticket to self enrichment. Therefore, BBEEE becomes an end in itself as opposed to a means to an end. In this world of twisted BBBEE logic, acquiring a few shares in a company in order to indulge in unbridled conspicuous consumption, as described by Thorstein Veblen, the economist who coined the term is seen as a zenith of BBBEE achievement.
This narrow description of what BBBEE is about is the biggest threat to all the noble intentions of this critical economic tool. The reality is that we have only scratched the economic surface of our country. It will take time before we change the structural make up of the economy of our country and ensure that all our people participate in it.
For BBEEE to achieve its goals of being an engine for economic as well as social and political change, we need visionaries and agents of transformation who look beyond the narrow goal of improving their own economic fortunes while the companies in which they have bought shares remain untransformed.
We have also noted a disturbing trend where our people buy shares in a white owned company, with the help of institutions such as the National Empowerment Fund. Once the shares appreciate, they then sell them before the ink is dry on the deal, thus denuding the company of its BBBEE compliance. This is not only short sighted but it undermines the noble intention of BBBEE. Obviously, programme director, it is a known factor that there is no individual who enters the business arena, for the sole aim of being charitable. All business people are in it for making a profit. But if we look at BBBEE through the narrow prism of making a quick buck, than we will not be able to achieve our strategic objective.
As we have said earlier, BBBEE is a tool for social transformation. This means that our approach as entrepreneurs is slightly altered from the normal wheeling and dealing and chasing of profit margins at all costs, which normally characterise the world of business. Role players in the BBBEE environment, from entrepreneurs to fund administrators, need to understand the transformation imperative inherent in the programme. This understanding will then dictate that all of us engage in BBBEE deals not only to get high returns from our selected ventures or to fulfil our quota of BBBEE applicants that we would have assisted build our nation.
Programme director it is a well known fact that the world is currently in an economic tail-spin of turbulent proportions owing to the economic downturn which has shaken the very foundation of the global economy as we know it. While signs have begun to emerge that the situation is easing, particularly in major economies, the reality is that we are not out of the woods as yet. As many of us know, many BBBEE deals have been financed by financial institutions which have been hardest hit by the economic recession. This, in many cases, was done on the understanding that when the shares appreciate and yield dividends the money will be paid back in keeping with that specific funding model.
However, the economic slump has seen many shares taking a steep decline, making it, in other cases, difficult for the banks as things stand to recover their investment. In fact, some shares have taken such a precipitous free-fall that at some point they were almost half the prices that they were when the BBBEE deal was signed. Given this grim economic situation, the question that we all need to answer is what is; the future of BBBEE? In a world where financial institutions, particularly those which are privately owned, are risk averse and are no longer doling out credit, what then is the future of BBBEE? These are questions that all of us should grapple with for BBBEE to remain a critical intervention with which to change the economic landscape of our country.
Programme director, one of the issues that as province of KwaZulu-Natal we want to acknowledge when it comes to the implementation of the BBBEE is that we have not kept up with the pace of other provinces. This is because of many factors, including political instability stemming from our recent past. This has meant that while the BBBEE train has long taken off in other provinces, ours has just left the station.
It is for this reason that we have set ourselves the target of aggressively implementing BBBEE in our province. In this regard, we are delighted that three KwaZulu-Natal-based BBBEE verification agencies have been approved by national government. This will help us ensure that there is strong monitoring and evaluation of the implementation of BBEE. All government departments and our entities will be assessed in terms of a scorecard which would form the benchmark against which future progress would be monitored. Following the assessment we would expect each department to provide a comprehensive plan on dealing with their deficiencies in order to meet predefined targets.
We are also delighted by the fact that the BBBEE advisory council will be fully functional before the end of the financial year. However, we must stress that BBBEE principle does not solely apply to the state or state sponsored entities. Indeed, the private sector needs to report on its BBBEE scorecard and how it is faring in implementing the principles of BBBEE. Our government will be monitoring very closely the conduct and practice of the private sector with regards to the implementation of BBBEE. We believe that transparency must be cross cutting and cover both the public and the private sectors.
Over and above this, we are establishing service points for our special target groups throughout the province of KwaZulu Natal to better implement both women economic empowerment and youth economic empowerment. We are concerned with the economic development of rural women and rural youth and we want to bring our services to their door step. In addition, in this financial year we will be spending more than R12 million on youth skills development and on mentorship of women entrepreneurs.
Programme director, during this financial year, we will be commencing the integration of processes in various institutions to implement what we call sector matrix enterprise development. We will do this in close alignment with establishment and sustainability of stable and medium to large sized BBBEE companies is critical for us in this province, therefore we will have interventions in critical sectors like property and construction, transport, agri-business and tourism to ensure diversity in the market place.
However, as we celebrate the launch of this programme, we must warn all the role players in the BBBEE terrain not to, in their quest to assist emerging entrepreneurs, to, inadvertently, create a culture of dependence. The business world is a cut throat world where sentimentality has no room. While assistance must be extended to emerging entrepreneurs, this should be done in a manner that the recipients of such assistance are able to, within particular timelines, stand on their own. We must at all times avoid the unintended consequences of creating over dependence on statutory institutions.
Therefore, the launch of this programme to help SMMEs has come in handy as it dovetails with our efforts to speed up the implementation of the BBBEE in our province. Our province is known as a trail blazer in many areas, therefore we believe that we need to change this when it come to the implementation of the BBBEE.
We have no doubt that the BEE Business Planner and Mentorship programme being launched by the National Empowerment Fund will help us achieve this goal and add impetus to the implementation and success of the BBBEE programme.
I thank you
Issued by: Department of Economic Development and Tourism, KwaZulu-Natal Provincial Government
20 August 2009
Source: Department of Economic Development and Tourism, KwaZulu-Natal Provincial Government (http://www.kznded.gov.za/)
