SPECIAL BOKAMOSO | Let’s build a real shareholder economy

The following speech was delivered by DA Leader, Mmusi Maimane, at the 2019 Black Business Summit in Midrand, Johannesburg on Friday 1 March.

Let’s build a real shareholder economy

Delegates

Fellow panelists

Fellow South Africans

The DA’s vision for South Africa is animated by the goal of putting a job in every home. This is what we judge all our efforts against. Does our policy create work? Does our policy encourage and support legitimate black business? Does our policy help reverse the legacy of our unjust past?

Apartheid systematically deprived the majority of our people on multiple fronts. People were disadvantaged economically, socially, psychologically and geographically. It is up to all of us to create a climate that addresses all of these issues and delivers broader inclusion and the transfer of assets to black South Africans.

That must be the goal and the outcome of our discussions here today: to build a more inclusive and diverse country together. Not to create another circle of insiders. Not to conjure up enemies and scapegoats. Not to pit one race against another in a zero-sum game contestation.

For the time being, these efforts need to be targeted at black South Africans specifically in order to address the injustice aimed specifically at them. Hopefully we all agree that our goal is a non-racial country with equal opportunities for all. There has to come a time when we no longer use race as a proxy for disadvantage.

But for now, there can be no doubt that our society and our economy still bear enormous scars from our past. We are very much still a nation of economic insiders and economic outsiders, almost all of whom are black.

At every level of our economy, black South Africans still remain disproportionately excluded from opportunities and from ownership. South Africa is a story of delayed and displaced asset transfer to black South Africans. This, despite more than two decades of government intervention and over 800 pages of BEE codes meant to correct this imbalance.

A quarter of a century into our democracy, this calls for an honest appraisal of what the goal was compared to what has been achieved.

Our number one priority must still be to break down the walls between the insiders and the outsiders – to broaden inclusion in the economy, to ensure a dramatic increase in the transfer of skills through education and training, and to enable the ownership of assets, property and pension savings for more black South Africans. Apartheid was a deliberate disruption of wealth transfer, but one way to overcome this is by promoting a pension savings culture in South Africa. This is a highly effective way to ensure wealth transfer to a next generation.

But if we want to make any headway in opening up our economy to more black South Africans, we need to agree on two things:

The first is that the ANC government’s efforts to transform our economy have failed – not only to build a growing and more inclusive economy, but also to favour legitimate black businesses. Twenty-five years on, all we can see for these efforts is a thin slice of super-empowered individuals at the very top of the economic ladder – individuals who all too often enjoy close proximity to the party.

The second thing we must agree on is that critique of the current model does not amount to opposition to the idea of economic redress and empowerment. You can be both an ardent critic of BEE and a staunch advocate for real broad-based empowerment.

In fact, if you care at all about correcting the imbalance in our economy, then this has to be your position.

The motivation behind BEE – or B-BBEE, as it was disingenuously renamed a few years ago – bears little resemblance today to the intentions it once started out with. Over the years it has been reduced to little more than a fig leaf for elite enrichment. Often then followed by re-enrichment of the same elite.

For a programme intended to boost black inclusion in the economy, BEE has had virtually no positive effect on poverty, unemployment, income and assets. Surely these should be important yardsticks when measuring the effectiveness of this programme? Surely broad-based empowerment cannot begin and end with the share of black ownership of JSE-listed companies?

And this is not only my view, or the view of the party I lead. This has been confirmed in independent polling in recent years, with the majority of black South Africans indicating that the current ANC model of BEE had helped neither their community nor them individually.

All of this makes a strong case for reform when it comes to our empowerment and redress efforts. The current model has not worked, and it is in fact losing support. Is it not time for us to return to the noble intentions we once had for empowerment? Should we not be looking at ways to better include more ordinary black South Africans in our economy?

By focusing on four areas – share ownership, enterprise development, skills development and diversifying places of work – we can create an empowerment model that both increases the inclusion of black South Africans in our economy, and dramatically reduces the complexity of the current model, making it far easier to do business in South Africa.

In terms of share ownership, we need to place a far stronger emphasis on workers as shareholders. When the re-written BEE codes came into effect in 2015, this aspect was radically diluted. In fact, it was initially taken out completely, and only re-included – albeit in a watered-down format – after an outcry.

This needs to be brought back, and placed front and centre of our empowerment model. Employee Share Ownership Schemes can be implemented across all sectors, from Agriculture and Mining to Manufacturing and Retail. This holds the key to real broad-based empowerment, as opposed to the narrow, elite version we are currently working with.

Apart from the obvious financial benefit to individual workers, owning a share in the business increases an employee’s commitment to the business. It raises productivity and it boosts employee retention.

Rather than searching for one BEE partner, businesses should be incentivised to make their workers their business partners. They should invest time in explaining to them what it means to be a business partner and co-owner.

And white businesses have a big role to play in this regard. I know it is often far easier to simply sign up a partner and be done with it. But if we want to transform ownership of our economy in a meaningful way, then we might have to put in a little extra work. This is one area of economic empowerment that calls for a whole-of-society approach.

The second aspect of empowerment that requires a re-think is that of enterprise development. We can’t claim to be serious about black economic empowerment if our model doesn’t prioritise bringing new entrants into the various sectors of our economy.

I would propose the establishment of a fund specifically aimed at financing new black entrants – whether they be in mining, insurance, clothing or any other industry. I call this a Jobs & Justice fund, and this will be ring-fenced start-up capital meant to launch new black businesses.

Along with this fund, companies should be rewarded for their efforts to help develop new black entrepreneurs, whether they do so by direct mentoring or by donating to organisations that finance and incubate black entrepreneurs.

When the BEE codes were rewritten, the points awarded for the inclusion of new entrants were also drastically reduced. This needs to be corrected. Focusing on bringing new entrants into the economy will ensure that empowerment remains truly broad-based, and that the same wealthy individuals are not re-empowered over and over again.

The third aspect of such a new empowerment model must be that of skills development. We all know an economy responds to its skills base, but yet we do very little to incentivise the broadening of skills among black South Africans.

In addition to turning around our failed basic education system and increasing access to tertiary education for more black youth, we need to start rewarding companies that invest in our skills pipeline. This could be through schooling, training, bursaries, internships, mentorships or apprenticeships.

And finally, we need to ensure that our places of work – across all sectors and at all levels – become reflective of the incredible diversity of our nation.

There are many other aspects to black economic empowerment that we can also talk about. Issues like transferring land with full title deed to those who live on it. Issues like building a capable state that can deal decisively with corruption – because all corruption does is replace legitimate businesses with politicians who reinvent themselves as businessmen and women. Issues like placing our cities at the forefront of development and growth, because this is one way to deconcentrate the economy.

But the four areas I mentioned – share ownership for workers, enterprise development for new entrants, rewarding the development and transfer of skills, and workplace diversity – have the potential to radically transform our economy.

I realise that some of my views might be met with resistance by some at this conference. Many attendees here have no interest in challenging the status quo. That’s because BEE, in its current format, has been exceptionally good to some South Africans.

And out there is an entire industry that has arisen around BEE compliance – armies of consultants and lawyers who only exist to guide companies through the maze of codes and legislation. BEE has been good to them too.

But most ordinary black South Africans cannot say the same. And they are the people for whom an economic empowerment programme was meant to exist. They have watched for over two decades as others went inside and shut the door on them. And they can’t wait much longer.

Not only has BEE in its current format failed to include them directly, it has also managed to deter investment and put the brakes on job creation.

We need to put our country and its people first. That means dismantling the system that rewards the few at the expense of the many, and replacing it with one that truly broadens inclusion.

If we want to call it “Broad-based Black Economic Empowerment”, then it has to be just that.

Thank you.

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