President Thabo Mbeki's much-vaunted black economic empowerment (BEE) policy
is set to change now that there is a new regime in
charge of the ruling African National Congress (ANC). On the face of things, the
new guard is making all the right noises, saying that BEE should not be limited
to the usual suspects and that it should be broad-based.
Yet early indications point to the very real possibility
that one set of business people who are politically connected may well be
replaced after the next general election by a new crowd that has better contacts
with the new ANC leadership.
At this stage, the new approach is still unclear, save for the intention to make
BEE much more broad-based and in keeping with sentiment arising from the party's
national conference in Polokwane two months ago. But already trouble is brewing
since it has become clear that old connections, such as those between Mbeki's
administration and the new Jacob Zuma-led group, will continue to determine
beneficiaries in profitable transactions, such as Vodacom's unbundling of its
lucrative BEE stake.
Rated among the most substantial to date, Vodacom's proposed R7,5bn deal has
come under scrutiny after businessman Bulelani Ngcuka was sidelined from a
consortium bidding for the prized stake. Married to Deputy President Phumzile
Mlambo-Ngcuka, the former National Prosecuting Authority (NPA) head is
associated with Zuma's legal woes. Ngcuka's consortium, which also includes
another Mbekiite, Saki Macozoma, was among a group that was on the verge of
snapping up the empowerment stake, which now appears destined for a more
politically palatable consortium. Rumour has it that ANC
heavyweights Mathews Phosa and Tokyo Sexwale, both of whom are part of
the new regime, and serving on the ANC's all-powerful national executive
committee, are touted as possible alternatives to Ngcuka.
Although the new BEE strategy remains wrapped in intentions, it reflects the
leftist leanings of the post-Polokwane leadership. The ANC has previously voiced
its abhorrence for opulence. Its "strategy and
tactics" document deplores "greed", "crass
materialism" and "conspicuous consumption"
that go beyond "the necessary spirit of entrepreneurship, ambition, daring
competition and material reward" inherent in a market-based system.
The director of the University of Pretoria's Centre for Business and
Professional Ethics, Deon Rossouw, says the proposed changes would take BEE
policy in line with its original intention of facilitating the upward mobility
of beneficiaries.
"Anything that can cascade the benefits down the economy should be welcomed," he
says.
Since its adoption as a policy, BEE has largely become synonymous with mega
deals empowering only a few with close links to the upper echelons of the
government and the ANC.
Sexwale, Cyril Ramaphosa and Macozoma are some of its most prominent faces at
press conferences where the latest deals are announced. But many others have
also been associated with various consortiums and taking minority stakes in
major corporations.
The Elephant Consortium, for instance, is remembered more for the prominence of
its shareholders than for its actual business interests. Names associated with
the consortium included former telecommunications director-general Andile Ngcaba,
Gloria Serobe, Dali Mpofu and the former ANC head of the Presidency, Smuts
Ngonyama .
"All you have seen as success stories is when individuals have become rich and
become role models," ANC secretary-general Gwede Mantashe says.
The party has no problem with individuals becoming rich
through their own devices but where the state is in a position to
facilitate empowerment deals, it should pay attention to ensuring that this
touches as many lives as possible, engendering a "sense of community
prosperity".
The Congress of South African Trade Unions (Cosatu) shares this view. "We don't
want to disempower individuals. What we want to do if empower far more,"
spokesman Patrick Craven says.
ANC deputy president Kgalema Motlanthe says a key target will be people in rural
areas who must own a viable stake in surrounding mineral and tourism wealth
where this will lead to a reduction in dependence on social grants.
With access to finance being the biggest problem on they way to economic
empowerment, Motlanthe says BEE has benefited mainly the banks."The merchant
banks have made more money out of BEE than the target beneficiaries," he says.
The proposed strategy will seek to "stream" financial institutions such as the
Industrial Development Corporation (IDC) to play a complementary role.
However, United Democratic Movement (UDM) leader Bantu Holomisa says the
envisaged broad-based empowerment approach will not work "because this is a
capitalist state".
Some BEE transactions are done through family companies and are therefore not
open to much bidding, he says.
Furthermore, he says, even the revised policy is a smokescreen for the new ANC
leadership, which is beginning to show "their true colours" by wanting a share
of the spoils.
"We've heard the song before of broad-based empowerment. We've also noted that
the unions have been the main recipients," Holomisa says.
The starting point should be an audit of the
individuals who have actually received dividends.
"It should start within the tripartite alliance, whose members have benefited
nine out of 10 times."
Craven says some union investment vehicles have benefited but this has not
substantially trickled down to general members. Co-operative ventures would
ensure " that the benefits of empowerment are spread".
Ironically, as a party, the ANC itself has not escaped direct involvement.
Although now under a probe for possible conflict of interest, its highly
profitable investment vehicle, Chancellor House, helped
the party close a gaping hole in finance by turning a surplus. No less
unpopular among some companies is the challenge of compliance, which often
results in abuse through fronting.
Craven is not convinced.
"It sounds to me like an excuse on the part of companies which are dragging
their feet," he says.
But, in Holomisa's eyes, the Vodacom empowerment deal which seems to have
sucked in the party's new leadership in the choice of politically desirable
beneficiaries exposes the ANC leadership's real motive
while also discrediting the company.
"The challenge of the new ANC leadership is how do you take BEE transactions
outside the elite?" Holomisa asks.
H e says the Vodacom transaction borders on "institutionalised corruption",
gives SA a bad name and is likely to discourage foreign investment.
If the company wanted politicians' help, rather than ignore the present
government, it should have shelved the transaction until after the next election
when the new ANC leadership is likely to have won a mandate from the electorate,
Holomisa says.
With acknowledgements to Wilson Johwa and Business
Day.
*1The troughs are still the same -
it's only the pigs that have changed.
- General Bantu Holomisa, circa 2001
I'm pretty sure the Shaik family, even eventually Schabir himself, will be able
to make good the R34 million forfeit to the State.
An Interesting Question
When Nkobi Holdings was forced to sell its 20% shareholding in Thales (Pty)
Ltd, this was snapped up by Thales International for around R25 million. Thales
is actually obliged to have BEE shareholding in order to do business with the
South African Government (which is all that they do) and so in fact should be
re-allocating this 20% once Nkobi Holdings's Constitution challenge on the asset
forfeiture is finalised.