Cracking the code of real change 20 years on

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As South Africa prepares to celebrate 20 years of democracy, the country continues to reflect on how much it has transformed politically, socially, environmentally and, most controversially, economically.

Black economic empowerment (BEE) and the subsequent broad-based BEE lens has become one of the key policy instruments to measure how it is redressing the imbalances of the past. Although not a fully comprehensive measure, it is a helpful standard for common reference.

The stated objective of the Broad-based BEE Act is to “advance economic transformation and enhance the economic participation of black people”.

Because past economic exclusions affected virtually all facets of life it is near impossible to answer this complex question in a one-page essay.

The past 20 years have witnessed significant social and economic transformation. For example, the proportion of households without electricity dropped from 49 percent in 1995 to 26 percent in 2012 (South Africa Survey, 2013).

In the same period, 2 million households acquired RDP or state-subsidised houses.

The SA Institute for Race Relations shows that the number of Africans who are employed has nearly doubled since 1994. There are three times more black business owners than white business owners.

Studies by UCT’s Unilever Institute of Strategic Marketing show that the black middle class has grown to 4. 2 million in 2013 from 1. 7 million in 2004.

Still, economic inequality persists and is maybe worsening on some measures.

Sustainable

The Gini coefficient was already among the highest in the world in 1996, at 0.60, and had crept up to 0.63 by 2012. While inequality using this measure has improved among Indians (0.52 to 0.44) and whites (0.48 to 0.40), it has worsened among coloured people (0.49 to 0.53) and African people (0.53 to 0.55).

It is more important to confront the drivers of inequality to yield greater and more sustainable shifts in economic transformation. My submission is that entrepreneurship and education are the most powerful tools to reduce economic inequality in a sustainable manner.

Entrepreneurship can deliver desperately needed economic growth and expand the economic pie. It creates new wealth rather than redistributing “old money”. On the other hand, quality education and developing skills increase the capacity to earn, and reduce the reliance on the government. Further, it should help reduce the number of unemployable youth.

Sadly, we still have serious inequalities in education. In public schools, where the vast majority of children are schooled, university entrance matric pass rates have increased from a mere 18 percent in 1994 to 27 percent in 2012.

In the independent schools, which the minority of pupils attend, university exemptions have increased from 70 percent to 84 percent in the same period.

This means a pupil in a public school has a 1 in 4 chance of going to university and starting a professional career, compared with a 4 in 5 chance in independent schools. If this persists so will inequality, except that it will be less to do with race.

Therefore, all public and private sector efforts to improve skills development and access to quality education have a greater chance of broadening economic empowerment in a more sustainable manner.

In 2013 the government released the new broad-based BEE codes of good practice. These new codes come with new opportunities, as large companies are now required to double their training budgets.

Nedbank and other financial services providers were measured against the new financial sector codes, instead of the generic codes.

The codes will play a key role in enabling overall transformation. During the past five years Nedbank has maintained its level 2 broad-based BEE rating.

The time is ripe for public and private sector stakeholders to pull towards a common goal. The next 20 years should consciously create a more inclusive culture where all races drive and benefit from economic growth.

* Thulani Sibeko is the group executive for marketing, communication and corporate affairs at Nedbank. This article is part of a monthly series on Transformation Dialogues (#TransformSA) supported by Business Report, SAfm, Nedbank and Unisa.


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