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Time to fix empowerment

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IOL News si fumani etch2 Pic Nov22 2012

Fumani Mthembi.

The image of black economic empowerment (BEE), the explicit aim of which is to marry race with economic favour in order to uplift groups that suffered economic dispossession and exclusion, has been tarnished by tenderpreneurship.

Part of the problem has to do with public relations. The dominant discourse on BEE is centred on corrupt state tenders and the emergence of rentier black elites whose sole mission is to profit from assets built by others.

Thus, the average person on the street has no idea that most liberalised sectors are governed by a broad-based BEE (BBBEE) charter that compels compliance in relation to more than just black ownership and preferential procurement from black suppliers.

BBBEE also includes job creation, skills development, local content, enterprise development and socio-economic development requirements.

Also, while race is the main measure, other identity markers such as gender representation are factored into what ultimately constitutes an entity’s BBBEE score.

Furthermore, reporting on BEE tends to focus only on its outcomes, completely ignoring the question of process. BEE processes are critical to the story of how we leverage the policy to make a productive nexus of the economy and identity.

My signature confesses to my involvement in the renewable energy sector and it has been mainly in this capacity that our business has found itself in the bosom of BEE.

In order to participate in the state-driven process to build renewable energy power plants and supply power to the national grid, companies such as our own are compelled to partner with experienced foreign companies.

This is to ensure that skills transfer takes place. To further incentivise black participation in the sector, there are requirements for black ownership and employment. It is thus laudable that transformation has been made a priority for this sector from the onset.

However, the processes for achieving these targets, particularly the assessment processes, still require refinement.

For example, we once sat in a meeting in which a white South African confidently proclaimed that he’d achieve the black ownership targets by simply grouping the blacks he employs in a separate business into an overnight black entity.

How would he do this? Well, he’d simply bring one of his shelf companies to life by giving it a black-sounding name and allocate his blacks to various positions with big titles like “executive director” and voilà, you have a 100 percent black-owned-company.

He would handle all this administration for free because, in his words: “These are good okes, they deserve to benefit.” Now I cannot contest the goodness of the “okes” in question, but the notion that entitlement flows only from blackness is a complete abuse of BEE.

Let’s also put aside the deeply patronising spirit in which a white man extends his “charity” by creating a dividend-taking, non-value-adding company for his black employees without even consulting them. The deeper problem here is that BEE assessment processes tend to reward such companies through blindness to their operational hollowness.

Thus, implicit in the absence of deeper checks is an endorsement of black businesses that have no operational competence or appetite. BEE as usual then, certainly as a measure of ownership, reproduces a rentier class of shareholders that are completely ignorant of business operations. And this works well for those white businesspeople who, in the first place, resent having to “give away” the value they’ve built.

The larger travesty that stems from poor process is that existing black-owned businesses are overlooked when it comes to the question of creating ownership partnerships.

These businesses may be factored into preferential procurement calculations because using them as suppliers is good for the scorecard. Thus, in our sector, we may see black engineering firms handling various parts of the construction or maintenance work.

However, despite their obvious operational value, those same entities are completely missing in action when it comes to partnering as owners of renewable energy power plants.

Why? It’s easier to partner with connected individuals and the grateful-to-be-at-the-dinner-table type companies who will have no interest and say in day-to-day operations. Thus in terms of transferring management skills at the highest level, a major opportunity is spoiled.

Analysed solely on the basis of outcomes, an operation such as the one proposed by the gutsy white businessman I refer to, is in fact above board. Nothing illegal would have been done.

However, by analysing the process, it becomes clear that every question BEE fails to ask is a loophole that counters its objectives. This should not serve to invalidate BEE but point to areas where it needs refinement in order to be relevant to our national development project. National development, certainly to my mind, is the ultimate purpose of BEE and all other policies.

Therefore, the opportunities presented by Mangaung and the next national elections to renegotiate our pact must not be squandered. We have an important question to answer about how identity and economic participation will interact.

As it pertains to BEE, this implies improving the processes to deepen value creation and facilitate genuine skills development.

It also means winning over hearts and minds so that policy imperfection does not result in gross and widespread abuse.

This is a question of buy-in, which is desperately sought in order to ensure that individual choices align with our collective needs.

 

 

- Fumani Mthembi is an entrepreneur in the renewable energy sector.


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