Chairman of the Sekunjalo Group Dr Iqbal Survé testifying at the PIC Commission of Inquiry. Picture: Oupa Mokoena/African News Agency (ANA)

Pretoria - Dr Iqbal Survé, the chairman of Sekunjalo Group, has slammed South Africa’s black economic empowerment model, saying it is fundamentally flawed and needs to be reviewed urgently.

He says the model was designed not to bring about any meaningful economic transformation, but merely as an “artificial” entry point into the capital markets.

Survé was testifying before the Mpati Commission of inquiry into allegations of impropriety at the Public Investment Corporation (PIC) in Pretoria on Tuesday.

He told the commission that he had watched as well-known BEE companies established after the new dispensation imploded as their share prices failed to perform.

This came after Survé had left his career as a medical doctor to lead Sekunjalo Investments Limited, present-day African Equity Empowerment Investments (AEEI), making him the youngest CEO of a diversified investment company on the JSE in May 1999.

“Sekunjalo can be described as belonging to the first - second wave of black economic empowerment companies. This wave included prominent black companies such as NAIL, REAL, Thebe Investments, NEC, Mvelaphanda and many others,” Survé said.

“Upon reflection, I suggest that the model of black economic empowerment was not designed to bring about meaningful economic transformation but served as a mere entry point into the capital markets albeit in an artificial way. Over the next decade, I watched as prominent companies were destroyed as a result of the share prices failing to perform, the debt structures being unsustainable to the point that today black participation in the economy remains negligible. The model of economic participation was fundamentally flawed and that led to introspection of our own model at Sekunjalo.”

He added that in its first decade, Sekunjalo shared the same negative experiences including small economic interest; high debt structures; inability to scale; dependence on Development Finance Institutions; dependence on government businesses or quotas; lack of owned equity and capital; and monopolistic market conditions.

“At one point the market capitalisations of companies such as NAIL reached a high of almost R10 billion making it one of the successful black companies on the JSE. The truth, however, is that the effective black ownership and control of these entities was negligible. The tragic outcome is that today, NAIL, REAL and Mvelaphanda do not exist and there has been a marked reduction in black companies on the JSE.”

Survé added that after watching some empowerment companies implode, Sekunjalo changed its strategy.

“Our strategy was to understand that it is not possible to compete in industries which are monopolistic and part of a closed economy and to rather focus on those where we have a competitive advantage where we can grow incrementally and where we can effect meaningful transformation.”

President Cyril Ramaphosa set up the commission in August last year and gave it six months to complete its work. However, he granted the commission three months extension at its request.

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