Ignorant of the importance of their responsibilities as directors of an empowerment company, the failures by Khulubuse Zuma and Zondwa Mandela to protect the interests of workers flies in the face of black economic empowerment (BEE), on whose ticket they rose to prominence.
A lot has been said and written about the progress of BEE (or lack of it) in South Africa. While many have criticised the empowerment policy for its inability to uplift the standard of living conditions of ordinary South Africans, especially those who are trapped in poverty, unemployment and inequality – it is also important to consider the role and conduct of major beneficiaries in these BEE transactions. Especially those black beneficiaries who are in a privileged position to direct the influence of the companies.
Although measures were initially designed, as early as February 2007, to streamline and provide guidance for the implementation of empowerment through the seven elements of the scorecard and the subsequent gazetted Sector Charters, it appears that very few transactions have adhered to these to the letter.
Five years later, the authenticity of the statistics on the extent of black ownership in the JSE remains a contested matter. A JSE commissioned study in 2011 suggested that black South Africans hold 17 percent of the companies in the JSE. This figure is correctly disputed by many organisations, such as the Black Business Council and the Black Management Forum and they argue that the real figures are even lower.
It is important to investigate the reasons and causes for this slow pace of empowerment. While some have criticised the broad-based BEE policy’s failure to create new black captains of industry in various sectors of the economy such as mining, engineering and manufacturing, it has been argued that where such new black captains have been created, they have regrettably “kicked the ladder” and behaved themselves in a manner that reversed the small empowerment gains by inwardly looking to enrich themselves.
Although personal wealth accumulation per se is not prohibited by BEE, this becomes a huge concern when it is done at the expense of vulnerable constituencies such as the poor workers and small black suppliers of the company.
The now regrettable Aurora Empowerment Systems deal presents a point in case. If the media reports on this are anything to go by, then this is a sad and regrettable legacy for broad-based BEE. What was meant to be one of its successful models in the mining sector, the Aurora Empowerment transaction, to the extent that it has perished and compromised the financial livelihood of ordinary workers is distasteful and unforgivable. If I had it may way, I would remove the word “empowerment” every time the word Aurora is mentioned.
According to the liquidation commission proceedings and special report by M-Net’s Carte Blanche show last Sunday, the directors of Aurora Empowerment Systems and everyone associated with them, should be ashamed of their conduct. Not only have they failed the basic tenants of corporate governance, they have sold out the revolutionary thrust of an economic transformation project in our country.
Through their inflated lifestyle and serious lack of judgment, they have misrepresented the true meaning of being an empowerment director in South Africa.
The strategy document on BEE envisages empowerment that is associated with economic growth, inclusiveness, corporate governance and prosperity. This means that BEE transactions not only create and preserve jobs, but improve the livelihood of the community and stakeholders that are associated with the enterprise. Instead of this, according to what we now know, the Aurora deal became the direct opposite.
Reportedly operated on cronyism, nepotism, systems failures including the non-payment of employees, Aurora directors neglected their fiduciary duties. It has now emerged from the liquidation proceedings that greed, selfishness and gross neglect of director responsibilities are behind the collapse of the company.
Allegedly ran by an Indian mafia family, Aurora operated like a “spaza shop” in a trillion rand industry, where relatives and friends of the administrators were camouflaged as “investors” and “creditors” in the absence of paperwork to support these. Over a period of time, fraud, corruption and the looting of company assets was the order of the day. More regrettably, the public faces of the company, Khulubuse Zuma, Zondwa Mandela and Thulani Ngubane all claim to have had no knowledge of how certain transactions were authorised and approved, a clear case of fronting or dereliction of duties.
While the recent acquisition of certain parts of Grootvlei mine by both Gold One and Goliath Gold are important in alleviating the plight of thousands of workers who were impoverished by the badly managed company, the fiasco behind the Aurora “empowerment deal” represents a miscarriage of empowerment history. Not only has the transaction gone bad, it also sent a strong message to new generations of empowerment “wanna-bes” on the Dos and Don’ts of empowerment.
To the extent that the deal only empowered and enriched the few directors who, despite the company collapsing, continued to draw extravagant pay-outs and salaries, neglected their duties and allowed bogus “investors” to authorise undue and illegitimate payments and looted company assets, the directors have, in terms of the new Company Act, a case to answer.
What is even more painful to the black and white workers affected by this, is that some of the directors are associated with and related to the names of current and erstwhile struggle heroes such as the Mandelas and Zumas. Given the rich struggle history associated with these surnames, the workers would have expected the individuals to act with caution and circumvention when it came to financial matters.
Even in the aftermath of widespread media reports, the Aurora directors did not seek advice, correct their mistakes and apologise to the affected families. Instead, they continued to splash money, buying expensive gifts and cars as if they were spitting in the faces of the desperate and dying workers. Their greed and selfishness overrode their conscience – if they had any.
As the liquidation proceedings reach their final stages, public interest necessitates that not only should the assets that were recklessly obtained by these directors be redistributed for the benefit of creditors, but also to the benefit of the workers who volunteered their labour.
The lessons coming out of the Aurora failure, tells us that as we pursue economic empowerment, serious introspection and consideration of the implications of our actions on other vulnerable stakeholders is necessary.
Thabo Masombuka is a lawyer advising on broad-based BEE and an executive director for Siyakha Consulting, an empowerment advisory firm based in Bryanston. www.siyakha.co.za