Transformation still has some distance to go, but we’ve come a long way.
I remember a conversation with a senior banker 15 years ago, when I still worked in the banking sector. He opined that achieving EE in senior positions was a near impossibility. In his experience, banks invested in the skills and development of black employees only to see them job-hop and be snapped up by the highest bidder. He went as far as to say that skilled black people in the financial services sector were so overpriced that soon the country would have to abandon Black Economic Empowerment (BEE).
We didn’t abandon BEE and fortunately no one argued for “once empowered, always empowered” in EE.
Investors and entrepreneurs instinctively understand that continuous investment in human resources is critical to a company’s competitiveness and growth. It would thus be considered absurd to only invest once and refuse further investment when there is staff movement.
Shareholders, on the other hand, are viewed as a source of investment funds. When companies are forced to “invest” in shareholders, they consider this to be against the natural order of things. Worse, if the investment has to be replenished continuously, the whole commercial model apparently implodes causing investors to run for the hills.
This perspective is part of the reason the “once empowered” issue in the mining charter was protested all the way to court.
Another perspective is this: South Africa is one of the richest countries in the world by mineral wealth. More than $2trillion (R26.9trillion) of the stuff is still in the country’s ground, but more than half of the 57 million people who “own” this mineral wealth are poor, and a third of them are living in extreme poverty.
Billions in investment are required to extract minerals in South Africa because surface reserves have mostly been depleted by more than 150 years of continuous mining. In some cases, miners dig nearly 4km deep to get to the minerals. The poor “owners” of these minerals have no other choice but to turn to investors with deep pockets for help.
For that help, the investors should be offered a share of the takings from the extractions, but not the entire profit. The bulk of the profit from this mineral wealth should be the citizens.
Unfortunately, it doesn’t work like this, especially on this continent.
Natural resources have been the curse of Africa. Despotic leaders who fund their armies and police forces from natural resources have no need for tax revenue. They use brute force to quell internal dissent and are funded by foreign investors who reward these leaders handsomely - and leave behind nothing but presidential palaces and motorcades.
South Africa similarly lived by the “might is right” principle until 1994.
Legislated oppression began with the Masters and Servants Acts of 1856, and was quickly followed by a myriad subsequent discriminatory laws including the Black Land Act of 1913 and various apartheid laws from the 1940s.
Successive Union and South African governments sought to remove Africans from their land and eliminate their self-sufficiency and advancement. This served to create a black class of perpetual servants providing cheap labour to white farmers and mine operators.
These laws also sought to create a monopoly for whites in skilled jobs and entrepreneurship.
Game was up
It worked, to some degree, until the contribution of the mining sector to the economy started falling. Mining contribution to private sector gross domestic product decreased from 21percent in 1970 to 13percent in 1985 and 11percent in 1990 (farming remained about 6percent). As the 1990s approached, it became clear the game would soon be up for the apartheid government.
The tax base needed to be expanded to sustain the debt-laden administration, the “largest army in Africa” and avoid total bankruptcy. The fortunes of South Africa’s mining elite were tied to the country’s fortunes before 1994. They rallied against the unsustainability caused by apartheid.
Harry Oppenheimer was quoted: “I’ve never thought that the policy of racial discrimination had been a great benefit to business because, while it may have had the effect of keeping wages low, it also had the effect of keeping labour exceptionally inefficient. I believe that apartheid is something that works against the interest of economic development’’
BEE, far from being a misguided or vengeful “reverse apartheid”, is a pragmatic policy designed to broaden economic activity and increase the middle class.
Until the participation of the black majority in all spheres of the economy reaches normal levels, no government will be able to generate enough income to function properly, stabilise the economy, or stay in power for long.
A large middle class increases the tax base and reduces dependency on mining and social welfare. It further improves the citizens’ bargaining power with mining investors for the benefit of the local economy and welfare of the collective.
Land, farming and mining are interlinked and closely associated with historical oppression in South Africa. They tug at emotional strings and fuel tempers like no other subjects.
While “Thuma Mina” buoyantly captures South Africa’s hope for a better tomorrow, the haunting past is perhaps best expressed by Caiphus Semenya’s Hauteng, which he wrote and produced for Miriam Makeba’s 1974 album, ironically named A Promise.
It is still a moving and sombre tear-jerker today and it comes alive every time a mineworker dies underground. Perhaps it should serve as a backdrop to deliberations on mining charter. Written in Sotho/Tswana, the song can be roughly translated as follows:
My little orphans perished there in Gauteng;
Listen to the cries of our men who died in the mines in Gauteng;
Look at our men digging diamonds and gold. Our mineral wealth;
Look at our nation, we have been enslaved;
Look, on our fatherland, our blood is flowing;
Our strength is enriching foreigners from overseas;
We perished here in Gauteng in the mines;
Look at our nation, it perished in Gauteng.
Karabo Mashugane is the chief executive of 20/20 Insight, specialists in B-BBEE advisory, supplier development and SME financing.
The views expressed here are not necessarily those of Independent Media.
- BUSINESS REPORT ONLINE