Transformation and making money: the history of business and transformation in South Africa, and what is the actual score, or is it about touching lives?
Lion of Africa CEO Adam Salmie speaks about the politics of business and transformation and how to make money out of transformation, and says that if the country gets the BEE drive just half right, the country will be considered an international economic tiger in years to come.
He looks backward first and the old days (1994), when the country had its first black president and the rest of the country holding their collective breaths to see what would happen to today, with a country that is growing and has done, economically for at least 10 years.
Well, the reality is that South Africa has some of the best economic managers internationally, and the whites are making more money than they did under the old regime.
The reality is also that more than half of our population lives in poverty a time bomb that will go off, if something sustainable isnt done. Growth rates have to be more than the current 6% projection levels. The problem is that a ceiling has been reached there is a lack of capacity, intellect and skills.
Charters huh?
The other reality is that proliferation of charters has done good, but perhaps not as much good as speedily. He touched on the Financial Services Charter (FSC) which was essentially developed to circumvent or short-cut the Minister of Housings threat to introduce community rating, which would have forced the banking sector to finance houses in the so-called red zones.
Samie says that they recently had a meeting with the Minister of Housing who mentioned that the meeting would not have taken place if she had introduced community rating four years ago. The reality is that affordable housing is still a major concern, and there is no delivery.
On the other hand the relative success of the Mzansi account which has provided a new market sector has also been a revelation to the banking sector. It appears that some 4m accounts have been opened since inception.
Broad-based doesnt really work
Turning to broad-based empowerment, he says that this is at loggerheads with traditional business principles. People enter business to make money, and make more money. People dont enter business to do business with millions of people.
The upshot is that the number of people involved in any deal will multiply by thousands the complexity and some deals are already going to the wall, as communities take businesses to court, and shareholders begin fighting with each other.
Broad-based economic empowerment is about touching their lives, and he pleaded for business to go out and touch peoples lives. BEE is not to give stuff away its stupid to give anything away. The partner that is selected must add value.
The procurement practices were also called into question and he says that while the banks brag about channeling billions to the black sector its all at low levels and turns on transport, delivery and plants. There has to be a move to the higher end of the procurement cycle.
Moms and pops
In terms of the economic engine of this country it is a fact that the mom and pop shops, or the SME sector, is still the most under-utilised economic sector in South Africa, and is seen as the engine for growth.
Its for this reason that the minister of Finance has allocated a substantial budget for the development of this sector.
Interestingly enough the largest buyer of goods and services in South Africa is still the government, at 68%. BEE is a serious issue. And on a consumer level, the black community has exceeded the white consumer in terms of purchasers and value. This is the first time.
Anyone like to volunteer?
While the government is still talking to business to get them to engage and voluntarily adopt the BEE approach that they are pushing its still that voluntary. Prescription will come if business doesnt engage meaningful.
This is now evident in terms of procurement, as the government department procurement officers were lectured recently. There is now a drive to take a cut-through look at the validity of the BEE status when it comes to awarding contracts.
At the end of the day a new tactic emerging is for consortiums to get together for a specific project, with specific skills and expertise and BEE credentials, win the business, complete the task and then disband.
The same group may get together to pitch for more business at a later stage, but ultimately there is a skills transfer and the BEE grouping will pitch independently for business in time.
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