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BEE not an answer: Moeletsi Mbeki  Comments
July 19, 2010


In his seminal work, The Architects of Poverty, Moeletsi Mbeki, the brother of the former President argues that Black Economic Empowerment (BEE) and affirmative action (AA) are not ANC policy.

Rather, they are policy initiatives put in place by the country's oligopolistic blue-chip business elite. Apparently this was in order to get buy-in from the newly released ANC leadership, which was still preaching a policy of nationalization, even in the aftermath of the collapse of the Berlin Wall.

The ANC, however, rejects this notion. In its BEE & AA policy document it states that it was the ANC who put affirmative action on the agenda.

The time was the middle 1980's, the context preparation for change. One of the toughest questions facing the Constitution Committee, formed under the leadership of Oliver Tambo, was how to deal with the enormous inequalities created by apartheid.

The ANC's rationale is thus: "If we accept, as scientists do, that brains and talents are randomly distributed amongst individuals in all race groups, then any normal system of recruitment and advancement would result in the army, the police service, the public administration and the private sector at all levels reflecting in its composition the neighbouring population," it says.

In the ensuing years, BEE and AA have become the twin pillars of restorative economic policy in the post-apartheid landscape.

These policies have certainly gone a long way in creating a small group of black property owners who sit at the apex of the economy through their equity ownership of many of SA's blue-chip corporates.

The latest data released by Who Owns Whom, shows that 60 black economic empowerment (BEE) deals valued at R57.5bn were done across all sectors between November 2008 and August 2009.

Many of these deals were concluded in the mining sector, which incidentally produced SA's first black dollar billionaire, Patrice Motsepe.

It has also produced such tycoons as Saki Macozoma, Cyril Ramaphosa, Tokyo Sexwale and others mainly affiliated with the ruling party.

The twin policies have also gone some way in shattering the glass ceiling in the corporate landscape, leading to the creation of sizeable black management corps as well as an exploding black middle class, called somewhat patronisingly "black diamonds" to denote their high propensity to spend.

The question remains whether BEE and AA have fostered the sort of entrepreneurship among the previously disadvantaged groups that is necessary to create real wealth in the black community.

The evidence thus far is not encouraging.

Carel van Aardt of the Bureau of Market Research, using figures produced by South Africa's All Media Products survey, showed in June 2003 that the number of African entrepreneurs had fallen by 16% from 1998 to 2002. The figures are expected to have deteriorated further since.


Recent surveys, however, are suggesting that these policies are at best not fulfilling their mandate and at worst they are retarding an explosion of entrepreneurship that is necessary to overcome the injustices of the past.

In March the First National Bank released a report, compiled by the Gordon Institute of Business Science (GIBS), called the 'The Entrepreneurial Dialogues: State of Entrepreneurship in SA.'

The report found that entrepreneurial activity in South Africa still lags significantly behind many comparable countries, and the economic retraction in 2009 appears to have hit the entrepreneurial sector hard.

South Africa's Total Entrepreneurial Activity (TEA) has dropped to just 5 percent- which is less than half of India, Brazil and Mexico.

However SA has some great black entrepreneurs, starting with perhaps the greatest black entrepreneur ever.

Richard Maponya grew his business organically in the dark days of apartheid, starting on the factory floor taking care of stock he went on to build Soweto's most iconic mall.

He is an entrepreneur par excellence, prospering long before black freedom was even conceivable, let alone BEE.

He does not dismiss BEE outright but he is adamant that government focus needs to be elsewhere.

"The government needs to create centres where aspirant young entrepreneurs can receive basic training in business skills. The country also needs access to banks that cater for the previously disadvantaged. Without money, you can do nothing."

These sentiments are not limited to old-school businessmen however. Young entrepreneurs such as Nthatho Modiselle, founder of StrussBob Apparel, one of Joburg's hottest street-wear companies epitomises the entrepreneurship spirit that the government is failing to inculcate.

He agrees that BEE and AA do not address the key obstacles facing entrepreneurs in SA, such as access to capital.

Regarding his own experiences he said: "I didn't even apply to any of the SA's youth funding agencies.

"I've heard so many bad stories that you'll wait forever before they respond and that most people never get the funding either way so I didn't want that to stop me from pushing my idea and dreams."

"The idea behind BEE is great but the way it has been executed is bad. It benefits only the elite few that is already up the ladder and does nothing for those down on the ground.

"I haven't heard of a case where BEE benefited a small start-up business or any entrepreneur," he concludes. - I-Net Bridge.
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Showing page 1 of 1 comment pages, 4 total comments
6 Weeks ago Jennifer wrote :
I always thought that Moeletsi Mbeki should have been President or Prime Minister of South Africa! What happened? No reason why he cannot be an advisor to the government; please apply Moeletsi, South Africa needs people in government like yourself - in fact, they need all the help that they can get.
6 Weeks ago Anonymous wrote :
We need to strive for a 100 percent employment economy that's the only way to fill tax coffers, educate and address crime. This is done through creating businesses with funding . It is no secret that 65% of all employees in this country are employed by SME'S ( small and medium enterprises) not government or corporate. This sector has access to zero funding. There is no funding to grow businesses here and the funding that is available from PE funds and individuals is very expensive and that's part of the reason so many SME's fail. We cannot keep giving money to banks who don't lend it out. This banking system has crippled our economy and has given more rise to crime. If Government is truly to make change they are to start entrepreneurial funding immediately. Why not levy a entrepreneur tax on the banks and use it to fund SME's. I mean the banks only pay 10% tax and not 40 like the top earner. Let them fund this fund and use it to create jobs and businesses. The problem is the government is not stern enough with these banks. They sit with most of the capital and do nothing with it. Now the banks expand into Africa seeking greater profit with our money and at the expense of our people, Enough, this looting has to stop and we as a people must demand action.
6 Weeks ago Raymond - small business mentor wrote :
BEE is very good in principle. Yes a fantastic idea in that transfer of skills and the startup of new businesses. The SWC 2010 proved a platform of humanity was needed to float the next layer of economics. The majority of tourists were white an very eager to spend where value was given.There are many more millions where they came from. What is needed is an all inclusive statement from the ANC heirachy that whites, yes whites need to be re-intergrated into the mainstream economy to assist those dis-enfranchised people. They have the skills to run the apprenticeships and the knowledge to assist practical start-ups maintain their profitablility. 90% of all start ips fail because they are iunable to negiotate the mine field of all that is needed on a daily basis. Did we say to all the white tourists stay at home we do not need you - no. So what is different to a tourist or a white person in South Africa. Intergrate them.
6 Weeks ago vuvu bee wrote :
Great article. Can't say I agree with it all, but it definitely is food for thought. Many people don't realise that fighting this type of inequality will take generations, with or without BEE or AA. No country has come close, but at least we're making a good go of it. One small point though, The term Black Diamond has nothing to do with a "high propensity to spend". It is a reference to diamonds used in industry, which are artificially produced. Quite fitting if you think about it.
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