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job creation south africa

Empowerment 3.0: Socio-economic Innovation

Today’s post is the first in a short series on economic empowerment and job creation in South Africa. Wonkie’s guest author, Trudi Makhaya, proposes a way forward to creating real empowerment in South Africa.

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Imagine if you will, a sleek boardroom somewhere in Sandton. It has all the markers of a modern South African corporate environment – cushy chairs, designer table, multimedia and communication gadgets, and colourful artworks depicting scenes from the margins of life in Johannesburg. A group of executives are waiting for a meeting to begin. So they trade stories about sports and schools and Schengen visas.

Of course, this being the new South Africa, in walks Mandla clutching a stash of PowerPoint print-outs. He is followed by his middle-aged white business partner, Koos. The chairman of the board welcomes Koos with a warm hug. They both grew up in the same small town in the Western Cape. Koos introduces Mandla, who is pre-occupied with setting up the presentation and handing out documents. Eventually the chatter dies down.

The chairman formally opens the meeting and welcomes Koos and his partner, Mandla. He looks forward to hearing their proposal, which could be the beginning of a fruitful business relationship. Koos leaps to his feet, thanks the assembled suits for their time and provides a brief background of his start-up. Then he introduces Mandla again. He explains that Mandla oversaw the development of the core technology of the product so he will take them through the business concept. And Mandla is also closer to the numbers so he will also break down the financial projections.

Mandla directs everyone to the first slide. Feet are shuffled, throats cleared, ties adjusted. The silence in the room is of the stunned kind.

In boardrooms across this country, it is still expected that “black entrepreneurs” are the curtain raiser, the opening act. The idea that it is the black business partner who lost sleep for years, coming up with a profitable idea and then building a company is pretty inconceivable in corporate South Africa.

We often pretend that this is not how we feel about black enterprise but this is betrayed by the way we speak. We ask of others in casual conversation: “Have you ever thought of going into BEE (black economic empowerment)?” We read that so-and-so is a BEE player. What could that possibly mean? What product does this BEE industry produce?

What started as a pragmatic solution to the marginalisation of black people in the South African economy has led to the creation of a new type of marginalisation. There are now two types of citizens in SA Incorporated: businesspeople and black business people; entrepreneurs and BEE players.

The second type of citizen is often not even visible. She is represented by a one-liner or a rating in the annual report. Her significance is to inform the world that the business has done the right thing.

This state of affairs is a pity for all the reasons that critics of BEE have put forward. The policy is perceived as entrenching racialism, distorting incentives and merely creating new oligarchs. These views informed the rejection of narrow BEE that aimed to empower politically connected (or at least politically palatable) elites. This led to the move from Empowerment 1.0 to Empowerment 2.0. With Empowerment 2.0, the benefits were meant to be broadly shared. BEE ceased to be an enrichment project and moved closer to more developmental objectives.

But reviews of key BEE initiatives paint a picture of the continued economic exclusion of black people.

This state of affairs robs us of immense possibilities. Across the world, leading business thinkers, including the late CK Prahalad, have recognised that the wealth of the future will be created at the “base of the pyramid”, through fulfilling previously unmet needs of the poor and disadvantaged for consumer products, medicine, education, sanitation, entertainment and other products. In a similar vein, the innovation magazine Fast Company has argued that business innovation has begun to “trickle up” from the developing world to the developed world. Examples include the increasing adoption of microfinance and mobile payments in the US.

South African society is sitting on a gold mine. With elements of the developing world and the developed world co-existing in this country, creative sparks should fly. We should be generating the “base of the pyramid” innovations of the future rather replicating such innovations from elsewhere. Some notable businesses have been able to gain success through meeting the needs of a broad range of South Africans. Imagine if this were not the terrain of a few radical companies (or the “mass market” divisions that are ghettoised in most companies) but business as usual.

For this type of innovation to take off on a large scale, true collaboration between the previously disadvantaged and established capital needs to occur. South Africa is on the cusp of a fundamental economic transformation. But first, all its people’s productive and entrepreneurial capacity needs to be unleashed. When we move past the “going into BEE” mentality and insist that black entrepreneurship is not an anomaly, perhaps then the business ideas that will address the challenges and opportunities of a transforming society will emerge and flourish.

Trudi Makhaya is a writer, economist and South African thinker of note. Wonkie readers are encouraged to visit her excellent blog at http://www.mzansipreneur.com/.

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Related articles on Black Economic Empowerment, and affirmative action in South Africa:

  1. Trevor Manuel on Black Economic Empowerment
  2. BBBEE News and Cartoons
  3. Skilled Blacks Shortage

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Comments

  1. You guys are the star.

  2. Chris Kloof says:

    I read a great deal about the failure of corporate SA to recognise/encourage/reward/empower emerging black businesses and their people. I am sure that it is a very real problem, but that’s all I ever hear. It’s a problem.
    Trudi echoes the comments of many but she fails, as they all do, to spell out in some very simple terms what she would like the corporate world to actually do. Give us some specifics Trudi. Don’t just complain that it’s a problem. What decisive, measurable, factual, concrete actions would you like to see happen?
    Pls stop using inane terminology like ‘true collaboration’, go beyond the adjectives and produce a list of real actions.
    I am sure that you may find a far more encouraging reponse.

    Chris Powell
    Durban
    [contact details removed by moderator]

  3. Unfortunately when the first “feature” on everyone brochure is your BBBBBEEEEE credential then we are not competitive in a global perspective. As for “established capital” that was transferred to guys like Patric, Tokyo, Mandela Children and Zuma’s family…..etc back when there was less B’s and E’s in the BBBEEEE system. Its about time young black people start their own firms.

  4. Hi Fred,
    Starting your own firm is tiring, is’nit? The Belgian Willem Elsschot described that exercise already 100 years ago in his work: “Kaas” (Cheese).
    To all interested BEE’s, try to make time and read this book. An Eye opener.

  5. In my private practice, I am fully BEE compliant. My key workers are all black – my computer, keyboard, screen, printers, fax machine and mouse. My office desk is brown. In my moonlighting profession, my laptop, guitar, loud speakers, microphone, synthesiser and stands are all black. My gutar cables however are green and blue, but they are legal immigrants from China.

  6. If you can’t invent something as technically complex as a bicycle the progosis is not good, starting with Ghana in 1956. Africa’s history tells us why RSA is equally doomed

  7. With only 7% of South Africa’s population being white there is little more they can do to expedite BEE. It is the turn of black entrepreneurs to create opportunities foe blacks instead of creating tenders for each other.
    I have two sons my youngest one could not get a job, he started out with a small company at the age of 18 he survived for 5 years while his company grew during that time he was extremely ill on occasion and underwent 2 operations caused by stress. Then one day one of his clients brought him out providing him with some money for the first time. His BEE clients were either slow on payment or did not pay him at all. One tender he applied for was won by a BEE individual who was lacking the knowledge for the job who had tendered higher than may son. That individual then hired my son to do the job. He to this day has not paid my son. He then got a full time job with a big company and in a short time had achieved a promotion, he then applied to a promotion job in Cape Town, he got the job was preparing to move when his company informed him that they gave the job to a BEE candidate. He immediately resigned put out his CV and got a job overseas. Now some 6 b\years later he is is a very well paid employee. His old company want him back. My eldest son took up a career in which there are no blacks because it requires artistic skill and intuition. He has been unaffected by BEE.

  8. It is estimated that BEE adds 14 to 25% oncost to your product, thus costing productivity and competitiveness.

  9. Scorpio says:

    I set my son up in business in his own name, contracted to my practice. To legalise the situation from a tax point of view, he has his own independant clients as well. I, in turn, am contracted to him for those clients, carrying out procedures he is not qualified to do. This was done because he could not obtain employment in RSA – wrong colour. My daughter is a successful professional person in Australia and has offered to take my son on and give him the opportunity of a better life. Unfortunately, employment overseas is the only option the younger generation has. And so the brain drain accelerates, all in the name of politics lead by the blind and ignorant.
    My son is also a maestro when it comes to guitar playing. BEE cannot take that away from him. I cannot forsee any Jimi Hendrix (black) guitarists coming out of this country.

  10. I cannot agree with Scorpio about ‘Brain Drain’ as young people we all struggle and stretch ourselves to find our place. There is no alternative to this and son of Scorpio will benefit from the process for he was born in a country that teaches independence from birth. We must have done something right with many of our young people returning to bring up thier children!

    Trying to rectify the damage done by apartiet and any other historical social ill, was always going to be difficult and from my view, we somewhat pragmatic South Africans have at least got on and tried as best we could. Business marketing dictates we provide what ‘face’ your client wants to see, and make no mistake we in business will provide it. Currently it is a ‘black’ face with BEE credentials. Does that acutally address the core requirement of our country to develop ? To answer my own question it certainly does not, for the simple reason that managers, engineers and the legal / commercial are developed over time gaining experience. Making him or her the ‘MD’ of an enterprise actually insulates that individual from gaining the experience needed for them to be an entrepreneur! At least, one that is still going to be in business in 3 years time. There are NO short cuts to this process. We do therefore need a sunset clause on this issue. What we have currently helps only a very few.

    Trudi in her article has not mentioned the serious damage being done by the awarding of major government contract to our current list of BEE compliant contractors and service providers. I do not think is is overstating the facts that corruption is rampant in almost any large government issued Tender. Even the most efficient and ethical business has to provide the right ‘face’. They have to and they do, for they are South Africans and as such will ‘mak a plan’. Does this current BEE process benefit the development of our people in the long term. I think not !

  11. Scorpio’s description of his BEE compliant office reminds me of my friends comment when asked if his business is BEE compliant? He answers is YES as it is 50% black owned because the ‘black’ partner does 50% or more of the work ! But he goes on to confirm their BEE status as, he the ‘white’ partner drives a green Mercedes and his ‘black’ partner drives a white Mercedes !

    I would hope that puts this issue in prospective.

  12. ArRiEhD says:

    Wonkie. This may be the worst one sided and racist article you have ever published. If you will please answer me just one question, why can’t black people consisting of more than 80% of the population not start their own businesses. Why must they take the businesses of whites conisting of only 7% of the population. Blacks can run this whole country’s businesses if only they were capable of this. They have now been the atvantaged sinse the early nineties only waiting for handouts and stealing if they don’t or even get it. Ask the people something to do and they will look at you with blank eyes, but o boy give them a change to steal, etc they will come up with a solution immediately. Or put them in Government to become millionairs immediatly. Trudi’s website must be a disaster.

  13. ArRiEhD. It comes to somehow developing a people that need to generate wealth to pay for what is needed for us all to be housed, fed and watered. When it comes to economics, there is no such thing as being ‘black’, ‘white’ or ‘brown’. The very size of our ‘black’ population dictates they have to be exposed to training & experience in the same way we in the ‘white’ community have been.
    IF you sincerely believe they are not capable of internalizing training & experience I have to tell you you are very much mistaken. The growth in South Africa since 1994 must surely tell you and indeed all of us, that that the white community did not do that on its own !

  14. ArRiEhD says:

    Conman: Yes only with the aid of BEE legislation and only for their own pockets, with the poor getting poorer.

  15. Arriehd: Hence the need for a sunset clause for BEE, or, when will the ’emerging’ contractor or developing service provider ever ’emerge’ or ever be fully developed?
    The answer is if, your in either of the greedy ‘white’ or ‘black’ sub groups, of course it will be never !

  16. ArRiEhD says:

    Senseless comment as before. They will never be developed in 50 years, at that time the rest of the world will be yet another 50 years more advanced than they are at that stage. I am a pensioner with a meager income because of BEE. Comment closed.

  17. Not senseless actually, just reasonably informed comment.
    It took a 1000 years to develop The Brits and indeed Europe so 50 years will be a great improvement. Hope the pension holds out for a few more years, certainly BEE wont ! Best of luck!

  18. ArRiEhD says:

    Well then let it be as it may. Thanks, the pension holding out, well that’s a nother storie …. Go well.

  19. Tyrone applied for a fork lift operator job at a famous firm based in Detroit.
    A white man applied for the same job and since both applicants had similar qualifications, they were asked to take a test and led to a quiet room with no interruptions by the Manager.
    When the results were in, both men had scored 19 out of 20.
    The manager went to Tyrone and said, “Thank you for coming to the interview, but we’ve decided to give the white guy the job.”
    Tyrone: “What ‘cho mean, why you be doing that, you be racist? We both got 19 questions right? This is Detroit and I be Black, I should get the job.”
    Manager: “We have made our decision not on the correct answers, but on the question you got wrong.”
    Tyrone said, “Tell me how would one wrong answer be better than another?”
    Manager: “Simple. On question number 7 the white guy wrote down, ‘I don’t know.’
    You put down, ‘Neither do I’.”

  20. Interesting comments so far. It’s quite remarkable how people sometimes through the lens of their distorted perceptions. If you read the scenario in the first three paragraphs and the argument that follows from it, you wil see that I am not asking “white” business to support traditional BEE at all. White business should refuse to get into partnerships with black partners who do not add substance (rather look for a Mandla-type than a political type) and black people should stop thinking about BEE as a business model – it’s about the product, service, innovation that may (or may not) brought to market with the aid of white capital. Black businesspeople shoud stop being BEE players and become entrepreneurs. The problem is not just about how corporate SA treats black business people (which seems to be what commentators such as ArRiEhD
    only want to talk about), but also about how black people present themselves in the business sphere. And I would argue the aspiration should be that of black entrepreneurs as co-creators, not pictures in the annual report. As an aside, I’m intrigued by the commentators who seem not to realise that this article is a critique of BEE as we know it. I’m hoping we could have a more robust discussion about Empowermentt 3.0 – how “black” and “white” business meet the opportunities at the base of pyramid for instance…

  21. A good redirect Trudi ! For my part I want to see industry and Government find some format that enables that enables the gaining of ‘hands on’ experience in a mentoring environment, that’s how you nurture entrepreneurs. Some companies are doing it but it is difficult in current these low margin trading conditions. In the 70’s it was easy, the margins were there because the growth was there. Then we produced plenty of entrepreneurs, who went on to manage the many small to medium business we see today. The ‘sitting by Nellie’ training has served us well for centuries. The process trained me well ( despite the fact I failed my 11+ !)and indeed many others, while we produced a profit for our mentor.

    To make our much needed ‘Black Empowerment” process work.
    Select the right candidate. + Provide a support bursary for 1 year + renew on measured results. That will be not only effective but really really cheap because the employer is monitoring the expenditure and value of his mentoring time . That is my final input !

  22. Interesting article Trudi but as long as the top-down mentality is to continue to allow blacks only in token positions (a la government in South Africa – not just business), empowerment 3.0 will never materialise. Whites still have all the real power in the country.. Juju is right and you silly people will never see it. When he was commenting about the lack of black representation in positions of real power in the cabinet this is what he was referring to. Blacks only in the HR senior positions in business or non-finance positions in govt without the real economic power… I can’t wait till the sunset clauses are removed and the whites can suffer the full brunt of what they should be experiencing post-apartheid.

  23. “and the whites can suffer the full brunt of what they should be experiencing post-apartheid.” (Mabang) That is the mentality that sets yhe country rolling backwards. Revenge never won the day! History has proved that over and over again!
    If resources, both human and material, are not used to the benefit of all that have entitlement by birth, the hot air emanating from your imagined wisdom, is all that it is – low level aspiration!!

  24. Why are so many concerned about a miniscule seven percent whites? Are we such a threat? Instead of wanting the little we have, why not get out there and come up with your own innovative ideas and generate your own wealth. Don’t take the typical African stance – cap under armpit, hands cupped together stretched outwards for a hand-out.

  25. Mabang my Bru, you really asked for that!
    You do need to re-examine your attitude IF for no other reason than it just does not help you, or indeed us all to progress. After 18 years in power it is not ‘the whites’ that are holding you back. Your own Minister in Cabinet has stated quite plainly that, we ( talking about his own people) must all stop being ‘dependent’, Colonialism is long gone. As a ‘black’ South African, you just cannot continue to use it as an excuse, as neither can we ‘white’ South Africans use it as a ‘guilt’ trip, to excuse poor performance. We all need to make the necessary effort, that living in 2012 requires of all of us.

    All of us love this Country, but on its own it is not enough. You and I have to apply both ‘Love & Logic’ to make it tick, so there is a benefit for us all. Being independent mentally is empowering and a great feeling. PLEASE just DO it !

  26. a-maize-ingly-corny says:

    @ Conman
    Gee! What a refreshing change – a person whose comments show no fear and no favour – a person whose comments totally do not reveal any ethnic origin – but a person who makes very sound comments that are neither begging nor patronising.
    A breath of fresh air.
    Unlike “ArRiEhD”, which you may have noticed is almost an anagram of ‘air head’

  27. a-maize-ingly-corny says:

    Oh! sorry – I just spotted my mistake. Conman’s last comment included “we ‘white’ South Africans”
    But that appears to be the only ethnic clue.

  28. a-maize-ingly-cornhead or whatever. Less of an “air head” than you and the BEE Velvet Sky, Arora Mining who loves to see their people dying from hunger, but one of their bosses is so fat that he is not able to get out of his house to attend a court hearing. AIR HEADS PAR EXELLENCE!!!!!

  29. Trudi – concise and thought-provoking. Of course no systemic / legislated means to redress will ever tick all the boxes and appease the broad spectrum of our body politic… There are several big hurdles to overcome when developing the most pragmatic solutions to the inequality that still existis within the business world and society at large – the biggest of which is the ideological stance of the government (read ruling party). The 1st problem there is obvious; the broad church that is the anc…. The other aspect of this argument that is oft overlooked is the broader context that BBBEE is framed in; namely the other acts that legislate employment equity, work place skills development / seta’s (dysfunctional), etc. As a whole, they are a laudable attempt at redress from the disasterous results of the nats policy of afrikaner protectionism (expanded govt employment for unemployable halfwits) by systematic, legislated suppression and oppression and dehumanisation of the majority indiginant population. However, by their very nature (being legislation) they will always polarise opinion between the entrenched (who have VERY short memories – or trot out the tired “I wasn’t born under apartheid so didn’t benefit from it” Cliché). The reality is that all attempts at redress will need 2 things; TIME and the BUY-IN of the majority… funny how that plays into the hands of the historically advantaged who still control capital… Unfortunately you cannot legislate a change of heart which is why you will always have unsubstantiated race profiling by the likes of ArRiEhD (AirRhED?). There are more than enough quality “black” entrepreneurs to grow the economy and run with it (I deal with literally hundreds), the problem is the high profile public face of the tenderpreneurs and connected miscreants who give the generalisers food for their monocular world view.

  30. phred, what did you eat for breakphast?

  31. @phred
    “redress from the disasterous results of the nats policy of afrikaner protectionism (expanded govt employment for unemployable halfwits) ”

    Pity that the “redress” does exactly the same thing, at the expense of people who are now the wrong colour. The difference of course being that “halfwits” is now used complimentary.

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