Three weeks ago, Jabulane Sikhakhane, well respected in providing informed commentary on matters black economic empowerment, in an article published in the City Press, lamented the narrow simplification of BEE to an share-buying or selling spree. Truth be told, he raised valid and relevant points.
Ostensibly, the modus operandi in the current empowerment niche is that a big company, more concerned about about loss of business or sticking out as the odd one out more than anything else, would engage with a hastily assembled consortium of high profile well-connected ‘previously disadvantaged’. Then, it would sell a stake of its business to them to earn empowerment credentials it desperately needs, after that, bingo, business as usual. Of course, there would be lot of media mileage, with grinning images of representatives of both parties, shaking hands, exploiting the rare limelight to good effect. However, the flaw of this approach, though supposedly well-intentioned, may not ensure that wealth in the mining sector filters down to the deserving majority, as beneficiaries are confined to the elite.
Even though the current BEE sharebuying model can be loosely labelled elitist, at the current pace of economic growth, even the elite may have a shallow pool of assets to dabble in. In the current environment, even established business that have been running for decades on end are either folding or scaling down their operations, due to the COVID-19 pandemic and a lingering economic recession.
Classically, one can reference the situation in the mining sector, particularly in gold mining sector, where shares of established mining houses have been sold to consortiums headed by high profile elite black South Africans. Nonetheless, in the past thirty years, there has not been investment in new mines, shafts and other areas. This means that there are no new assets, which translates into a shrinking piece of pie for black South Africans to participate in, undermining the initiative of using the mining sector as one of the vehicles of transferring wealth to black South Africans. One cannot rule out this scenario playing out in other commodities as well. In this environment, there is paucity of opportunities for black South Africans to buy stakes of companies.
Instead, offering a sustainable solution, Sikhakhane suggested going beyond buying shares of a white-owned existing companies by facilitating the establishment of competitive black-owed businesses in new businesses niches. Pitifully, the current perversion of buying shares of established businesses has turned out to be elitist and the preserve of a well-connected individuals, something anathema to the wealth transfer.