Do South African Corporates Have Their Heads In The Sand

I have been operating in the BEE industry for well over a decade and have found myself fighting a deep, creeping cynicism over the last year. It’s hard to tell whether this is simply because I’ve spent too many years in the industry or whether it is because things have become increasingly dire.

Never before has there been a greater standoff and mistrust between the government and the private sector in the BEE space.

On the one hand, you have policy-makers who go through the motions without any real attempt at understanding the practical, on-the-ground realities of the BEE legislation they have created. The policy is deeply rooted in the proverbial stick, and if business doesn’t want to transform, the answer must be to get a bigger stick. The idea of providing a carrot was blasphemous – at least until the introduction of the Youth Employment Service (YES) initiative, which is in my opinion the first potential carrot that BEE has produced.

On the other hand, you have many business owners and corporates who really don’t want to transform. Although some companies certainly care where their money goes and show a concern about impact, this is far from the prevailing view. Companies that see a strategic advantage in BEE, the opportunity to tap into the value of diversity (proven globally time and time again) or an opportunity to access new markets and opportunities are also few and far between. They see BEE as simply yet another tax to pay in an over-taxed society, not a tool which we can use to create the change which South Africa needs to pull ourselves back from crashing over the edge of a cliff.

My biggest frustrations in BEE stem from policy failures, market failures and rampant fronting. An example is when clients “buy” disabled learnerships because that’s what the Codes incentivise as the cheapest Skills points. One can’t pretend that points and “incentive” don’t exist, but you know that sausage factory training academies are exploiting disabled youth and pocketing the profits, and that most businesses don’t have the time or inclination to consider how to accommodate disabled employees. Prolific fronting happens through BEE affidavits that you are compelled by the policy and the DTI to accept, even though large generic entities are getting Ownership points they shouldn’t be getting and real black entrepreneurs are being undermined.

Another unfortunate example is when ESD money goes to businesses that are 74% white owned but structured to look like they’re 51% black owned. Funding institutions also pull the upside out of preference share structures (which no one except an elite few understand, and companies that have maybe 5% real black shareholding look like they’re 51% black owned. When all of this happens, it can be difficult to stay optimistic in order to keep pushing the true transformation that South Africa so desperately needs.

That’s not to say that BEE hasn’t had some success. Without it, I doubt we would have made the progress we have made with skills development, hiring and promoting of black employees and buying from black owned businesses. It’s just that we could have done so much more. We could be doing so much more. So much BEE money is wasted, goes into a black hole or ends up in the pockets of advisors, facilitators, funders and opportunists. As a nation, we simply cannot afford this.

A recent article from the Daily Maverick highlighted that, while global inequality is increasing, South Africa’s inequality doesn’t mirror global patterns of wealth and income distribution and is unequal in the extreme, with the top 10% earning 67% of all income. In fact, as many as 75% of South Africans are struggling to get by. The data simply does not reflect a “burgeoning black middle class”. South Africa’s schooling system is ranked 140 out of 140 countries in terms of maths and science. Intergenerational income mobility, where children get a better shot at life than their parents, is statistically almost impossible. Stats from 2017 show that 19% of black graduates are unemployed, compared with 4.7% of white graduates, and only about 10% of our youth even make it as far as obtaining a tertiary qualification. If this statistic alone doesn’t scare you, nothing will.

BEE is a policy that measures inputs and outputs. There are one or two indicators that measure outcomes – which are sometimes manipulated for short term gain – and no indicators that measure actual impact. It’s no wonder that businesses view BEE as a tax; they aren’t incentivised to think of it in any other way. If we aren’t careful, the YES initiative will simply become another box-ticking exercise. If that happens, we are on shaky ground indeed. We saw what happened with Fees Must Fall,
and if we “give opportunities” to a million youth, raise their expectations and then fail to deliver on jobs and career paths thereafter, we can expect them to be more angry than if their hopes were never raised in the first place, and rightly so. We need far more than pretend jobs at R3,500 a month for economically active citizens – we need youth, with solid foundations, ready to be upskilled and who can enter and hold down real jobs paying living wages.

South Africa does indeed need radical economic transformation if we are to steer clear of corporates who continue to support corruption and state capture. We need strong, decisive and ethical leadership that leads by example, instead of leaving it to politicians and angry youth.

We don’t have to have the perfect policy. We just need business leaders to wake up and understand that change is necessary, to take ownership and help to create impactful implementation of solutions that work for all.

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