The new South Africa has witnessed the advent of Affirmative Action [AA] and Black Economic Empowerment [BEE] as a course of action for employment and wealth equity. The evolution of these concepts over the span of almost a quarter of a century have resulted in gross abuse at the expense of the masses, for whom this was to be an economic panacea.
Evidence confirms that most JSE listed companies have either misunderstood BEE or arrogantly ignored the programme since black ownership stands at 3% of public listed companies. According to bdlive.co.za “…The ownership scorecard has a target of 25% for direct black ownership. There is no target for indirect ownership, which occurs where an institution or other investor owns shares on behalf of beneficiaries and there may not be direct participation by the beneficiaries in the voting rights …” While Alec Hogg quoting the JSE statistics, reports that the number stands at 23% , this however is not a record of direct ownership since 10% is in the form of complex Bee Schemes involving high interest Debt and derivatives and 13% via indirect ownership through unit trust and Insurance companies. We may conclude that direct ownership by black persons is far from the targeted levels and sadly ‘smoke and mirror’ type statistics are offered with respect to a simple computation.
The path followed by many of the JSE listed companies was to award large blocks of shares to politically powerful individuals, a system designed to ensure that reciprocity of contracts or tender awards would be forthcoming. This behaviour confirms a wealthy future for ‘White business’ with a misunderstanding of the spirit of AA or BEE. The result was the creation of a group of super wealthy, the ‘Black Diamonds’ which include Ramaphosa, Sexwale and Motsepe, a cluster with political gravitas awarded millions of Rands worth of shares.
These large listed entities have clearly abused the system, many of the directors of these companies count as board members of multiple companies, this further compounds the error of wealth distribution. The study, according to politicsweb.co.za, of the number of Black directors on the JSE by Empowerdex records an improvement of Black directors from 485 to 1046 during the period of 2006-2012, however the study is flawed in that it does not include duplicity.
A case in point is Patrice Motsepe, who has more than 8 appointments concurrently, he may not be in a position to properly contribute to boards that he sits on, it is submitted that each of these positions if tasked correctly should take considerable time and energy. Who’s who goes on to site that he is at a senior level of many JSE giants spanning over 20 years. The tragedy here includes that each corporate position is not appropriately worked, further the previously disadvantage individuals are not always right skilled for the positions, they are then placed in successive roles in a variety of industries. If under this yoke black people do not fair well , we may well be conclude that they are spread to widely over various boards or chosen more for political favour then talent. A further summation must be that the ‘white companies’ that employ these board member really don’t care whether they contribute at the board level or not, they have a sprinkling of colour for statistical purposes and another political puppet at the table. It may be the case that the appointments is without actual contribution and merely for “colouring”.
BEE and AA has an importance beyond words on law statues, this embodies much of what the liberation struggle was for. Wealth empowerment in a broad based sense is what was intended, the result is a creation of the Black Elite with continued poverty and social inequity for the masses. The above abuses act as murky barrier for true progress domestically. It may well be appropriate to change posture in our outlook on AA and BEE, possibly an opportunity for stricter codification of the law in this area so as to address this lacunae in the Commercial Law environment. A due consideration of punishment for Companies that do not appropriately comply.
We must admit that in South Africa during the period of Codes a much of the negotiated settlement that architected our future rested upon a cogent understanding of proper wealth redistribution. The promises made them had the impact of staying off land grabs, looting, violence and forced stakes in mines and large JSE companies. Much of the pain in the rest of Africa is as a result of the unplanned colonial hand-over. As south Africans we were determined not venture down the path of chaos chosen by the rest of the continent. The stubborn approach by many listed companies may create the cracks in our country. Poor choices about wealth distribution, and random duplicity of board members may well be the catalyst for a downward spin. We notice during periods of poverty and economic depravity that the masses become restless, this is the breeding ground for extremist political parties and break away unions.
Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views and opinions of MANCOSA.