Posted Sunday, April 11, 2004; 2.15BST
Milase Mzamo knew what her future business partner Shaun Webber would look like before she even met him: white, male, construction worker. "I was thinking big like a rugby player," says Mzamo, 36, who, with three other black women, owns a company called Infinity Inc., founded in late 2002 to buy a stake in Cape Town's booming construction industry. "And when I met him he was those things." But over lunch last August, Mzamo discovered that she had more in common with Webber, the managing director of design and building firm NMC, than she might have guessed. Both were raised in the Eastern Cape and share a passion for golf. More importantly, both agreed that together they could build NMC, which currently takes in around $30 million a year, into a major player.
"I remember walking away thinking, This is someone I can do business with," says Webber, who concedes that he was looking for a black partner to help win government contracts. "She brings what we needed, which was access to markets. But she also fits into the company culture." Three months ago, Mzamo and her partners at Infinity signed a deal to buy 15% of NMC. "I don't know much about construction yet," says Mzamo, who has worked as a journalist and in events management. "But give me a couple of months and I'll be a builder along with the rest of them."
The story of Mzamo and Webber is a common one in South Africa these days. The country is in the midst of a business revolution as control of the economy shifts from the white minority to the black majority. Frustrated with the sluggish pace of change, President Thabo Mbeki often speaks of South Africa's "two economies": the first, prosperous, developed and mostly white; the second, poor, underdeveloped and overwhelmingly black. "To build a unified nation based on equality and justice," Mbeki said last month, "we must ensure that the economy is in the hands of all our people."
To get more black hands on the economic levers, the government has introduced Black Economic Empowerment (BEE) charters, which encourage companies to train more black workers, promote more black managers, procure supplies from black firms, and — as in the case of Mzamo and Webber — sell ownership stakes to black investors. In many ways, the future of South Africa depends on a successful handover. If it fails, the country will remain one of the most unequal in the world, and economic growth is likely to stagnate as crime and poverty grow. Make it work, and South Africa's huge economic engine could help rev up the entire continent.
By the measures of South Africa's first economy, the African National Congress (A.N.C.) government has done a good job. Ten years ago the country was swinging between boom and bust, and was in its third decade of double-digit inflation. The rich were sending their money overseas and the apartheid government was running a massive deficit. These days, most indicators look better. South Africa is experiencing the longest period of uninterrupted growth in a half- century; the inflation rate is a respectable 3.5%. Some 30,000 people applied to bring home millions of dollars in overseas assets as part of a recent tax amnesty, and the budget deficit is down to 3% of GDP. South Africa has a better credit rating than Brazil or India.
But South Africa's second economy has fared far worse. True, the government has built 1.6 million new houses and connected millions of people to the national power, water and telephone grids. But poverty remains stubbornly stuck at around 45%. Unemployment has jumped from 19% in 1994 to 31% last year. Economic growth is steadier, though only half the minimum 6% per year economists estimate is needed to fuse Mbeki's two economies into one. Even the initial postliberation flurry of "black chip" listings on the Johannesburg Stock Exchange fizzled, and by the late '90s black ownership in public companies was actually declining. After peaking in early 1998 at 9% of listed stocks, black-owned companies fell to around 5%, where they remain today.
So maybe it's not surprising that pollsters note a small but growing number of blacks experiencing "apartheid nostalgia." "It's not that they want to return to apartheid, but in retrospect it was a time when things worked better," says Robert Mattes, co-director of the Afrobarometer poll, which in 2002 found that 20% of black South Africans described some aspects of apartheid as positive. To move beyond this sad nostalgia, the government is putting its massive buying power — $20 billion a year, or just under 20% of GDP — behind the BEE charters. Any company that employs more than 50 people and wants to do business with the state — from supplying stationery or software to building a new road — must fill out a "scorecard" to prove it is empowering "previously disadvantaged individuals" — blacks, coloreds and Indians.
To reassure investors that the BEE agreements don't amount to state control, the government has made the charters nonbinding. But by making procurement from black firms one of the central planks of the new policy, the result is the same. "You just have to have a few key players demanding that all their suppliers are empowered, and because businesses are interdependent, you start a snowball effect," says Colin Reddy, BEE research director at BusinessMap Foundation, which tracks the South African economy. "Pretty soon, no one can afford to sit and do nothing."
Even so, BEE got off to a bad start. Two years ago, when word leaked that mining companies would have to sell 51% stakes to black owners within 10 years, investors wiped millions of dollars off mining stocks in a single day. A few months later, when the mining charter was finally approved, black ownership levels had been set at 26% — enough to create a critical mass of middle-class blacks, insisted the government, but not so much that the market would choke. "That massive flight of capital caused the President and the government to pause and say, 'We can mess this up,'" says Bheki Sibiya, head of Business Unity South Africa, an umbrella group of white and black businesses. By the time the charter was launched, the mining industry, which accounts for more than one-third of South Africa's exports, had also recognized that real change was needed. Over the past 18 months a flood of deals in the industry has increased black ownership to around 15%, well on the way to the 2012 goal. Even diamond miners De Beers, long a symbol of white might, will soon sell a stake to black investors.
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