Posted Sunday, April 11, 2004; 2.15BST
As corporate South Africa recognizes that transformation makes economic sense, other industries have begun to write their own charters. "For us it's a business imperative," says Johan van Zyl, ceo of insurance firm Sanlam. "If we really want to grow as a company, we have to be all-inclusive." Dali Mpofu, president of the Electronic Industries Federation, is more blunt: "If you're selling mobile phones, do you want to be selling to a market of 5 million or 40 million people?" The answer is clear: last year, more than $6 billion worth of empowerment deals were struck, according to accountants Ernst & Young, up from $1.9 billion in 2002.
But paying for one of the largest transfers of wealth in the history of capitalism is proving to be a headache. Most black South Africans have limited access to capital, and raising funds for even the most modest buyout can take months. The National Empowerment Fund, created in 1988 as the flagship vehicle for financing black ventures, has yet to announce a business plan, while the Industrial Development Corporation, a self-funding, government-backed development bank, has financed just $1 billion worth of deals in the past decade — a tiny share of the tens of billions of dollars needed. Commercial banks are growing savvier at finding creative ways to finance BEE deals. But for now, many deals still require the seller handing the investor a stake that he or she then, if things go well, pays for out of future profits.
Another problem is the dearth of black professionals, a legacy of the apartheid school system that deliberately gave blacks second-class education. Even as millions of South Africans struggle to find work, employers can't fill vacant positions. The problem: a massive skills mismatch between what companies want and what job seekers offer. Some black professionals regularly move jobs and charge a premium for their services. "You see guys jumping from one job to another and exploiting that shortage of skills," says Mandla Maleka, chief economist at Eskom Treasury, the financial arm of South Africa's giant power company. "And I wouldn't count myself out of that loop either." Maleka has worked at four different places in the past few years.
Then there is the dubious practice of "fronting," which occurs when a black face is hired to win contracts and mask a white company that has no intention of transforming. "They're nothing more than a glorified salesman while the white guys in the back office continue to take most of the profits," says Business Unity South Africa's Sibiya. "It's a significant problem." So, too, is the issue of how to deal with foreign firms, many of whom balk at selling stakes to South African investors just to do business there. The government is encouraging foreign firms to come up with creative alternatives. Foreign banks have agreed to provide financing for BEE deals equivalent to 25% of their value. Such haggling has proved healthy. In nine months of talks to develop a financial-services charter, "the representatives of the black community learned a lot about the issues and hurdles of the financial sector," says John Coulter, ceo at J.P. Morgan Chase South Africa and head of the Foreign Banks' Association. "And we learned a lot about the expectations, needs and difficulties of the black community."
Critics charge that BEE is enriching a tiny élite. They point to the fact that 80% of the value of the 10 largest BEE transactions last year involved just three men, all of them with A.N.C. connections: Cyril Ramaphosa, former party Secretary General and a key negotiator during talks to end apartheid; Tokyo Sexwale, who served time on Robben Island with Mandela and was later the premier of Gauteng, the province around Johannesburg; and Patrice Motsepe, whose sister is married to the Minister of Public Enterprise. President Mbeki's brother Moeletsi, a businessman and deputy chairman at the South African Institute for International Affairs, is one of the policy's most outspoken opponents. "We are not creating entrepreneurs," he said in a speech last year. "We are taking political leaders and politically connected people and giving them assets which they don't know how to manage."
Workers grumble that there should be more emphasis on improving rights for the country's employees, regardless of their color. They also worry that the government will undermine competitiveness and the supply of basic services because it favors affirmative action toward blacks rather than awarding contracts on merit. "If [BEE] means worse services, it can actually be disempowering for the poor," says Neva Makgetla, chief economist at the Council of South African Trade Unions. Others want to know the point at which a person no longer merits special consideration. Mining magnate Motsepe has built an empire worth more than $500 million. Should he still be considered disadvantaged?
The government counters that its scorecard system will deliver real change by focusing not just on ownership but also on training and employment. And many of the new élite insist that they act as vital role models for would-be black entrepreneurs. "The crucial issue has to be the growth of the middle class," Motsepe told Time. "Successful blacks have a very special role to play to ensure the meaningful upliftment of all our people. It's a huge responsibility, but one that we are willing and honored to bear."
As the complexion of the corporate world changes, the government hopes that South African society will also be transformed. There's a long way to go, but signs of change are everywhere, from Jaguar South Africa, which now sells more cars to black customers than white, to the appearance of black mannequins in upmarket department stores and blacks spurring strong growth in the insurance industry. "I wish I'd had these opportunities 10, 20 years ago," says businesswoman Mzamo. "It has given me the freedom to make my thoughts reality." Her business partner Webber also sees opportunity in the changes. "We've all got a role to play in making South Africa great. If you leave too many people behind it'll never work."
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