The black lives matter movement has created a stir around the world, with black people and other marginalised groups coming out against being treated and perceived as though their lives are less than. Black people are generally in the minority the world over, outside of Africa, and because of the effects of slavery over the world, have always been at the back foot economically, and always striving to attain equality in different forms.
South Africa, a country in Africa, can definitely relate to the calls from the Black Lives Matter movement of the US, mainly because black people are still at the back foot economically. Despite being the majority in physical numbers, they are still the minorities in the economy, despite all the interventions that the government have implemented over the years, chief of which being Broadbased Black Economic Empowerment (‘BEE’).
However, the implementation of BEE has left much to be desired. The focus on ownership over the last 20 years has not resulted in a shift of 25% of all companies into black hands. Instead it has led to investment companies that have done their best to grow their portfolios, and over time, start exercising some influence over their investee companies. Because of the effects of the standard 10 year lock in period, the only reason to get involved in a BEE transaction, is in the hopes of receiving a profit, net of debt, after the 10 years, and then buy more investment assets. This does not change the face of or ownership of companies.
However, there is an opportunity that is presented by the Sale of Asset provisions of Statement 102 of the Codes of Good Practice. Companies can sell parts of their income generating assets, such as divisions, subsidiaries, or even properties, to black owned companies. The idea behind Statement 102 is that a sale of a business (please note, not a franchise) to an entity owned by black people, means that they take ownership of something that has been proven to generate business, and the codes allow for a period of not more than 3 years, for the initiating company to transfer skills to the other business to ensure it is sustainable. Think of all the early mining transactions where certain mines were sold to black people that became the basis for the creation of black billionaires over time. These types of transactions ensure that there is little
interference from the seller over time, and they are able to claim the value of the business, in comparison to their own value, as part of their BEE ownership equivalence percentages. And the black purchasers are able to own an asset, exercise control over it, and turn that into an even bigger business. Better than starting from zero.
There are of course pitfalls with any and every initiative you would choose. Firstly, the sale of an asset does not necessarily assist in stimulating the economy, as it is essentially sharing in the same economic pie, but with more say over it. However, what we have found is that it can act as a launching pad especially if the sold asset was not the core business of the seller, and little attention was given to that particular division or product line. It has been known to happen where the value of the sold business overtakes the value of the initiator over time. Also, some transactions lead to situations where a new business is created to hold the asset, without any intention of growing the business. This happens when the seller creates a black trust that will own the asset, with the trust mandated to hold and not even manage the asset. It may count, but it does not move the needle.
Of course, support for start-up companies is the fastest way to grow the economy, and create other options to absorb the ever growing unemployed workforce, as opposed to splitting what already exists. However more thinking needs to go into making Enterprise Development work, with better incentives for both business and government to fully commit to assisting in the establishment, development, and sustainability of black owned entities.
As a country in Africa, black people should not feel like their lives do not matter, due to the legacy of apartheid, compounded by an ineffective government that is being disabled by corruption. However the citizens all have an opportunity to choose initiatives that can lead us towards some level of equity, that is inclusive, and can lead to prosperity for all the citizens.