It?s time to change the BEE discourse

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It?s time South Africa looks at BEE in a new light and re-ignites initiatives to support and develop high-potential entrepreneurs.

This is according to Ciko Thomas, best known as the founder of the first fully black-owned BMW and Volkswagen dealerships in central Johannesburg and current marketing director at Barloworld Automotive after an empowerment deal which saw Thomas take ownership of a 0.44% slice of industrial giant.

Thomas was speaking at the Distinguished Speakers Programme hosted by the UCT Graduate School of Business earlier this month.

"The Broad-Based Black Economic Empowerment Act of 2003 and Government?s BEE Strategy states its aim of addressing inequalities resulting from the systematic exclusion of the majority of South Africans from meaningful participation in the economy. When we stress test this against the mainstream discourse on BEE it is rather discomforting to see where the focus is today,' he said.

"The current focus is around the reapportioning of white capital. There has been a trend in the recent past in business of black entities buying 25.1% of white-owned businesses - the minimum requirement for compliance for these firms. A large part of the public still fails to think deeper about how black people can participate in the economy beyond 25.1%.'

Thomas explained that current perceptions have been shaped by the way BEE has evolved since 1994 and the role of the media tending to glorify these types of "re-apportioning' deals at the expense of true entrepreneurial ventures.

Between 1994 and 2000 the discourse was split between the beginnings of BEE and the new wave of post-apartheid enterprises. Players pre-2000, such as Herman Mashaba, began as very small and relatively unknown players in the entrepreneurial space. The period from 2000 - 2003 saw the beginning of the "mainstreaming' of BEE.

A new set of players such as Patrice Motsepe and Tokyo Sexwale took centre-stage - no one knew of these people as business leaders before this period. Then, from 2003 - 2007, BEE launched into the stratosphere with a significant number of deals (i.e. Old Mutual, Nedbank and VW).

"SA all of a sudden had a whole new class of super-wealthy oligarchy - these have become household names associated with BEE deals,' said Thomas.

Things, however, are beginning to change again in the BEE space. "We have in the last couple of years for the first time seen a shift towards more broad-based BEE deals such as those of SASOL and Vodacom.

These have given ordinary people significant chunks of the deals. We have also seen a new type of "operator-entrepreneur' emerging, such as Andile Mazwai (securities industry) and Given Mkhari (advertising),' said Thomas.

But the problem, he added, is that even today despite these advances to more broad-based deals, when deals are announced it?s often the case that many people focus on the "usual suspects', as they see it, involved in the deals.

"There is cynicism in the mainstream discourse despite the good things that BEE has achieved. Today the perception from many quarters, particularly the left of the political sphere, is that it is unattractive to make money.'

Thomas asserted that for him the reality is much different and BEE is working much better today for many more people, particularly ordinary citizens.

He added that, in focussing so much attention on BEE dealmakers, entrepreneurship has also not received the focus it deserves.

"We know that entrepreneurship delivers major strategic benefits to the economy. If we look at India we see the growth of IT entrepreneurship there - some of the best software programmers can today be found in that country. It?s a similar story in Japan and South Korea in heavy industries.

"Putting entrepreneurship high on the socio-economic agenda can help SA meet a number of key challenges such as: poverty reduction, sustainable economic growth, greater income equality, social and economic inclusion, and building a national economy that is based on innovation and cutting-edge technology,' Thomas asserted.

Yet we continue to dither, he added. There are four key reasons for this: the failure to separate high growth entrepreneurship from SMME policy, failure to recognise the role of education/ skills, failure of forward-looking national policy and the failure to delink the debate around entrepreneurship from the debate on BEE.

"In addition, the media plays a part in the lack of focus on entrepreneurship - only recently have I seen articles broadening the discussion on BEE. I just saw an article on franchising and BEE in a top business weekly - it is really exciting to see new ideas being explored beyond the big deals and the 25.1% notion,' said Thomas.

There is much work to be done though to boost entrepreneurship in the country. Thomas pointed out that the Global Entrepreneurship Monitor, the leading annual global study on entrepreneurship, shows that South Africa lags behind many other developing countries. The study shows there is little penetration of international markets, innovation is under pressure, employment creation is not encouraged, regulation is a costly burden, and entrepreneurs lack key business competencies.

Can we overcome these challenges? Thomas believes we can as a nation.

"Two key things we must do is to ditch our inferiority complex and encourage more local venture capital to be directed at businesses in South Africa,' he said.

"We need political leadership to show the way and social activism - it requires this two-pronged approach. We need great leadership and stewardship from the top and great social activists to stir change on the ground".

"We need to deal with the BEE debate from its current focus on redistribution of white capital to a more philosophical realm which the BEE act evokes. We need a clear departure from the practice of "politics-as-theatre? and drive action".

"We need to clarify SA?s pro-poor stance. We need to articulate a clear entrepreneurship policy and aggressively incentivise entrepreneurship and innovation, and we must sort out the education system.'

"Are we up for it as a nation? Yes I believe we are!'

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