Black Economic Empowerment Commission: briefing by Cyril Ramaphosa & Lott Ndlovu

Meeting report

TRADE AND INDUSTRY PORTFOLIO COMMITTEE
13 September 2000
BLACK ECONOMIC EMPOWERMENT COMMISSION: PRESENTATION

 

Black Economic Empowerment Commission presentation

SUMMARY
The Black Economic Empowerment Commission was formed two and a half years ago to study ways to empower black South Africans to participate more fully in the economy. Cyril Ramaphosa, Chairperson of the Black Economic Empowerment Commission, explained the basic elements of the documents that would come from the Commission. He spoke of black economic empowerment as part of the transformation process, explained the need for it, and set out the institutions that the Commission would be proposing to implement this. These include an Investment for Growth Accord, a Black Economic Empowerment Act, and other implementing agencies. Following the presentation, there was extensive discussion.

MINUTES
Mr Cyril Ramaphosa, Chairperson of the Black Economic Empowerment Commission, made the main presentation. He explained the Commission's origins and its objective in terms of developing a coherent case for black economic empowerment and development strategies. The Commission had engaged in wide-ranging consultation and was moving toward a 200-250 page discussion document for later in September. Today, he appeared before the Committee in order to brief them on a preliminary summary of this document.

Mr Ramaphosa explained first the need to define black economic empowerment and the Commission's focus on it as a transformative process aimed at redressing past inequities and ensuring meaningful economic participation by black people. He explained that there is both a moral and an economic case for this process, the latter because of the economic repercussions of marginalising the black majority outside the economy.

Mr Ramaphosa explained the key elements of the National Strategy that the Black Economic Empowerment Commission is proposing. First, he referred to the idea of an Investment for Growth Accord, which would involve commitments by government, business and labour. These would include commitments to investments in areas of national priority. Mr Ramaphosa stated that this is a mild initiative that would help to overcome the confidence problems that Governor Mboweni of the South African Reserve Bank has recently brought to the fore. He suggested that such an Accord could kickstart the economy and lead to a higher growth path.

Second, Mr Ramaphosa spoke of a Black Economic Empowerment Act. After briefly referring to the situation of black women in South Africa, he stated that this Act would address a need for a measure of coordination. It would define black economic empowerment, set out indicators by which the private and public sectors would measure progress, set procurement targets, and require government departments to file annual black economic empowerment reports. At this point, Mr Ramaphosa referred to his experiences in business and the phenomenon of companies on journeys of self-discovery with employment equity legislation that are learning how they have wasted resources and ignored the need to uplift the disadvantaged. He stated that the parameters in the Act could give guidance to people to pull up their socks and join the new South Africa.

He explained that the Commission proposes three implementing agencies. First, there needed to be a body in the President's office (which he called the National Empowerment Commission) so that these issues would be at the highest level. Second, there should be a National Procurement Agency that would change government tendering. Third, the document explained the more complex proposal for a National Empowerment Funding Agency that would address issues of capital availability.

Finally, Mr Ramaphosa referred briefly to the need for an integrated Human Resources Strategy that would address the great crime of the denial of appropriate education to black people. This would be a key to unlock the future for all. He also briefly referred to the need for institutional and structural changes that would address rural development.

Mr Ramaphosa concluded by expressing his hope that this strategy would lift up people who have not been meaningfully and actively participating in the economy and help raise all of South Africa to a higher level.

DiscussionProf Turok (ANC) described the document as very impressive and as proposing a kind of new RDP. He indicated that he had one question about the lack of confidence issue. He noted that he did not see an equivalent coherent dedication to South Africa among black professionals and black businesses. He asked if there could be a united front of black professionals and black businesses. Mr Lott Ndlovu, Commissioner of the Black Economic Empowerment Commission, assisted with the responses to some questions, including this one. He stated that there are two separate threads to consider: black professionals and black capitalists. He stated that neither thread is strong enough to make a major contribution here. He indicated that organisations of black professionals have frequent changes in their leadership as their leaders have other opportunities, so these organisations are inherently weak. He stated that black business is more an idea than a reality and that blacks have historically been simply consumers. He also noted that the black bourgeoisie almost does not see the need to mobilise and that its members are not helpful because they begin to think that they have succeeded because of their personal merit and then refuse to help others. Mr Ramaphosa stated that the patriotism is there among black professionals and black businesses but that it needs to be nurtured, encouraged, and enhanced on an ongoing basis. He stated that these communities need to articulate progressive positions.

Mr Zita (ANC) indicated that he welcomed the document as a breath of fresh air. He asked first a procedural question as to what the role of trade unions had been in the Commission. Mr Ramaphosa indicated that all and sundry had been invited to participate in the Commission but jested that COSATU and similar organisations had been too busy organising marches. He indicated that there had, however, been formal consultations, and there would be further consultations.

Mr Zita (ANC) noted that it was good to talk about affirmation but that this did not obviate the need to address structural defects in the economy. Mr Ramaphosa stated that black people, once affirmed, would address the structural defects in the economy. He also stated that many of the Commission's recommendations go to these structural defects.

Mr Zita (ANC) asked how black economic empowerment relates to class forces among workers, the black middle class, and the black bourgeoisie. He noted that workers might want to own businesses or work for cooperatives. Mr Ramaphosa gave his comment on workers as owners as "why not?". He indicated that the report would call for new forms of ownership in terms of community ownership and even share ownership. He stated that the Commission was also studying cooperatives. Mr Ramaphosa concluded that the report would find ways for many more people to be players in the economy and that it is exciting to try to spread ownership. Mr Ndlovu added that unions themselves are often capitalists through their investments and there are issues about the clarity of their position on class issues. Mr Ndlovu stated that the issue of whether race or class is the prior issue in South Africa has not been resolved. He said that it is similar to the issue of whether black women are women first or black first. He said that the answers to such questions have important implications but that we do not yet have answers.

Mr Zita (ANC) also asked what happens if white business disagrees with the proposals. Mr Ramaphosa emphasised that the recommendations in the report would be modest, would not be about "prescribed assets", and would avoid disrupting the market. He said that he could see no reason for white business to oppose them. He indicated that he had met with captains of industry and discussed with them the fact that the way to avoid becoming another Zimbabwe is to take proactive steps to deal with problems sooner rather than later.

Finally, Mr Zita (ANC) asked whether there might not be a need for changes in the banking sector and asked if it would be a good idea to have a type of African State Bank. Ms September (ANC) later noted that in Spain, there had been changes to the banking sector and noted there might be different thoughts on things to do in this sector. Mr Ramaphosa noted that the idea of a state bank has been proposed but stated frankly that the Commission has not applied its mind to it.

Ms September (ANC) asked whether the expectation is to have the economy follow the same cyclical patterns with empowerment or whether this strategy will alter the economic format. Mr Ramaphosa stated that he would like to believe that the answer is that things will be done differently. He stated that the apartheid era had had many distorting effects. Mr Ndlovu later added that this is a situation where we need changes of form before we can have changes of substance. He stated that the idea is that once we reach a critical mass, it will no longer be business as usual, but we need to reach that critical mass first.

Ms September (ANC) asked if the proposed Investment for Growth Accord would be over and above other accords such as that at the recent Jobs Conference. He stated that the Investment for Growth Accord was to be in support of other initiatives and to add to them rather than replace them. He emphasised that it was the Commission's humble contribution to a complex debate.

Ms September (ANC) asked for comments on the proposed Sacob / Nafcoc (South African Chamber of Business / National African Federated Chamber of Commerce) merger. Mr Ndlovu noted that many people in the Black Economic Empowerment Commission saw dangers in rushing in without knowing all the impacts and thought that there should be a debate in the Black Business Council. Mr Ramaphosa later clarified that the Commission itself takes no position on the issue.

Ms September (ANC) also asked whether part of the training aspect FOR black people would be training BY black people. Mr Ramaphosa noted that an African proverb reminds us that if you point a finger, you point three at yourself. He stated that training by black people is very important. Mr Ndlovu later added an extra comment that it is very important not to let training become an excuse. He stated that not every black person needs training and it is important to endorse training without falling into the myth that so long as they have life in their bodies, all black people need to be constantly in training sessions.

A committee member welcomed the document but had some fears. She noted her support for the idea of making changes in the banking sector and asked how long all the implementation would take and whether it would be another five years before there was any help for black businesses. Mr Ramaphosa stated that the Commission would propose broad time frames targeted around different aspects and structured around achieving certain goals. Ms Andrea Brown, Researcher for the Black Economic Empowerment Commission, noted that the National Empowerment Funding Agency (NEFA) would make changes in the way capital was available for small businesses. Mr Ndlovu stated that banks can be both a strength and a weakness in the transformation process. He noted that because banks are part of the society being transformed, they too will have to face transformation. South African banks are at a level of international acceptability but that they do have to be changed to serve the community.

Ms Sigabi (DP) stated that she welcomed the report but she had a few questions. She asked first what the state of small business is in this country. Mr Ramaphosa stated that there is no need to research the state of small business in this country as it is well-known. He stated that black small business faces major hurdles and that government funding has gone to white businesses. Small business faces problems of access to capital, skills and markets and he emphasised the first two as the big challenges for black business. He stated that there is a need for a broad strategy and a government body to deal with the problems of small businesses.

Ms Sigabi asked what concrete proposals there were in terms of the development of human capital and how the Commission would support institutions of excellence to address the problem. Mr Ndlovu acknowledged the need for excellence in human resources development and stated that the Commission would try to link its recommendations to excellence. Mr Ramaphosa admitted that the proposals here were not entirely specific. He stated that other countries had set targets as to numbers of graduates from different programs and that he would be prepared to "go bold" and say we should have such numbers. He stated that these should come from the President in the highest office in the land.

Ms Sigabi also asked whether there would be a perpetuation of the same structures that were holding back black businesses. Mr Ndlovu noted the need for new forms of ownership that would make black people more than workers. There was no further comment specifically on this question.

The Chair noted that the document was very important. He asked if the Commission had an impression of a widespread perception among black businesses of discrimination in the banking sector. Ms Brown replied that the Commission's work had identified huge problems in this area and that black business spoke uniformly of the banks' unwillingness to make money available to them. There is indeed a perception of racism in the sector. Mr Ndlovu stated that, leaving aside the issue of whether there is deliberate racism in the sector, there is no doubt that there is discrimination. Mr Ramaphosa added that black businesses would definitely say that there is racism and that, even if it is sometimes muted on big deals, it is always there.

The Chair asked how far the Commission envisioned community reinvestment legislation going. He asked if it would stop with disclosure requirements or if it would go on to this disclosure informing market and government decisions or if it would go further to actual targets. There was no specific response to this question.

Ms Taljaard (DP) indicated that she had several questions of form and several of substance. She began by asking whether the Commission's upcoming conference was to be open to all and what its methodology would be. Mr Ramaphosa stated that whoever wishes to go can go, subject to the payment of a small fee. There were already advertisements in the papers to invite people.

Ms Taljaard asked if there had been any discussion of these proposals at the recent summit between government and labour. Mr Ramaphosa stated that there had not been, although there had been discussion with Alliance partners throughout the process.

Ms Taljaard asked what the Commission envisioned in terms of the interaction of commercial and public enterprises. Ms Brown referred to the expectation that the report and guidelines would firmly guide the public sector.

Ms Taljaard noted that there seemed to be a problem of short political memories. She noted that there had been major changes to procurement policies implemented in February and asked if there should not be an assessment of its effects before the Commission began recommending other changes. Ms Brown stated that the suggestions were not based on a review of the operations of the new Act but based on general analysis and research starting from past procurement policies. She stated that the Commission had some concerns about aspects of the new policy from this perspective. She mentioned concerns about it being formula-based and not considering guidelines, supply development, and supply management.

Ms Taljaard asked about the diluted form of a prescribed assets requirement and asked why there was no indication in the report as to a similar requirement on unions as on businesses. Mr Ramaphosa stated that the strategy is not about prescribed assets but about investment for growth and that he hoped the newspapers would get this right. He stated that all have responsibilities and commitments to make but that union holding companies are still very small.

Ms Mahomed (ANC) asked about skills needs and asked if the Commission had considered (a) small and medium enterprises (SMEs) and micro-entrepreneuring; (b) incubating in the present cocoon; and (c) technikons and tertiary institutions. Mr Ramaphosa commented favourably on the incubation of SMEs. He added that many young people are going to technical institutions and acquiring good practical skills.

Ms Mahomed (ANC) asked about the gender component and whether the Commission had "engendered" its objectives in terms of making women part of the mainstream economy. Mr Ramaphosa stated that the Commission thought it had, although it acknowledged that there might be weaknesses here. He stated that he hoped people would point any of these out to him. He stated that the Commission had considered dealing with women separately in a different chapter but that it would then have had a concern that it was marginalising them, so it chose to deal with women's issues holistically.

Mr Moosa (ANC, NCOP) indicated that there is an unstated assumption that a black business is a small business and thus all resources should be channelled to survivalist and micro enterprises. He asked what the Commission would do to separate its Black Economic Empowerment strategy from strategies for small business, since he considered that these are separate issues. Mr Ndlovu stated that it is a simple matter of honesty that black business is small business.

Mr Moosa also asked what the strategy has been with small business and what should happen to institutions dealing with small business. Ms Brown noted that government funding has gone significantly to survivalist and micro enterprises through programs designed to address market failures. She stated that the challenge now is to bring all of these into one entity. She stated that the design of NEFA would address constraints on SMEs. Mr Ramaphosa stated that the Commission would not be devising the whole strategy for how to deal with small business. He noted the Commission's concerns that institutions working in the area had been funding white businesses. At this point, there were shouts of agreement from some members.

Mr Moosa also asked if the Commission had considered the Reserve Bank's proposal of a bond on the open market like that used for the war effort in order to raise some high risk capital. Mr Ramaphosa stated that he had heard this proposal, that the President had mentioned it at the Millennium Labour Council, and that there was some prospect of it being dealt with.

During the discussion, Mr Ndlovu also tossed in a comment about the need in appointing officials to bodies to appoint people ready for transformations, the need to avoid people who are apologists, and the need to appoint people adequate to the task and to the ethical demands of the task.

At the very end of discussion, Mr Ndlovu noted that he wished to add a comment on the Credit Bureau. He stated that if it were an individual, it should be arrested and put in jail. He stated that it denies blacks access to loans. He also noted that because debt is not an African tradition, many blacks get a credit record only when they are forced into debt. He stated that the Credit Bureau featured among many businesspersons' concerns.

Before adjourning, the Chair thanked all who had been in attendance.