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Anger over enrichment of black elite

[South Africa] Durban Skyline IRIN
Towering office buildings are a symbol of a stable, growing economy - but many South Africans live in poverty.
South Africa's black economic empowerment (BEE) programme, meant to address the economic inequities of apartheid, is coming under intense scrutiny as deal after deal seems to benefit only an elite few. The latest announcement of a BEE deal involving Andile Ngcaba - the former director-general of the department of communications, now a board member of information technology giant Didata - and ruling party spokesman Smuts Ngonyama, who are acquiring a 15.1 percent stake in phone monopoly Telkom, has sparked outrage. The Congress of South African Trade Unions (COSATU), the largest trade union federation in the country and an alliance partner of the ruling African National Congress (ANC), has slammed the deal as "the very worst form of so-called 'black economic empowerment', which benefits only a tiny elite". COSATU added that "this deal ... will do nothing to help the overwhelming majority of South Africans". The country's most influential daily, Business Day, in a front-page editorial labelled, the deal "an insult to the poor". Commentators have increasingly begun to question whether the last 'e' in BEE stands for enrichment, rather than empowerment. Analyst Reg Rumney of the BusinessMap Foundation told IRIN on Thursday that "without doubt there's growing resentment" over the nature of BEE transactions. The Telkom deal follows a raft of similar transactions, most recently by three of South Africa's 'big four' banks with politicians-turned-businessmen, such as Cyril Ramaphosa, Saki Macozoma and Tokyo Sexwale. All three were already wealthy prior to their deals with the banks, having media, mining and wine estate interests. Leading members of the ANC have also questioned how many times an individual can be "empowered". Ngcaba and Ngonyama are part of an "empowerment consortium", to which US-Malaysian group Thintana has agreed to sell its stake in the telecommunications parastatal, Telkom. The Thintana group bought the Telkom stake seven years ago when the government was looking for a strategic equity partner. Such deals have raised "fundamental questions about the involvement of former and present government and political leaders in ... share-buying schemes," COSATU said. "Was, for example, Andile Ngcaba, when DG [director-general] of the department of telecommunications, working to create the conditions for such a deal, which he is now able to take advantage of? Is this not a typical example of a government policy-maker throwing a javelin into the private sector and then picking it up before it has landed, as a businessman? Is there also a conflict of interest between his shareholding in Telkom and his current position as chairman of Didata, which is a potential rival to Telkom?" COSATU asked. Business Day argued that "by creating a tiny class of favoured black capitalists, in much the same mould as the established class of white ones, the economy does not change shape ... this is no way to create a secure future for a democratic market economy in South Africa". Commenting on the Telkom deal, Rumney said: "There are a number of [concerns] ... one is the potential for a conflict of interest with someone sitting on the Telkom board and on the Didata board; the second is the perception of poor governance, in having someone move directly from government into a well-paid private sector job; the third is the concern over a narrow-based versus a broad-based empowerment; and, fourthly, is the perception that political connections are being used for enrichment." Rumney noted that a "cooling-off period" had already been mooted for senior government officials wanting to move into the private sector, "particularly at the level of director-general, as there's a possibility that they could frame policy in government, which they then take advantage of when they leave for the private sector." The fact that the same names kept coming up in relation to equity transfer deals was simply because "there are only a handful of black people who already have money, a track-record and [a political] profile" who are viewed as adequate partners by white capital, Rumney said. While there was no doubt that ownership of South Africa's economy had to be diversified, the country had been "relying on normal business process to grow the pie, and BEE to split it up", he noted. "We need to ask 'how do we get BEE to grow the pie, get more businesses and more competition? There seems to me to be groundswell to rethink the equity [ownership] side of BEE. I don't think people object to employment equity or affirmative action, as they realise you cannot have a business sector that's completely white; but the problem with equity transfer is that it's trying to address one issue only: inequality of ownership. Where has BEE led to job creation?" asked Rumney. "We need to decide what exactly we are trying to do: encourage black business or just redistribute ownership?" he concluded.
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