Down but not out – Economic transformation in South Africa

Johannesburg. October 2009. There is speculation that the recession is bottoming out or will bottom out by mid 2010, depending on which economist you listen to. Whether the recovery will take the shape of a W or V or L, nobody knows. The reality is we have been in recession for 12 months and it has caused damage to all areas of business, including Black Economic Empowerment (BEE)

Before the recession, South Africa was at a stage where it needed to review its progress on the hard and sometimes treacherous route of transformation, more specifically, economic transformation. This review is now even more necessary as we approach 2010, as it will mark 20 years since BEE, as we know it, emerged.

Whilst we should be careful of being lost in numbers and forget the fundamental reasons of the transformation process, we cannot ignore that some of the recent figures are worrying, to say the least. The Finweek edition published on 15 October 2009, quoted extensively from various reports, results and studies in its cover feature: “We’re all equal but some are more unequal that others- Fifteen years after the claim of democracy, we seem to be back to the starting blocks”. In quoting UNISA’s Bureau of Market Research it states, (page 17), “Last year, almost two thirds (61,9%) of black Africans were 'languishing' in the lowest income group, with just 0, 2% occupying the highest income bracket.”

What attracted my attention is the 0,2% cited in the study. To understand the context of this 0,2%, it has to be put in the following context:
· If the South African population is 47 million, then this represents about 94000 people
· The other race groups, other than black African, comprise 99,08% of the highest income
bracket
· If you were to take the average over the past 15 years, that would mean a petty 6000
more people being admitted into these upper echelons per annum.

If one thinks of how much time and energy has been devoted to this group that some have labeled as “black diamonds”, “usual suspects” and other terms, one wonders what we should be calling the other 99,08%.

The same article quotes from Statistics SA's Quarterly Labour Force Survey and states “By stark contrast, a whopping 80% of the richest 3% of the general population are still white. White unemployment stayed stable at just 4.6% – lower that 10% average unemployment rate among whites in the United States. Let me say no more.”

If you consider the above report and understand that most, if not all the statistics, do not cover the period of the recession, it starts to show that this recession has caused major set backs, especially noting that:

· Some BEE schemes have evaporated, leaving the companies they invested in
underpowered.
· Most vendor financing schemes have been reversed, in some instances permanently,
setting their BEE ratings back to where they were
· About 40% of the value has been lost over the period.

In my view, the progress of BEE is almost where it was in about 2005 and that is nowhere .

The same Finweek article offer some solutions for the government, amongst which are: “to increase services, design more teeth empowerment and transformation legislation and then wield bigger sticks to make sure companies adhere to it”. I wish we will not get to the stage of a bigger stick being wielded but that depends to a great extent on how, all of us, as the business community:
· Recognize the backlog which was there even before the recession
· That very little has changed over the past 20 years,
· That the recession has reversed a huge portion of the gains which were made and has the
nation back by many years.

Not all is lost. There are huge lessons which have been gained on which we should build. We should realise that if we do not move on our own, we are inviting government (rightfully so) to intervene. I remain optimistic that the storm will clear and the journey will continue, this time with a sense of urgency for our country and for future generations.