South Africa

The BEE in our bonnet

By Stephen Grootes 16 September 2013

That there is something wrong with the way we currently run Black Economic Empowerment isn't a novel statement. We all know that somehow it's immoral and very hard to justify. But the current ruckus over the Gold Fields deal really reveals just how failed an experiment it is. And it also shows up what is wrong with the entire system. By STEPHEN GROOTES.

It’s hard to argue with the rationale behind BEE. Except in the comments section of News24, it cannot be in dispute that there is a need to take wealth from the beneficiaries of Apartheid (even if they weren’t alive then) and give it to those who lost out then (including those who weren’t alive then, too… economics is really unto the third generation, remember). And when it comes to somehow trying to do that without completely disrupting the economy, there actually aren’t that many ways to do it. Can you imagine trying to impose higher taxes on whites, for example? Even once-off, it would create more outrage than your average French rugby referee.

So putting some kind of a tax with a racial element on companies, and putting it, generally speaking, on new business, whether it be licensing for a gold mine, or getting government contracts or whatever, actually does make economic and political sense. Some black people do get rich, the companies involved shrug and pay slightly more to carry on with business as normal, and the economy chugs along at 2.5%.

The problem, of course, comes in with whom exactly you make rich.

This is where the Gold Fields deal comes in. Ten days ago the Mail & Guardian splashed a story claiming that ANC Chair Baleka Mbete demanded and received a R28.6 million stake in Gold Fields. The firm had got itself into a corner in that it needed more black ownership just as it was trying to get a license for its new South Deep mine. The paper says that essentially, through an intermediary, Mbete let it be known that that was her price, and that if it was not met, the license would not be forthcoming.

Gold Fields, having no other option, caved. And then the American regulators decided they must investigate this, as it looked rather fishy to them (Gold Fields has a secondary listing in the US, thus giving them jurisdiction). Of course, Mbete, through the ANC’s media machinery, has strongly denied doing anything wrong. She’s demanding a retraction and an apology, and threatened, as angry politicians like to do, to “explore her legal options”. Well, don’t think the M & G is going soft just because Nic Dawes has gone to India. It ain’t, and it’s sticking to its story. Which means that if Mbete’s threat turns out to be hollow, perhaps we shouldn’t take her denial at face value either.

This leads us to Monday, and probably the best public explanation of how BEE deals really work that has yet been published. It comes, no surprise to those who know her, from Carol Paton in Business Day. Paton is at pains to stress she has not managed to get anyone to speak to her on the record about how these deals actually work. Which is odd, when you think of it. BEE deals started in the mid-90’s. Surely by now some retired grumpy old fart (who clearly doesn’t work for ANN7) would have broken his or her silence. Surely there would have been a falling out, Cosatu-style, that would have seen wonderful details of who got what from whom. But that hasn’t happened, which is in itself perhaps an indication of how high the stakes really are in these deals.

But Paton’s sources point to one really salient, and fairly obvious fact. When it comes to BEE deals, the names of the people who must be included in it – in other words, the people who will get millions – come in some way, shape or form, from Luthuli House. It’s the ANC that really decides. The company can certainly enrich others, but there is a list of “non-negotiable” people who must benefit.

I realise that you are probably not surprised. We knew that, right? But what’s surprising is the fact that it’s all kind of out in the open and that no one seems to care how much money is being paid over here. What does Baleka Mbete, for all her life experience and political skill, bring to Gold Fields that is worth R28.6 million? The answer can only be her political influence. Nothing else. It’s a similar question to why the Guptas pay Duduzane Zuma a salary – and why he nearly received a billion rand for that ICT mining deal in the Northern Cape. He’s just around the thirty-year-old mark now. So it can’t be business experience. And he doesn’t have a Wharton School of Business doctorate in Stuffing the Opposition. So it has to be his name, right? Surely.

So then, if it is so rotten, how do we fix it?

The real problem here is not so much with the idea of BEE itself. It’s to do with the amounts involved for individuals. If you like, empowerment is one thing, enrichment is something else. For Mbete to receive something for her retirement, considering the life she’s led, is fine, in that it fulfils the other aims of transferring wealth to black people. It’s the amount that is really the problem. R28.6 million is surely just greed. Why was it such a high amount? What on earth does she need that money for? Does she have a friend who over-spent her premiership credit card at Steers? Or maybe she models her spending habits on Floyd Mayweather?

The problem is, by making the stakes so high, people are not just going to lobby to get involved, they’re going to lie, steal and cheat. And there’s another major problem. You then limit the number of people who can benefit in the first place. So instead of spreading the wealth, you just make some people super-rich, when they don’t deserve it. They certainly don’t seem to work for it once they get their stakes.

One of the lessons of history is that people in power will always fix the system to suit themselves. That’s certainly the lesson of our history – just look at the way President Zuma structured the state around his own needs. What is also frightening here, is that while we all know that something is deeply wrong, in fact, no one does anything about it. Oh, there’s the odd criticism from the unions (back when Cosatu was one organisation), and something, sometimes, at the politically opportune moments from the SACP, but that’s about it. That may be an indication of how deep the tentacles of those now in power reach.

It also shows us how difficult it’s going to be to change this system. Those with money only become more entrenched, not less, over time. Their children are in a primary position to stay in the elites. And it wouldn’t be in their interests to spread the wealth.

The only way to really counter BEE is to stop focusing on giving away wealth, and start focusing on creating wealth. If there are more and more businesses employing people, and more money around generally, the focus on BEE will simply slowly disappear. Those in power will be too busy creating their own firms and will lose their need to steal someone else’s. With a bit of luck, many will consider concentrating on their business careers, and see that as the route to riches, rather than politics.

But it’s going to be a very long haul before that happens; the BEE era still has a long, long way to run.

To change all of this is going to take time. But it will happen. Because it is becoming politically harder and harder to stomach. Getting into a BEE deal is now something only those who are leaving politics soon can manage. Because the risk of getting into the wrong deal, or of it being used against you, is simply too great.  DM

Grootes is the host of the Midday Report on Talk Radio 702 and 567 Cape Talk, and the Senior Political Correspondent for Eyewitness News. He’s been part of the political hack pack since before the Polokwane Tsunami, and covers politics in a slightly obsessive manner. Those who love him have recommended help for his politics addiction. He quotes Amy Winehouse.

Photo: South Africa’s President Jacob Zuma (R) jokes with his party’s newly appointed Deputy President Cyril Ramaphosa at the National Conference of the ruling African National Congress (ANC) in Bloemfontein December 18, 2012. South Africa’s ruling ANC re-elected Zuma as its leader on Tuesday, setting him up for seven more years as head of state of Africa’s biggest economy. REUTERS/Mike Hutchings


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