Self-enrichment is a poor foundation for transformation

THIS column is based on comments made by Mihe Gaomab, then president of the Namibian Economic Society, at a September 2005 function to launch a black economic empowerment (BEE) programme for small and medium enterprises.

There are interesting parallels between the statistics on Namibia’s transformation process and that of South Africa, specifically regarding the income gaps between different races, employment equity backlogs and unemployment. The Namibian Government’s aim is to ensure that the majority of the population is integrated into the mainstream economy.Some sectors in Namibia, such as the energy and mining industries, established transformation charters ahead of any Government intervention.In a nutshell, there is no official, coherent or integrated approach to BEE in Namibia yet, which is similar to the situation in South Africa in the first decade of democracy.Namibia has made progress on employment equity, but this has mostly been influenced by the public service and parastatals, which have driven affirmative action policies most aggressively.The position is similar in South Africa in that most progress at the top level and in senior management representation of black people has been accelerated by the Government.Gaomab’s speech touched a nerve when he outlined the challenges facing Namibia in driving its BEE process.The first challenge he identified was that of fly-by-night investment companies established without any sustainability intentions and with no ultimate goal other than self-enrichment.Part of the problem with these companies is that they receive a capital injection to begin their development, but these funds are redirected for personal consumption.Gaomab highlighted that “directors of, and investors in, these companies do not simply want to take the ‘road less travelled’ approach whereby it’s better to reap the fruits of the profits after the company has established itself but starts to eat from the root itself”.Linked to this is that people who have no expertise, qualifications or experience in running a business are always at the forefront of these transactions, and they don’t gear up to meet the challenges.There was a stage when South Africa had the problems highlighted above, but over time they have been minimised.Fronting has taken a different mode because of the level of sophistication involved and the difficulties in detecting some of these elaborate schemes due to extensive collusion.What stands out for me from these comments is the lessons we still need to learn in South Africa.Some black people are still going into ownership deals not because they want to create long-term value for others and themselves, but because they want self-enrichment.We still have people who may not have the appropriate skills, who want to run companies that they have no clue about and wish to get paid obscene amounts just because they are black.The alchemy of BEE does not lie in being black but in being able to transform and create value in the economy in a sustainable manner for all South Africans, especially those who were previously discriminated against.It is good to seek and maybe achieve quick wins but the reality of the transformation process is that it is going to take time to change and transcend the mentality that has been ingrained in most people’s minds over the past 350 years.The key message from Gaomab is that South Africans need to start building a solid foundation for economic prosperity.This foundation will come from building companies with the sweat of our brows, where we can get practical experience that can be put to use anywhere in the world.We need to acquire skills and expertise that would enable us to succeed whether the markets are good or bad.A parting shot from Gaomab: “We as a nation need … to learn perhaps more about delayed gratification and reaping only what we are sowing, and not gobble up what we ought to use in the first place to develop the companies that will ensure a foundational example of the concept of BEE.”Business ReportThe Namibian Government’s aim is to ensure that the majority of the population is integrated into the mainstream economy.Some sectors in Namibia, such as the energy and mining industries, established transformation charters ahead of any Government intervention.In a nutshell, there is no official, coherent or integrated approach to BEE in Namibia yet, which is similar to the situation in South Africa in the first decade of democracy.Namibia has made progress on employment equity, but this has mostly been influenced by the public service and parastatals, which have driven affirmative action policies most aggressively.The position is similar in South Africa in that most progress at the top level and in senior management representation of black people has been accelerated by the Government.Gaomab’s speech touched a nerve when he outlined the challenges facing Namibia in driving its BEE process.The first challenge he identified was that of fly-by-night investment companies established without any sustainability intentions and with no ultimate goal other than self-enrichment.Part of the problem with these companies is that they receive a capital injection to begin their development, but these funds are redirected for personal consumption.Gaomab highlighted that “directors of, and investors in, these companies do not simply want to take the ‘road less travelled’ approach whereby it’s better to reap the fruits of the profits after the company has established itself but starts to eat from the root itself”.Linked to this is that people who have no expertise, qualifications or experience in running a business are always at the forefront of these transactions, and they don’t gear up to meet the challenges.There was a stage when South Africa had the problems highlighted above, but over time they have been minimised.Fronting has taken a different mode because of the level of sophistication involved and the difficulties in detecting some of these elaborate schemes due to extensive collusion.What stands out for me from these comments is the lessons we still need to learn in South Africa.Some black people are still going into ownership deals not because they want to create long-term value for others and themselves, but because they want self-enrichment.We still have people who may not have the appropriate skills, who want to run companies that they have no clue about and wish to get paid obscene amounts just because they are black.The alchemy of BEE does not lie in being black but in being able to transform and create value in the economy in a sustainable manner for all South Africans, especially those who were previously discriminated against.It is good to seek and maybe achieve quick wins but the reality of the transformation process is that it is going to take time to change and transcend the mentality that has been ingrained in most people’s minds over the past 350 years.The key message from Gaomab is that South Africans need to start building a solid foundation for economic prosperity.This foundation will come from building companies with the sweat of our brows, where we can get practical experience that can be put to use anywhere in the world.We need to acquire skills and expertise that would enable us to succeed whether the markets are good or bad.A parting shot from Gaomab: “We as a nation need … to learn perhaps more about delayed gratification and reaping only what we are sowing, and not gobble up what we ought to use in the first place to develop the companies that will ensure a foundational example of the concept of BEE.”Business Report