ADDRESS BY HON. PREMIER T S P MAKWETLA AT THE PROVINCIAL BEE CONFERENCE, EMNOTWENI ARENA
24 May 2007, Nelspruit
Program Director,
MEC for Economic Development and Planning, Hon Craig Padayachee,
Members of the Executive Council present,
Members of parliament
The Director General, Mr. Khaya Ngema
The Executive Mayors of:
Mbombela, Councillor Justice Nsibande
Umjindi, Councillor Richard Lukhele
Pixley Ka Seme, Councillor EM Madonsela
Head of Department of Economic Development Ms Smangele Sekgobela,
CEO's of Parastatals, MTPA, MADC, MEGA and MRTT
Captains and leaders of Industry
Organised business
Distinguished guests
Ladies and Gentlemen
We are gathered here to reflect together on the path we have traveled not only to grow our economy, but also to increase the proportion of those who were previously marginalized from owning and operating our common economy.
In its preamble, the Broad-Based Black Economic Empowerment Act (Act no 53 of 2003) is very eloquent about the nature of the challenge facing our society with regard to the equitable distribution of incomes and assets and patterns of participation of the majority in the economy of our country. The democratic government inherited a society in which race had been a primary determinant of access to productive resources and skill.
We know from history that the marginalization of black people in economic terms did not just happen. It was consciously designed and implemented with commitment and discipline throughout the colonial and apartheid period. Thriving farmers, traders and professionals from black communities were systematically dispossessed and denied the possibility to participate and grow this economy. It is always important to remind ourselves that there is a history of meaningful black economic participation even before colonialism.
Early in the life of our democracy, it became apparent that left to the market alone, these years of socio-economic engineering would not be undone. In the Freedom Charter we pronounced that the people shall share in the country's wealth. To give effect to this pronouncement, the interventionist approach of a developmental state that facilitated the empowerment of blacks became inevitable. Since 1994, we have turned around the economic performance of our country. To date the main anomaly of our economy remains the exclusion of the majority of the population from the ownership of productive assets and possession of advanced skills.
As a consequence, our economy has not really performed at its full potential. This is so because such exclusion results in deficient demand for goods and services resulting from the low levels of incomes earned and output generated. Simply put, as a province and as a country, we would be in higher levels of growth and employment if our economy was not constrained by skewed participation rates, incomes, and ownership of assets. Broad-Based Black Economic Empowerment is an important policy instrument to broaden the economic base of the country, to stimulate economic growth, to create jobs while eradicating poverty.
The Broad-Based Black Economic Empowerment Act rightly defines Broad-Based Black Economic Empowerment as ‘the economic empowerment of all black people including women, workers, youth, people with disabilities and people living in rural areas through diverse but integrated socio-economic strategies. Such strategies include:
• Increasing the number of black people that manage, own and control enterprises and productive assets;
• Facilitating ownership and management of enterprises and productive assets by communities, workers, cooperatives and other collective enterprises;
• Human resource and skills development;
• Achieving equitable representation in all occupational categories and levels in the workforce;
• Preferential procurement; and
• Investment in enterprises that are owned or managed by black people
Among the interventions that this government has done was to promote an economic environment in which broadening economic participation became an incentive for the growth of business. We did this because we understood both the economic and political imperative for our country to prosper for current and future generations. We understood that this generation had to do what was necessary to position this economy and this society for sustained and balanced growth. This was complemented by initiatives undertaken by some of the more visionary business leaders who took the baton from government and worked with our initiatives resulting in a range of industry charters in key sectors of the economy.
According to the 2006 survey conducted by Thornton 's International Business Owners, 70% of South African Business Owners indicated that BEE was a key issue for them in winning business. The survey indicates that business owner opinion on the importance of BEE is on the rise across all regions and business sectors in the country.
One of the challenges to BEE is the fact that in all economies emerging businesses face barriers to entry relative to established businesses. Yet the evidence everywhere shows that the most dynamic economies in the world maintain a healthy balance between established and emerging businesses and between big and small businesses. BEE will have the effect the effect of introducing a range of players in the economy thus promoting competition and innovation. This will depend on how the new BEE players position themselves within the economy.
One of the areas of concern with regard to black business in Mpumalanga is that, relative to other provinces, we have not built a thriving and self reliant black entrepreneurial class to a meaningful extent. Many of our black businesses have not allowed themselves over the past thirteen years to develop and grow, to acquire a defined set of competencies, to build a reputation in the market-place, to acquire the latest technologies, and eventually compete on an equal footing with white business. Although it is understandable that at the beginning black business may start at the lower levels of the value chain, we have always hoped that they would eventually graduate to higher levels. However some of us have not invested in the growth and consolidation of our businesses. Some of us have even allowed ourselves to be used as fronts over and over again. Some of these fronts have been notorious for their methods of acquiring business. In other instances government has suffered through poor quality goods and services.
It is the intention of government to ensure that Black Economic Empowerment goes beyond just addressing narrow equity ownership and incorporate broad-based empowerment structures and the development of critical skills. BEE should therefore be viewed as part of the business growth strategy as all elements of empowerment such as training and affirmative procurement address the sustainability of emergent enterprises.
Program Director, our experience regarding our efforts at Black Economic Empowerment from the days of the MEEC and MII to date can be summarized as follows:
• Lack of capital, while generally acknowledged as the main constraint to the growth of black enterprises, is by no means always the most important one. The incubation process in Middleburg funded by the DTI, known as the Mpumalanga Stainless Steel Initiative has demonstrated to us that business and technical skills are an essential part of BEE. The experience of the incubator suggests that big companies will procure from and partner with smaller companies where they have the comfort of mitigated risk, sustainability and delivery.
• The second lesson is that there is a general shortage of medium sized black businesses that can readily take up opportunities for joint ventures and partnership. The case of Jacob Magagula is instructive. A former backyard welder who made window frames on a small scale; today through the incubation process he services a standing order for at least ten housing units per week. The question we may want to ask ourselves is should we not integrate the growth of small enterprises through incubation into our empowerment efforts rather than simply structuring deals that deliver no long term sustainable enterprises. Black Economic Empowerment must be seen in the growth of small enterprises into medium sized and bigger ones, supported by institutions such as Umsobomvu and SEDA.
The economy of Mpumalanga is made up on the one hand of major capital intensive industries such as mining, energy and hi tech manufacturing which pose the challenge of barriers to entry for new entrants. Procurement from BEE companies by the big players in these industries provides an easy entry route. Substantial public and private investment is targeted to the energy and mining sectors. Black business must position itself to participate in these opportunities and not be limited to government procurement.
On the other extreme, we have relatively labour intensive industries such as low tech manufacturing, agriculture and tourism. While entry barriers are not that onerous in these industries, service standards must still be maintained at a high level. It is for this gathering to device strategies for black companies to penetrate these sectors.
Ladies and gentlemen, in our province, we need to see a significant increase in the number of black people that manage, own and control the provincial economy as well as significant decreases in income inequalities. Towards this end, the department of Economic Development and Planning has now established a BEE unit whose aim is to facilitate the implementation of BEE in the province. Government will, through the Department of Economic Development and Planning, engage in a number of activities to ensure that business get all the necessary information with regard to BEE legislation and opportunities. The Department's BEE unit will be engaging itself in regional BEE summits focusing mainly on the 7 elements of the scorecard. We would like to call upon our big businesses to come forward and share all the opportunities with stakeholders in the various districts before taking them outside the province.
We must all agree that there has been limited progress on Black Economic Empowerment in the province. While the private sector has moved slowly, government programmes were not particularly strong in terms of procurement from black business. In an effort to address the difficulties and challenges faced by business in meeting the targets of the BEE Codes of Good Practice, government has commissioned a study to look at the current provincial spend to establish where and to whom government expenditure goes.
While government makes commitments such as to accelerate preferential procurement and pay service providers on time, black business must build capacity to deliver quality goods and services, failure to do so impacts negatively on service delivery. In the final analysis, the people who receive services from government want quality houses, clean water and reliable power supply, even if that may not be delivered by a black owned or empowered company.
The MEC for Economic Development and Planning will establish a BEE advisory Council. The Council shall advice the MEC and his Department on a number of issues pertaining to BEE. This Council will deliberately be dominated by members of the business community, both big and small to ensure the advancement of BEE in the province. We hope that such council will also strengthen the linkages between big and small businesses
This conference was convened partly to communicate the Codes of Good Practice on Broad-Based Black Economic Empowerment but also to help government to shape its strategy in facilitating BEE. Such a strategy must give clear guidelines on ways to achieve our BEE objectives as a province. We must continue strengthening our partnership with the private sector and the various BEE support agencies, to accelerate the implementation of BEE in the province.
I wish you all productive deliberations.
Thank you!