Presentation by Roger Southall

• Largely based (but not exclusively) on my chapter in HSRC’s forthcoming State of the Nation, and dealing with ‘Black Empowerment and the Limits to a More Democratic Capitalism in SA’
• Can BEE drive us towards a more humane, more democratic capitalism? Links in with ANC’s notion of a patriotic bourgeoisie, one which invests at home, eschews conspicuous consumption, promotes investment in townships and rural areas, promotes black skills and managerial capacity.
• Question fits in with the recent debate about whether BEE is elite empowerment or broad based – which was fueled by the recent bank deals. This debate was joined by leading ANC and COSATU spokesmen – responding to such headlines as ‘Fat Cats Take Loot’
• Revealing govt frustration with progress of BEE. Since 2000 a more assertive strategy but results appear limited – only 4% black ownership of JSE 2004.
• And a wider concern – voices of capital joining in saying BEE should proceed through such devices as employee share ownership to devise a more cooperative capitalism.
• Notion of stakeholder capitalism increasingly touted – whereby managers and corporations have to balance interests of ‘stakeholders’ such as workers, consumers, governments, local communities against those of shareholders – managers are rendered accountable
• Stakeholder capitalism promoted both by capitalist advocates and social democrats in post-Soviet world: Anglo-American market versus European style social market capitalism. Undeveloped in SA but even COSATU uses the language of stakeholders.
• But – SA industry remains heavily concentrated. 40% of market capitalization of JSE owned by just five firms; another 31.3% by 8 banks and institutional investors; plus 18.5% by foreign groups. Recent bank deals likely to reinforce these trends
• Echoes British experience of growth of influence of finance capital and institutional investors, which are increasingly dominated by managers, who are increasingly unaccountable. Unbundling and internationalization. Most of our large companies are now owned by institutional investors, yet few of these own controlling shares – leaving destiny of large scale corporations overwhelmingly in hands of managers, who are assisted by shareholder apathy. Plus culture of impunity from the law.
• Reflected in the growing rewards to non-executive directors and CEOs – ‘greed’ of top black executives is matched by wider and whiter high level managerial rapacity – During 2003-04 SA’s top executives received pay increases well in excess of 15 per cent, more than double the rate of inflation, widening further the gap between themselves and skilled and semi-skilled workers. Overall differential between executive pay and minimum wages rose from 37 in 1994 to 48 in 2004 – forced disclosure has set off a race for the top.
• Govt response to such developments – has been since 2000 a more assertive strategy to promote black ownership of commanding heights of the economy. Charter movement – pressing capital to set medium and long term goals for black ownership and skills empowerment etc. Resulted in DTIs’ Draft BBEE Code of Good Practice December 2004. – focused on targets for black equity and ownership, employment equity, skills development, equity procurement, enterprise development etc – broad target of 25% ownership by 2014. Points system.
• This relatively comprehensive approach suggests potential to change face of SA capitalism over medium to longer term – but what will be the nature of that transformation? In this context, instructive to examine BEE’s impact upon the corporate elite and extent to which BEE is developing a black business class more generally.
• Spectacular wealth accumulated by a few figures since 1994. Attitude towards them is ambivalent. Admiration and Brickbats. But no doubt that there have been changes in SA power elite. ANC government, increasingly black control of SOEs, plus some blacks assuming leading position in corporate world. Various measures – eg Empowerdex 2003 saw Ramaphosa wielding market influence of R137 billion, 25 top black directors market influence of R1.2 billion. Top ten black CEOs presided over companies with market capitalization of R42 million. This sort of data inevitably problematic – but even such fuzzy details indicates blacks penetrating corporate corridors of power.
• FM agrees – 9 blacks rated among the 20 most influential people in SA business in 2003. No blacks had made that list in 1993. 9/10 persons tipped to make the list within next five years also black. FM sees: convergence between political and business elites, although this likely to lessen as black business class expands. ‘These people have decisive influence beyond their sphere of business, on the way business is done ….have the ear of policy makers and can move markets”. In short, they can deploy money and resources influencing lives of millions of South Africans.
• The wider extent of a black business class: BEE heavyweight companies continue to dominate – DTI says 72 per cent of total deal value in 2003 involved at least one of top six black companies. But: 40% of deal value of BEE transactions in 2004 involved broad based entities.
• Difficult to assess – but BusinessMap records many deals since 2000. We see that BEE deals, large and small, are being concluded over a wide array of sectors, by a wide range of BEE entities (owned variously by individual,s manages, employees, investment trusts and unions) through a variety of devices (outright purchase, loan purchase, joint ventures with established firms, buy-outs and partnerships). Even though often debt finances, moving into hands on involvement in mining, manufacturing, and services. Reflects modest growth of black m/c.
• BUT – if BEE propelling SA towards a deracialisation of capital, transformation so far of limited benefit to mass of population. Share ownership schemes remain limited and complicated by tax laws. Broad based trusts and so involved in investments often seem to ‘tail end’ the big players and offer little prospect of involvement by ‘stakeholders’. Govt strategies with regard to small business have hitherto made limited impact. BEE deals seem to involve mostly buying into existing businesses, and critics say few are job creating. Overall, black share in SA’s aggregate household income said to have declined from 54.5% in 1995 to 53% in 2000 (Simkins).
• So is SA capitalism becoming more democratic?
• ANC keen to see blacks sharing ownership and management of corporate sector; new black moguls and white magnates eager to legitimate a ‘kinder’ capitalism; organized labour keen to harness capitalism into providing improved benefits for workers and wider poor. Hence espousal of stakeholder capitalism and corporate social responsibility.
• But obstacles in the path. White dominated corporate culture often uncomfortable territory for blacks – yet blacks are making some progress in scaling walls of corporate power. Plus we do see growth of a larger black business class backed by the potential of the Charter movement.
• However problems for advocates of stakeholder capitalism: since 1994 SA capitalism more like contemporary capitalism of western world; no longer contained and protected by state imposed barriers, domestic conglomerates have unbundled and internationalized; international and domestic finance capital increasingly dominant over manufacturing; shareholding concentrated in hands of institutional investors, whose fates determined by managers who are less and less accountable to even shareholders and even the law; gap between top executives and workforces widening alarmingly in a country where patterns of inequality deeply entrenched. BEE may promote a black bourgeoisie, but seems more likely at present time to blur boundaries of race and class than to propel SA capitalism in a more inclusive, accountable and equalizing direction.