Skim-reading just the bolded text may save you time
Our ruling party and the third-largest political party in the National Assembly are having identity crises around land ownership and “radical economic transformation.” The latter has become justification for far-reaching cabinet reshuffles. At any rate, the parties are egging each other on to see who’ll blink first on the ownership of your business.
A good BEE rating will inform forward-thinking companies’ offensive (profit-making, competitive), defensive (risk-management) and public relations’ strategies. The alternative is the private sector will be scapegoated as populist sentiment strengthens. The reason BEE hasn’t fully alleviated the effects of apartheid is that in design and use, it’s been to enrich a few politically-connected elites.
Playing judge, jury and executioner, the government will try to frame business for the State’s crimes, and then sacrifice it for atonement. For the sake of amassing enough social capital to buffer itself against the onslaught, business needs to position itself as having fought for real BEE from before this hit the fan. This will push the responsibility from it as the scapegoat, back to the State.
The alternatives to BEE (in terms addressing the effects of apartheid), such as nationalisation and land expropriation without compensation, are antithetical to the principles of free trade and enterprise. BEE is, in a sense, unavoidable.
Just after Moody’s agreed to pay a $864 million settlement to U.S. authorities for its role in the 2008 global financial crisis, the ANC Secretary General and his deputy fed the rating agency’s admission of fallibility into their conspiracy theories on “imperialist agendas” and regime change. Standard & Poor downgraded South Africa to Junk Status; this will probably add to the ANC’s rhetoric that the West is against African self-determination (as it supposedly conflicts with its interests).
After the Moody’s scandal broke, the Competition Commission uncovered collusion on the part of over a dozen banks. This is more ammunition for the ruling party, for private-sector collusion undermines the integrity and legitimacy of free trade.
Then there’s the scandal with the Department of Social Development.
If we were the ruling party’s spin doctors, we’d admit that when business does business with government, corruption ensues. Then we’d join up with the EFF in National Assembly to change the Constitution so government could nationalize more industries in order to prevent the corruption that supposedly forms between office-bearers and businesspeople. Indeed, one of the tenets of communism is that a “capable state” is what helps avoid state-capitalism affairs.
We’re not saying this is the right thing for the ruling party to do; we’re saying that the ruling party may have to do such things to justify shifting further left and making business the scapegoat and the subsidiser for this shift.
Indeed, the recall and firing of former Finance Minister Pravin Gordhan was based on a non-existent or false intelligence report with paranoid allegations that he and the Deputy Finance Minister, Mcebisi Jonas, were conspiring to overthrow the State with global captains of industry.
As Business Day’s Bianca Capazorio said on the former Public Protector’s address to the Cape Town Press Club,
“[Thuli] Madonsela said she had also noticed how the use of the phrase ‘white minority capital’ had started to flourish in the wake of her [State Capture] report, and that she had read how governments in Africa ‘whip up ethnicity as an issue’.”
Madonsela also said,
“As long as face of poverty is black and a woman‚ and the face of wealth is white and male‚ that is a recipe for disaster.”
Around the world, the accelerated development of communication technology has fast-tracked the convergence of business regions’ activities around the narratives, or “unspoken themes,” that define the geo-political spaces those businesses operate in.
In the face of increasingly competitive environments, these companies have seen the need to capitalise on this development to better cement their relevance amongst and relationships with product- and service- end-users.
This is why Gore Fabrics develops relationships with the armed forces: to get feedback on the quality of the uniforms their fabrics are used to create. They ensure they are the preferred suppliers of that fabric and more relevant than their competition.
This is similar to how South African companies increasingly prefer to deal with BEE-compliant businesses. It affects their scorecards’ ability to attract new customers at some point down the value chain they are a link in.
Overseas, we’ve seen similar “convergences” produce strange, counterintuitive, cross-disciplinary hybridizations. Forbes’ contributor Avi Dan lists the biggest ad agencies as
“Deloitte, Accenture, KPMG and PwC. Even McKinsey is slowly building an agency arm. Tech companies like Adobe, Oracle and Epsilon have added a service component in the form of an agency to their core product offering.”
Ten years ago, not as many South Africans spoke about race, inequality or politics as do today. Social media — backed by technological evolution — changed that. As computers lost weight and gained processing power, cell phones grew cameras and smartphones ate Kodak’s lunch. Facebook pulled the rug out from paid-for dating sites. Without a car to its name, Uber bit into the taxi industry. Air BnB shook up hotelling. And so on it’s been going.
But where is it going? What do companies making non-linear acquisitions know that their competition doesn’t? It is written in our business bible,
“Whosoever is not a step ahead is a step behind; whosoever is not growing is atrophying.”
“Evolve or die.”
To put it differently, what are you doing to not be the next Kodak? And how is the transformation discussion in South Africa like any other discussion elsewhere that businesses are leveraging to increase demand amongst their service- and product-end users?
Our handsets are shrinking, but the amount of data we’re able to transfer through them per day is growing. People want data, but not just any data, but data arranged into information, and not just any information, but information that’s arranged as ideas, and not just any ideas but ideas that correspond with their ideals, ideologies. And whether you like it or not, their voting choices affect the environment you trade in and your bottom line.
Unless you’ve been working under a rock (no offense to our colleagues in mining) you will know that the convergence here is on transformation. Do you know where B-BBEE is going, with or without you? Kodak had one job — to make devices that focused light on photographic surfaces — but even it had a blind spot. Do you know where yours is?
Among some large corporates, evolution has kicked in. 81 CEOs signed pledges to stand with former Finance Minister Pravin Gordhan’s late last year. MultiChoice Group released a series of adverts about their Phuthuma Nathi share scheme transformation initiative; MTN has its Zakhele Futhi initiative. Businesses are responding to their political environments and Kodak-proofing themselves against the unwanted effects of this inevitable convergence.
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*The commentary offered here is not business or legal advice; it is a perspective that is to be compared with others. BEE Novation will not accept liability for any loss, injury or harm of whatsoever nature and howsoever arising that result from interacting with said commentary. The material here is available for use at no cost but we ask that you credit BEE Novation and the author as its source. No politicians were harmed in the making of this thought-leadership piece.