As Exxaro Resources CEO, Mxolisi Mgojo said at this year’s Mining Indaba, we need to move away from inflexible policy formulae that tie black shareholders into burdensome structures and look for ways to generate sustainable black wealth.
In the SONA 2017, President Jacob Zuma stated “The skewed nature of ownership and leadership patterns needs to be corrected. There can be no sustainability in any economy if the majority is excluded in this manner...We need fundamental change in the structure, systems, institutions and patterns of ownership, management and control of the economy in favour of all South Africans.” He elaborated that government’s R500bn consumption spending will aggressively seek to promote black-owned suppliers.
This was echoed by minister of finance, Pravin Gordhan, in his Budget Speech 2017: “The ownership of assets and the distribution of income is captured by a minority of the population – a situation that is morally wrong and economically unsustainable...We have to mobilise both private and public investment in social and economic infrastructure, new technologies and new activities that help build a modern and diversified economy.”
However, there are problems with the current ownership model including the high level of indebtedness which has accompanied most broad-based black economic empowerment (B-BBEE) transactions, its inappropriateness for highly cyclical industries, such as resources, and lock-in periods for black investors.
Clearly, creating a transformed, inclusive economy is one of South Africa's greatest imperatives at present. But, how can the constraints of a 25,1% (and higher in certain industries) black ownership requirement in the B-BBEE Revised Codes of Good Practice be met by companies on an ongoing basis? And how can regular South Africans be part of the change?
Dr Gil Mahlati, chairman of African Financial Group (AFG), believes the solution lies in re-engineering the country's economy and driving transformation using black capital. “We are focusing on actively managed share portfolios that invest in B-BBEE schemes, private equity where appropriate, and emerging industrialists.”
Portfolios with permanent black capital means an end to ongoing empowerment deals and ensures continuous compliance, making the “once empowered, always empowered” argument moot.
