Power struggle between BMF and BLSA gave rise to radical policy
- Author: Andile Ntingi
- Published: Tuesday, 18 April 2017 10:02
In the past few weeks, a three-word catchphrase has spooked investors. “Radical economic transformation” has become the catchphrase for supporters of the recent Cabinet reshuffle, which sent financial markets into a tailspin and led Standard & Poor’s and Fitch to downgrade South Africa’s debt to junk.
President Jacob Zuma said his restructured Cabinet, which affected 10 ministers and 10 deputy ministers in all, will drive radical economic transformation (RET). The rating agencies read this as a signal of a significant shift in South Africa’s economic policies, a prospect that has made investors nervous and raised fears of capital flight, rising interest rates, and the spectre of a recession. Since the Cabinet reshuffle, RET has been hotly debated.
The sceptics say RET is a populist slogan designed to enrich a tiny ruling elite and its cronies through the looting of the state. In contrast, supporters see it as a credible attempt to decisively address the skewed ownership of the economy in favour of black people.
Radical economic transformation is not new as an ideology, but it has been on the periphery of public discourse over the last seven years, until after last month’s Cabinet reshuffle, where it was mentioned in Zuma’s statement that spelled out the axing of finance minister Pravin Gordhan.
Zuma has referred to RET several times this year, but it has really been Gordhan’s dismissal that has given it prominence. If you want to understand the origins of the ideology, you have to cast your mind back to 2011, when a power struggle between Business Leadership SA (BLSA) and the Black Management Forum (BMF) over the control of Business Unity South Africa (Busa) led to the BMF walking out of Busa.
The BMF, at the time led by RET advocate Mzwanele “Jimmy” Manyi, walked out of Busa to re-establish the Black Business Council (BBC), which had merged with Business South Africa (BSA) in 2003 to form Busa as the pre-eminent business lobby group in SA.
The BBC was originally founded in 1996, but it was disbanded when Busa was established. It was around the re-establishment of the BBC in 2011 that I first heard of radical economic transformation from the new leadership of the lobby group, which felt that BLSA had hijacked Busa and was furthering the interests of large corporates at the expense of black business.
The BBC saw Busa as a stumbling block to meaningful economic transformation to empower black people. Manyi led the charge for other black lobby groups to follow the BMF out of Busa and lobbied them to rejoin the BBC, but there was no unified voice within the black business community, as some feared the move was catastrophic for black business interests.
Radical economic transformation is not new as an ideology, but it has been on the periphery of public discourse over the last seven years, until after last month’s Cabinet reshuffle
Despite the initial misgivings, 18 black affiliates of Busa jumped ship and threw in their lot with the BBC. By early 2012, the BBC had 22 affiliates under its wings and had become a powerful mouthpiece of black business, often overshadowing Busa in influencing economic policy formulation.
However, during this formative stage in its re-establishment, the lobby group still had not clarified what RET was and what it entailed. In March 2012, the BBC embarked on a retreat, where it plotted its plan of action and crystalised RET.
When the BBC emerged from the retreat, RET as we know it today, was born. The lobby group immediately called for wholesale reforms to the black economic empowerment (BEE) legislation to drastically increase the ownership of the economy by black people.
It proposed the creation of black industrialists through giving black-owned and operated companies access to state contracts from the government’s multibillion infrastructurespending programme.
The BBC also advocated for the criminalisation of fronting, where black partners are fraudulently exploited to win state tenders on behalf of white businesses.
The group also lobbied the government to not bow to pressure by big business to write into BEE legislation the “once empowered, always empowered” principle, the adoption of which would have meant that companies that had done BEE deals would be regarded as empowered even after black investors have exited and sold their shares.
The corporates are resisting re-doing BEE deals and a stalemate in this regard has ensued. The BBC also pushed for BEE to be revised to encourage large, white-owned companies in the private sector to include black suppliers in their supply chains.
All these recommendations, which the BBC packaged as RET, have been made policy under the presidency of Zuma, who clearly has an ear for the BBC compared with Busa, which had unsuccessfully tried to woo the BBC back to its fold. Just at the beginning of this month, the government introduced new preferential procurement regulations that will increase the chances of black and female suppliers scoring high-value government tenders worth R50 million and above.
These reforms would not have been possible without the BBC’s lobbying efforts. While Zuma is currently seen as the face of RET, he is not its creator.
- Andile Ntingi is the chief executive and co-founder of GetBiz, an e-procurement and tender notification service