Johannesburg — FOR a nation that talked its way out of precipitous conflict, we seem to have become rather good at talking our way into certain strife. Take our approach to black economic ownership transformation. The adage that insanity is doing the same thing over and over but expecting different results is probably misused here, but there is something unbalanced about our attempt at black economic empowerment (BEE). Especially in the mining sector.
The Ministry of Mineral Resources spent months cautioning fire and brimstone about the lack of BEE progress, and there were mutterings from the mining sector about erosion of investor confidence. Yet we are to set on a course that will lead us back to where we are now.
We will not reach the target of 26% net black equity ownership in the mining industry. It goes against the fundamentals of investment and finance. Most of the industry players know this. Yet no one says anything. Instead we perpetuate a masquerade.
At its core, what this points to is a failure of trust and a lack of common purpose. How else to describe a commitment to something that is unachievable?
The government and business are involved in a charade. They sit and talk past each other. At best they seem to talk around the edge of things, unable to deal with conflict because there is no genuine common purpose or mutual respect that would allow honest engagement, underpinned by constructive self-interest. The best remaining option is easing tensions - finessing the situation, even if this means avoiding the core issues and challenges. This lack of leadership may avoid short-term conflict but it creates a long-term structural weakness.
There is continuing uncertainty in SA's mineral-resource architecture. It undermines investment and productivity. There are those who know that the 26% target will not be met. They wonder what will happen as 2012 and 2013 approach and it becomes obvious that those targets are beyond reach. And it is not just foreign and private investment that will be undermined - the government will have a half-baked policy approach to mining as long as this deception continues.
Although ownership yields the least broad-based effect, its uncertainty is also the biggest barrier to investment. There remains significant untapped transformation potential via indirect empowerment. Mining industry stakeholders could conceivably have pushed out the date and aimed for a progressive realisation of the ownership target, while committing to an accelerated strategy of meeting other components, such as procurement, infrastructure and human development. These create less structural uncertainty. The government could also introduce penalties for companies failing on things such as human development and procurement that would not be overly obstructive to the industry as a whole.
Unfortunately, the government's approach to BEE shows its focus on real development and transformation is deficient - it is focused on content over form, which is rarely premised on practical reality.
Take the issue of employment equity. According to research by the South African Institute of Race Relations, in 2008, 257161 black children wrote matric math s against 20072 whites. Just more than 4000 black kids passed with more than 80%, compared with just more than 5000 whites. The implications for the ratio of engineering and finance graduates in 2012 are clear. Blacks' status as a majority is meaningless as a representation of the work force if we are not producing enough educated black kids. We'll berate business for something that is simply not achievable.
Business is just as complicit. SA lags most of its competitors in work-force training - most peer emerging economies spend more than 5% of their wage bill on training, while SA's average is below 3%.
In part, the problem is that too many CEOs have a short-term perspective. Leadership is about managing the external issues that affect your business. Education and skills are one of the challenges hampering SA's commercial strength. Yet it appears that business fails to robustly engage the government on these threats, while doing little on its own to mitigate the situation. The sectoral education and training authorities are not an excuse for poor investment in training. Business must act decisively to force a restructuring of the model.
As has so often been observed, SA needs real leadership. Only the maturity that comes with realising that self-interest and common purpose can coexist will produce purposeful engagement on the economic and development challenges facing SA. Given the history and structure of our society, it is difficult to conceive how we will achieve sustainable economic growth and transformation with this distinct lack of social capital.
Mahabane is a partner at Brunswick, a financial communications firm. He writes in his personal capacity.
