LOOKING TO THE FUTURE: WHAT NEEDS TO BE DONE NOW LOYISO MBABANE

1. BEE CONFERENCE: WESTERN CAPE PROVINCIAL GOVERNMENT LOOKING TO THE FUTURE: WHAT NEEDS TO BE DONE NOW LOYISO MBABANE

2. BEE CONFERENCE: WESTERN CAPE PROVINCIAL GOVERNMENT SOME OF THE KEY CHALLENGES *Paradigm shift and growing the “cake” *Definition-related issues (Black) *Underlying principles of BEE *Scope of BEE and beneficiaries *Overall economic development framework (Ikapa elihlumayo) *Sectoral approach and need to target *Roles of various stakeholders and responsibilities *Financing and support mechanisms LOYISO MBABANE

3. PROBLEMS WITH PAST BEE INITIATIVES: SHARE-OWNERSHIP TYPES • Failure of stock market approach (1998 crash) • Poor performance of “black chips”, (discount to NAV) • Difficulty in raising capital (SPV model) & heavy gearing • Narrow focus on “deals” and very limited number of participants (35 “black-influenced” companies (JSE) in April 1999, 21 in 2003) • Continued dilution of BEE component in most of the “black-influenced companies”; divestment by black shareholders and delisting of many. • None or little operational involvement by shareholders and no impact on control and management of companies; SD, or procurement.

4. OTHER BEE CHALLENGES • Abuse of Affirmative Procurement facility; poor monitoring of service providers by clients (paper partners) • Little or no skills transfer; business training or mentorship for blacks in “partnerships” and JV’s • Non-strategic partnerships/ JVs; focus on “non-core” • No involvement and/or buy-in by unions and employees • Ill-prepared communities and low entrepreneurial culture • Continuing barriers to business start up and high failure • Continuing problems with access to capital

5. SOME RECOMMENDATIONS FOR BEE, GOING FOWARD • Must adopt the integrated & broad-based approach of the Scorecard • Adopt an inclusive approach to “Blackness” and avoid “Darker than thou” • Ownership still important but to be accompanied by operational control and robust EE and SD strategies (an integrated strategy) • Broaden BEE, as in Mining Scorecard, and make it relevant to all stakeholders (internally & externally); also consider “bottom up” interventions & SME’s • Make BEE (in its broad sense) an integral part of the Vision and Business Strategy of every company/ institution/ Department • Each component of company/ institution to have BEE objectives and to be measured on performance (from CEO’s KPA’s to top management) • To have support systems for BEE: Business Development Units; financial support mechanisms; entrepreneurship education; auditing of BEE partnerships and ventures; appropriate internal structures

6. - SOME RECOMMENDATIONS FOR BEE- • Need to focus on green field operations (expansion of the cake and new job creation in successful areas), not just partnerships in existing businesses • Also target specific sectors based on growth prospects and significance to economic growth (six sectors identified); develop provincial BEE charters • Ensure value added and skills transfer for BEE initiatives • Effective use of R10 bn (Finance Ministry) to finance new ventures in key sectors, and new DFI regime of DTI (NEF, etc) • Explore Provincial and Sectoral Financing and Venture Capital Schemes • Deal with the continued problem of education system and skills (need to focus on ES&T at high school level); SETA’s role is vital; Departments; Municipalities (Entrepreneurship and business training to be part of SD) • Encourage entrepreneurship education and culture among school children; communities and employees (Need for constructive and pro-active campaigns, not just re-active disaster management programmes)

7. ROLE OF GOVERNMENT IN BEE • Provide overall guidance and framework (policy guidelines; targets): As in Ikapa Elihlumayo at the provincial level and link to national • Assist with benchmarking and good practice across sectors • Conduct effective monitoring to stem out BEE abuse • Help with financing of BEE and lower cost of capital (SME’s) • Transform the education system and ensure production of appropriately skilled population in the relevant fields (R1,09 extra on education and focusing on key subjects) • Monitor implementation of Skills Development Programmes and the HRD strategy to align them to the development needs of the country • Aggressively enforce BEE requirements and targets in procurement; privatisation of state assets; licensing (mining, gambling, etc); PPP’s; SDI’s; rural and urban nodes and other government-related initiatives

8. ROLE OF (WHITE) BUSINESS IN BEE • Must understand importance of sharing the country’s resources and commit themselves to the BEE project • Participate actively in the redressing of past imbalances and contribute with the skills and the resources in their control, be a partner • Be involved in the mentorship and development of black business as well as the skills transfer within institutions (must get measured and rewarded for succeeding in this regard) • Get involved in meaningful partnerships with black businesses; joint ventures and champion other empowerment initiatives • Review and adjust past policies and practices where necessary in order to further BEE (e.g. financing; procurement, etc) • Allow for failure • Provide the necessary support mechanisms for black businesses

9. ROLE OF BLACKS IN BEE • Must acquire the necessary skills and experience • Refrain from being “procurement prostitutes” • Ensure operational involvement in the ventures they are in • Use their shareholding and control to effect positive changes • Make a pro-BEE and EE difference in their companies • Seek new business opportunities and better ways of running business (add value and positively transform past and present business ways) • Enter into meaningful partnerships with white business (value added) • Be good role models to their communities and abide by legislation • Be prepared to fail and learn • Not seek mere personal enrichment

10. OTHER CHALLENGES IDENTIFIED • Building a conducive overall economic framework • Sustainable economic growth • Geographic equity • Inclusion of Youth; women and people with disabilities • Focus on downstream operations (e.g. beneficiation in marine sector) • Creation of ready-to-occupy enterprises and financing • Proper planning around the R10 m loan and partnership