The Role of B-BBEE in transformation, or can South Africa become another Zimbabwe?

Posted by Dr Robin Woolley
Monday, 17 August 2009  |  0 comments
Dr Robin Woolley is a consultant at Transcend Corporate Advisors.
Read all of Dr Robin Woolley's Posts

After working in black economic empowerment for eight years and assisting hundreds of companies including yours, with their transformation efforts I have come to appreciate the fact that today there is still a “Zimbabwean” possibility for this country.

This article focuses explaining why I believe there is still this risk, and on explaining what your company is doing to work against this low road for this country:

Our children are not all equal!!!!!!!!

The Gini Coefficient is a measure of statistical dispersion developed by the Italian statistician Corrado Gini, commonly used as a measure of inequality of income or wealth. A low Gini coefficient indicates a more equal distribution, with 0 corresponding to perfect equality, while higher Gini coefficients indicate more unequal distribution, with 1 corresponding to perfect inequality.
When used as a measure of income inequality, the most unequal society will be one in which a single person receives 100% of the total income and the remaining people receive none (G=1); and the most equal society will be one in which every person receives the same percentage of the total income (G=0).

Now we are not aiming for utopia but if there is a close proximity of wealth and poverty it destabilises the social fabric as people see in front of their own eyes on what they are “missing out on” which fuels their unhappiness. Sweden detailed below is possibility as healthy example:

Country                  UN             CIA Gini
Sweden                  25              23
Pakistan                 30.6           30.6
UK                            36              34
USA                         40.8           45
China                       46.9           46.9
Zimbabwe              50.1           56.8
Brazil                       57              56.7
South Africa           57.8           57.8

Note that one needs sufficient number of wealthy people in a country for the Gini co-efficient to be problematic, hence Zimbabwe even though they are in abject poverty does not have as a bad Gini co-efficient as South Africa. Note also that those countries that have a ethnic / caste or racial loading to their Gini co-efficient such as Malaysia, Brazil, India worsen the tension in the social fabric and so these countries are useful benchmarks for South Africa.

If the racially loaded poor Gini co-efficient is brought into view with the countries level of un-employment one starts to get a real feel for the stretch in the social fabric of the country. The table below gives a feel of South Africa relative so some other democracies on transition:
 

Country                   Rate             Year
Zimbabwe               80                 2005
Pakistan                   5.2               2008
Malaysia                   9                  2009
Brazil                         8.9               2009
South Africa             21.7            2008

This shows that South Africa is under significant social tension relative to peer benchmarks.Today 1/3 of our children grow up in households that earn less than R1000 per month. 8% of our children are in child headed households or in care other than their parents. That’s why most of our children have the type of experience captured in the cartoon below:

The wealth of a nation lies in its youth, its future is its children and beyond the macro-economic indicators described we need to understand if the skills base of our children is improving or not.

The black middle class and B-BBEE

Once can infer from the weightings and pillars of B-BBEE that it is predominantly focused on building and strengthening the black middle class. One only needs to look at the weighting of socio-economic development to come to that conclusion.

This is a useful short to medium term strategy as a strong middle class is a good mechanism to reduce tension the social fabric, but not if it’s a shallow middle class and there is a hollowing out in the gap between the middle class and those in poverty, or if this middle class is artificially supported. Mbeki’s legacy in terms of broad based black economic empowerment can be reasonability tested in the endurance of this black middle class through tough economic conditions.

I come from a country that thankfully no longer exists, and I move into a country were the emergent black middle class (spending R 130 billion last year which is 28% of the total spend in this country), is going to vote with their money. Now I ask you how do we as a business understand these clients? By having diversity within the company. This DOES NOT mean hiring people because of their race, but we do want to ensure that we build the talent pool out there that there are great talented black and white people that the company can draw technical skills from.

B-BBEE is a business tool to build an enduring company that understands its customer and like any business tool it can be poorly or well applied. Its up to you.

So start with yourself because as we get older our memory tends to dominate our world-view, and if the world changes around us, the memories don’t help us to be wise but rather disable us. The test to being relevant and adding value and understand your customer, as a person rests on constantly re-inventing ourselves. We must treasure the memories that still work, but have the courage to discard that which does not work.

Is it not the province of a great leader, to understand the moment we are in, to understand the forces that shape the behaviour of their customers and to lead your employees toward using its resources to create sustainable value to those customers? Do you know companies that are just out of step with business in South Africa today? Do you know people like that. . . or are you like that?

There’s an Irish poem that says "now that the battle for the plains has been won the battle for the hills remains" as we struggle for a country that works for all our children, we face the most formidable opponent – our own minds.

So can South Africa become another Zimbabwe? – well it's up to you!!!

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