White Monopoly Capital

There is an ongoing call from the Zuma camp of the ANC that White Monopoly Capital must go. The fact that this call is based entirely on the same demand by the EFF is a clear statement of the lack of ideas in the ANC. But the questions still remain: Why must it go? And do those mouthing the slogan really understand what they are asking?

The story that all the ills of the South African economy stem from the domination of the economy by White Monopoly Capital is a myth created for reasons of political expediency, and is demonstrably devoid of any truth. Almost every medium-large company, and every large one, is listed on the Johannesburg Stock Exchange, and the shares in them are available for purchase by any person, including persons who are not part of the supposed White clique whose sole aim in life is to dominate the economy at the cost of the Blacks. The simple fact is that a large proportion of those shares is already owned, indirectly at least, by Blacks, through their pension funds and insurance policies, and more could be purchased for a relatively modest sum.

Even if we were to ignore those facts, the question is why should Whites, monopolists or otherwise, not run those companies?

The companies in question represent the vast bulk of employment opportunities in the economy, apart from the Government jobs which are a form of grossly-overpaid unemployment insurance for mainly unqualified persons, a system of subsidy that has come at great cost to the South African public, but which forms an effective way of buying the votes of those so employed. If the supposedly White-dominated companies were to disappear, the present rate of unemployment would almost certainly soar, probably to more than double the 35%+ that it now is. If you doubt that figure, consider the fate of the numerous successful commercial farms that collapsed within, at most, two years after the Government handed them over to Blacks. It is rumoured that the failure rate of those farms lies at about 97%, notwithstanding the huge amount of public money that has been sunk into them. The fault for that did not lie in any inferiority of the new Black owners, but rather in the fact that to be a successful commercial farmer, the managers of the farm must have extensive training after receiving a good education. In most cases, that is added after the farmer has acquired a cultural background of the processes and mindset of such farming. A man does not become a good farmer, a successful commercial farmer, simply by acquiring the land. The same applies to a manager in a business. It is something that is learned over many years, and the number of Blacks who have acquired that learning is small at present. That number will increase, as the best of the current crop of young Black employees work their way through the system, in exactly the same way as their Indian, Chinese, Coloured and White counterparts, and they should be encouraged to compete for the relatively few jobs available at the senior levels, to ensure that the new generation of senior managers are the best that the country can produce.

The fact that those shouting the slogan do not have even a low level of understanding of what realization of their demands would imply is evident from the catastrophic shape of the economy. They are making the call on the basis of a background of political training and political, communist, brainwashing by others who were equally unaware of the hard facts of business life. Jacob Zuma was a herd boy, and then a terrorist, neither of which could give any understanding of the thinking and economic background of the way the world operates, which are required to be effective at even a low level in a modern business activity. He has made numerous statements that are proof of this assertion, and his performance as a manager of the economy and of the activities of the members of his Cabinet is abysmal, to say the least. Zuma’s chief protégé at one time is Julius Malema, another man with absolutely no understanding of the business world. These two men know how to buy favours, but neither of them has contributed to the promotion of economic activity. Do they seriously believe that the disappearance of White Monopoly Capitalists would create a stronger economy or more jobs? Who do they think would create the profits to pay the taxes that their polices would distribute so profligately?

Quite apart from these considerations, the insistence by the political leaders on the use of the term ‘White Monoply Capital’ places a heavy emphasis on the ‘White’ element, placing on the broad group of Whites by implication an accusation of wrongdoing, that the Whites are to blame for everything that is wrong in the society, even after 23 years of rule by the ANC. Surely that would be long enough to rid the country of those ‘evil’ whites if, in fact, they are evil. That term is creating a racial disharmony that threatens to undo much of what Nelson Mandela and Ahmed Kathrada worked to achieve, a non-racial South Africa in which every person is free to contribute what he or she can to the country, and to benefit from the common welfare. By the very nature of the situation that existed at the start of that time, the Whites had more knowhow and capital to contribute, which they did with delight, in the knowledge that their efforts would assist their Black (and other) compatriots to step up to their own level of capability. However, as the racism propagated by the ANC and the EFF has grown, so the willingness of the Whites to play that role of helper and equal partner has declined. The stronger and more unfair the rules of Black Economic Empowerment have become, the closer the country has come to a White Economic Empowerment backlash. That may take the form of a faking or downgrading of the BEE activities so essential to the development of a Black managerial class, or the emigration of White capital, or, worst, the emigration of the skilled Whites to countries which value their capabilities more than do their own countrymen.

Political sloganeering is dangerous at the best of times, but the type of sloganeering typified by “White Monopoly Capital’ in the South African context constitutes economic suicide.

Black Industrial Empowerment

President Zuma has espoused a new project.  He is pushing to invest huge amounts of money to support the move of Black people into the ownership of industries, in a bid to ensure that White will not continue to dominate the ownership of industry.  The objective of supporting Black ownership of industry is good, but Zuma admitted, in a sideways manner, that the plan to support Blacks alone is racist.  He denies that the plan has racist objectives, but, as we have seen, when Zuma denies something, with many small coughs and pushing of his spectacles, the denial is a simple prevarication. 

The simple fact of business is that experience gathered over many years of exposure to the real world is an essential element in the building of a competent businessman or woman.  The experience builds on a good education and a good understanding of how the world works.  Experience can only be gained over time.  It cannot be legislated into existence, and it cannot be replaced by State support, or even by mentoring, which, in any event, can only be based on that same experience.

The urgent problem faced by South Africa is the lack of sustainable jobs.  That problem has been caused by Government in many ways.  The high level of regulation, and the time consumption in complying with the regulations added to the multiplicity of fees is a strong dampener on the creation of jobs.  The duplicity of SARS in its dealings, using its draconian powers, in many cases illicitly to support the objectives of the ANC, including the promotion of the personal wealth of ANC members, has driven many industrialists from the shores, and prevented many potential investors from coming to South Africa.  The imposition of unrealistic and expensive Black Empowerment rules has increased the cost of doing business to the extent that many investors, including numerous companies which were South African icons, to establish themselves abroad.  The rampant corruption has been a major factor in reducing employment opportunities, as well as in increasing the costs of doing business in South Africa.  And, to top it all, the insistence of Government that cadres be handed directorships and senior management positions in all major corporations and bodies has ensured that the management of those bodies remains mediocre or even catastrophic.

Is this racism?  No, it is realism.  One need only look at the bodies managed or supervised by ANC nominees to see how abjectly poor even the best (in ANC terms) cadres are.  Eskom is a continuing disaster, after having been a star performer in its field at a world level under White (for ‘White’, read ‘experienced’) management, SARS used to be a competent and honest organisation and is now an instrument to assist ANC cadres to acquire huge wealth, the SABC has been directed and managed by liars, the NPA is engaged in infighting while its incompetence to conduct an effective prosecution was highlighted to the world in the Diwani case, the SAPS has demonstrated a total lack of competence in controlling and prosecuting crime, the Department of Public Works has admitted to having wasted R38 billion, the Department of Defence wasted over R600 billion on arms that were not required and are now no longer capable of use, SANRAL has lost the fight to maintain the roads, allowing them to degrade to the point where they will have to be rebuilt while concentrating instead on the conversion of public roads to toll roads, and refusing to divulge the details of the contracts (leading to apparently well-founded beliefs that the true beneficiaries are ANC-connected cadres), the Department of Education has demonstrated convincingly that it has no capability to provide the sort of education that will equip young people with the knowledge and skills they will need in life, the liquidation of Aurora is a clear statement of the desire of certain Blacks to enrich themselves at the expense of others, in the same way as the liquidation of Johannesburg Consolidated Investments, a venerable company that had existed for over a century, after less than two years of ownership by a Black ‘entrepreneur’.  One does not need to look far to find convincing examples of how bad the performance is of Black people forced into the top levels of management.  The reason is glaringly obvious:  a black skin is not a good replacement for thirty or forty years of experience, gained at the workface, with gains made slowly and carefully over time as they build on a good education.  This does not mean that Blacks are not capable.  Examples abound of Black people performing adequately or well once they have accumulated the experience required to do the job.  To accumulate that experience, the easiest way is to work in a formal organisation with the required competence, to learn how to do the job, what to watch out for, how to apply intelligence to understand the challenges and to develop ways to overcome them.  The fact is that in South Africa the knowledge and experience resides in the hands of Whites, and the efforts of Government have been directed at displacing those Whites, rather than using what they have to offer in order to support the development of skills and abilities throughout the population.  Those efforts have succeeded to a large extent, with most competent Whites in Government organisations being removed, often with large retrenchment packages in order to make way for the Blacks who do not have any of that experience.  The Government has spurned the willingness of the Whites to help make the country succeed, preferring instead to hand the lucrative jobs to incompetent and inexperienced Black, on purely racist grounds. 

The result is clear to see.  South Africa has slipped from being the leader of industry in Africa to become one of the worst-performing economies on the continent.  It has slipped from being the light of democracy under Mandela to being an Apartheid nation once again, one that is bent on implementing communism, in the face of all the evidence that that system of government has, as its main objective, the exploitation of the people for the benefit of the rulers.

The downgrading of the Eskom bonds on the international financial markets is just the first sign of the world’s judgement of the incompetence of the Black management of the country’s institutions and bodies.  Further downgrading will come, inevitably, pushing the country further down the slope of collapse that the ANC has chosen, rather than the enlightened path that recognises that the development of a non-racial development-oriented society requires the skills and experience of the Whites to help the best of the population, Blacks and Whites, to achieve their potential. 

A job is a job, whether the employer is Black or White.  A Dollar of foreign exchange has the same value, whether it is earned by a Black or a White.  And the way to achieve those jobs and earn those dollars is to encourage the development of industries, not of Black-owned industries, not to intensify the job-destroying, economy-devastating racist policies that have become the foundation of Jacob Zuma’s desperate campaign to cling to power.

  

The Failings of BBEEE

It is clear to most thinking people that the BBEEE policies have many unwanted problems.  Some of those have already been discussed, and many others will be discussed in coming weeks.  The subject for today’s discussion is the extent to which even a successful BBEEE program has effect in transferring the knowledge and experience needed for the operation of a successful and efficient business.  Many years of Management Consultancy at a high level in large and effective organisations has provided fairly conclusive proof that the chances of this objective being satisfied are very small, except in the largest companies.

It is probably fair to say that most BBEEE projects are carried out in small to mid-sized companies.  Aspirant Black Managers and Supervisors are employed by the company with the main objective to satisfy the regulations.  They are inducted into the company and trained in the systems and procedures, as well as the way of thinking, of the company.  And therein lies the problem.

Most of the small to mid-sized companies have grown from small beginnings, with a very large proportion of them still under the management of the founders or the children of the founders.  It is very seldom that these people have much idea of how professional managers work, of what sort of information they use to make decisions, and of how to make those decisions even if the information is available.  Very few have much understanding of statistical collection and valuation methods, of management accounting, of market analysis.  In many cases, the success of the company is a result of a good idea being promoted by a driven individual who has learned over the years of mistakes and trial and error what brings the results that are desired, more or less.  In many cases, the top managers of these companies fly by the seats of their pants, keeping a rough and general idea of where they want to go in their minds.  The result of this is that their decision-making is unclear and somewhat erratic, with decisions being made as more or less knee jerk reactions to a change in the situation, rather than as a clearly considered response to changes that are clearly identified for what they really are, and with the goal of meeting a long-term objective that has been formulated in advance.

‘Nonsense’, you say.  ‘South Africa has many good and effective businesses.”  It has, but most of them are operated at a sub-optimal level of effectiveness, and those sub-optimal processes, management systems and ideas are being transferred to Black trainees, who do not have the background to recognise the extent to which they are faulty.  As an example, on client company has grown to a turnover of over R40 million per year, employing about thirty people.  A couple of BBEEE candidates were brought in, to facilitate the next stage of the company’s growth.  A Consultant sat in on a number of Senior Management meetings for a purpose unrelated to the training of those persons, and was astonished to hear the Managing Director requesting a ‘Budget for the next three years’, a good sign, but without direction.  It is not possible to undertake a business projection without knowing the current status and the objectives of the company over that period.  A suggestion to the Managing Director after that meeting, that he should provide at a minimum a starting point for the budgeting process and a clear formulation of the strategy of the company, setting out objectives and constraints, was rejected as being too much ‘big corporation’, and a waste of time.  The Consultant had no role in the matter, so continues to observe the developments.  At the next meeting, the BBEEE candidates produced a mush of words, stating what they hoped to achieve, with only the vaguest description of how they would do it.  Unsurprisingly, the ‘Budgets’ were roundly criticised by the Managing Director, who demanded that they be more specific, and that they include a rate of growth amounting to over 30% p.a.  After the meeting, the Managing Director complained to the Consultant that the quality of the two was not up to the desired standard.  The candidates complied, again with many imprecise words.  There was no attempt to quantify any of the objectives, yet the Managing Director seemed to be satisfied with the new effort.  It was clear that the ‘Budgets’ were totally meaningless.  One of the essential ingredients of management is the measurement of results against desires, and that can only be achieved if the objectives are quantified in some manner.  If you can’t measure what you want to achieve, there is no way to know whether you have achieved it.  A subsequent discussion with the Managing Director revealed that he refrained from stating his objectives because that would prevent him realising that he had failed to achieve those objectives.  It did not surprise the Management Consultant to hear nearly a year later that the two BBEEE candidates had been fired for incompetence.  They had never had a chance to develop any competence, or to show what competence they did have.  The cost to them was a total waste of a year, and, probably, the learning of many faulty management lessons.  The cost to the company was in excess of nearly two million Rands as well as the loss of a year, or more, of the growth that the two candidates could have brought.  The loss to the country is probably five times the loss to the company, because two possibly promising people have learned that the way to progress in an organisation is to kowtow to the boss, not to apply the mental capabilities they have.

The case described is not an isolated one, nor is it confined to BBEEE candidates.  It is common to find within South African companies that the level of management capability, in terms of modern management techniques and science, is extremely low.  There are several reasons.  The base reason is probably that there has never been a culture of training management personnel, except in the largest and most competent companies, and most of those trainees have left the country to work in the overseas operations of their employees or, where that has not been possible, they have sought better opportunities abroad, where their capabilities are recognised and rewarded, no matter the colour of their skin.  Another reason is that the process of growing through the ranks in a competent company seems to have been largely abandoned, with people having the barest understanding of the science being elevated to fill much more senior positions than those for which they are qualified.  This is partly a result of the brain drain which has afflicted the country, and partly a result of the Black Empowerment policies, which seem to assume that a Black person with a Matric and the right political affiliations is also magically imbued with the capability to do a competent job in a senior management role.  The lack of the control capabilities has also resulted in an increase in in-company fraud, because the frauds are not easily detected and the fraudsters have acquired the ‘entitlement’ mind-set propagated by Government policies and by Government Ministers and Civil Servants.

The effect of this situation, as with most of the policies introduced by the Government during the past two decades, will bedevil South African commerce and industries for many years to come, even for many years after corrective measures are introduced, as the bad appointees will continue in their positions, spreading the misinformation.  One way to improve the situation is to use a competent, internationally-experienced Management Consultant as a mentor, training BBEEE employees and their managers in the correct way to do their jobs, instituting internationally-recognised systems and ideas and undertaking a survey of the management practices at least every three years, to detect and correct sub-optimal drift.  Consultants should be employed to do routine work only in an emergency or in the process of bringing about a correction.  Any extended employment of a Consultant should be seen for what it is – an admission that the organisation is not capable to do the work required.  In that capacity, they are no better than contract workers.

Anglo American – Big Business sees the Light

It has been reported that Anglo American is refusing to hand over 60% of the shares in its New Largo coal mine, the anchor supplier of coal to Kusile power station.  Anglo is willing to sell such shares on commercial terms, but not simply to hand them over to a Black Empowerment partner.  Anglo American is to be congratulated on this stance.  The company has long been an admired corporate citizen, and this refusal to knuckle under to ANC pressure restates the reasons why it has gained its reputation for corporate integrity.

It seems that Big Business is finally growing a backbone, and refusing to roll over under the ANC’s Black-mail.  If we examine the practice of Black Empowerment, it shows up as what it really is – no less than blackmail and theft on a grand scale.  In the vast majority of cases, the Black partners add nothing to the business.  They are parasites, sucking the lifeblood of South African and foreign entrepreneurs and industry, adding significantly to the cost of doing business, and contributing nothing.  It is the civic responsibility of every South African to reject such Black-mail.

In one case, the details of which are known to the writer, the Department of Mines demanded that a substantial shareholding in an operating mine be handed over to one of a shortlist of three Black (ANC) nominees.  When the Managing Director asked what would happen if he chose not to do that, he was told that ‘We will tax you out of existence”.  The mine had been abandoned years before a group of foreign investors purchased it and resuscitated it, investing large amounts of money.  The mine could have been purchased at any time by a Black entrepreneur, who, if he had the entrepreneurial spirit that the foreigners possessed, could have brought it into operation and enjoyed the benefits and the fruits of his efforts.  None did.  The Managing Director told the Department of Mines officials that a sale of a shareholding on normal terms would be welcomed or, if the intending purchaser had any skills, experience or qualities other than an ANC connection to offer, the company would entertain some method of funding the purchase.  He refused to hand over the shares on the normal basis, which amounts essentially to a gift to a favoured person.  Not surprisingly, a couple of weeks later, a notice was received cancelling the mining licence, citing spurious grounds.  That was defeated in a High Court case.  Not too long after, a VAT inspection by SARS took place, followed by an assessment imposing a penalty of R21 000 000 for failure to pay VAT on exports.  That was a clear violation by SARS of the VAT Act, and an objection was lodged against the assessment.  During the waiting period, the bank accounts of the company and all other companies which had a common Director were frozen by order of the Reserve Bank.  An application to the High Court succeeded in having the accounts unfrozen, as the action had been illegal.  Shortly after that success, the Attorney conducting the cases was appointed as Collection Agent by SARS, which required him to hand over to SARS all funds received from or on behalf of the company.  This action effectively deprived the company of the ability to defend itself in law!  A method was found to pay the legal fees, and the Attorney then received a demand from SARS to hand over to SARS all documentation relating to the company.  His reply, that the documentation was protected by legal privilege and so would not be handed over, elicited the response from SARS that they would conduct a VAT inspection of his practice and ‘make his life a living hell’.  He continued the action, which the company won, achieving a retraction of the assessment, followed a day later by an identical assessment for R18 000 000!  The performance continued over the next three years, with the assessment being fought and lifted, and new assessments being imposed every six months for the next three years.  At the end of the process, the investors closed the mine, removed the equipment they had installed, much of it new technology invented by them, and withdrew their investments from South Africa.  They have since made sure that every possible investor they knew might be considering investing in South Africa came to know the full extent of the criminality conducted by the South African Government and its arms.  The loss to South Africa since then has certainly been in excess of several billion dollars of new investment.

The demands made by Eskom for a 60% shareholding by Blacks in New Largo before it will sign a contract for the purchase of coal for Kusile is nothing less than simple criminal blackmail.  It detracts from the public benefit of the public investment in Kusile, adding to the risks of continuing inability of Eskom to meet the power needs of the country, and adds to the cost of that power.  It is the sort of conduct that the public has come to expect from President Zuma and his cronies in the ruling Party.  It is an example of the Nkandla syndrome.  This cabal is prepared to put the economic wellbeing of the citizens of the country on the line for its own benefit.  The policy has had the effect of driving inflation, reducing GDP, adding to the massively high unemployment in the country. 

It is common knowledge that Anglo American is actively withdrawing from South Africa, joining the ranks of dozens of other leading-edge companies which are no longer willing to accept the costs and indignity of submitting to the illegal acts of the ruling Party, so attractively wrapped in the appearance of the ‘good of the previously disadvantaged’.  Paying a bribe to someone for the purpose of gaining a Government contract is criminal and reprehensible, no matter the form it takes.  The sale of 20% of Shell SA to the ANC investment arm, probably to ensure the granting of the Karoo fracking licence is certainly a transaction that screams to any fair-minded person, demanding to be investigated, in South Africa and in its home country.  The appointment of ANC-connected persons to the Boards of listed companies must equally be suspect.

If you need a reason for the thrashing about of the ANC in order to retain political power, the probable (legitimate) of these items of graft, corruption and influence-peddling is it.  If the DA wins the next election, all of these deals must be investigated as a high priority, in order to put the country firmly in the ranks of those countries that abhor Government-sponsored criminality.  The top ranks of the ANC should be very concerned.