Some of the stickiest transformation issues are around leadership, ownership and influence, which are all difficult to quantify.
Where it has been easy to quantify: By 2014, blacks made up 91% of the 1.2m public sector employees and 86% of public sector managers were black (up from 40% in 1995), as are 61% of judges and 59% of magistrates, 15% of senior advocates, 27% of advocates and 36% of attorneys.
There are now more women than men in the public service. Black directors of listed companies increased from 15 in 1992 to 1 046 in 2012 (but 869 of these were in a non-executive role).
So apart from the complete transformation of the country’s political leadership, leadership in other measurable areas has been slow to transform.
In the area of ownership, transformation is visible, but there are few, if any, statistics available to quantify the level of success.
Ownership of the JSE remains a contentious issue. The researchers highlight previous research, conducted by Alternative Prosperity on behalf of the JSE, which
shows 23% (10% direct and 13% indirect) of the JSE Top 100 traded shares were black-owned at the end of 2013, with 22% in non-black hands.
In addition, 39% of the Top 100, which represents 95% of the JSE's value, were owned by foreign investors, according to Alternative Prosperity.
A big concern around B-BBEE deals was whether the high levels of debt in the deals allow net value to be created in the hands of black shareholders. Intellidex showed that since 1994 R316bn worth of direct net value has been created by the JSE Top 100 as at the end of 2014. Of this, R196bn was attributable to strategic partners and R69bn to community groups.
The Alternative Prosperity/JSE study found that industries which have a significant reliance on government procurement contracts to earn revenue, or a dependency on regulators from a “licence to operate” perspective, generally tend to exceed the market aggregate when it comes to black ownership.
“Given the fact that institutional investors, such as the GEPF and other retirement funds, are significant owners of the JSE Top 100 companies (mandated investments made up 25% of JSE in 2013), an opportunity exist for groups such as organised labour to drive its transformation agendas as active shareholders,” Fourie says. “Currently it is mainly the GEPF’s investment manager, the PIC, that is driving B-BBEE and transformation through its investment activities.”
From a small business perspective, it is widely estimated that 70% of small- and medium-sized enterprises (SMEs) are black-owned. Although analysis is lacking, it is likely that by value SME ownership will be skewed heavily towards white ownership, the researchers say. Another challenge is SA's low rate of entrepreneurial activity, which is only about a quarter of that of other sub-Saharan African countries.
When it comes to land, it’s a bit more difficult, if not impossible, to determine ownership by race, and government has been dragging its feet on doing a proper land audit.
A contested 2013 fact sheet by the Institute for Poverty, Land and Agrarian Studies (Plaas) showed that 25% of land, including black communal areas, belongs to the state, and 67% (of which only 13% is arable) to “white” commercial farmers. The remaining 8% includes metropolitan areas.
Looking at various housing statistics, Stats SA has indicated that 14.4% of South African households were living in RDP or state-subsidised dwellings.
According to government data, 12.5m people have been given access to accommodation and a fixed asset. The Presidency has also said that government and the private sector have delivered 5.7m houses, increasing the number of people living in formal housing from 64% in 1996 to 77.7% in 2011.
Fourie says the research highlights potential for positive changes in SA as a result of a changing economically active population.
“African people who are young are moving into the ‘older’ cohort of the economically active population and more white people are moving out of it, and as more black people move in, they are more likely to start accumulating assets if they have acquired the necessary skills and were presented with opportunities to participate in the economy.”
'We're at a tipping point'
There is no denying that transformation is taking place in South Africa, says Ajay Lalu, managing director of black lite consulting. For one, SA is educating young people, and there have been positive outcomes, he says.
“The other thing we are doing right is that we are starting to see pockets of change in procurement, where we are developing young black entrepreneurs, and I would like to see more of that happening.
“If we don’t fundamentally change supply chains, and provide an enabling environment where young black South Africans benefit from procurement opportunities, we will have a society dominated by big companies and this is no good for sustainability.”
He is critical of transformation research, which is often focused on the quantitative rather than the qualitative. “For example, there may be an increase in blacks in leadership positions in companies but they are more often than not appointed in non-core positions, and if they are in core positions, we replace them with people who are not black. In this day and age, there should be no excuses that we don’t have experienced, skilled people and it is also an indicator of poor succession planning.”
Economists.co.za’s Mike Schüssler says transformation is “an ongoing project”, but agrees that there has been significant positive change.
There are, he says, many things people often don’t take into account. For example, the median age of whites is higher than the median age of Africans. “By virtue of their age, white people should be in more leadership positions and should earn more.”
SA is ranked 6th highest in pension fund assets to GDP and 56% of SA’s workforce say they have a pension fund. This is important, says Schüssler, as this represents long-term savings as opposed to savings accounts.
“On the asset side, for such a young population, there is a high proportion of black people who own a home and people are making productive use of their land,” says Schüssler.
The biggest challenge is getting the economy to grow at higher rates. Only within an economy that is growing, can the pie be shared disproportionally, Lalu says. But the worst enemy of transformation, he says, is corruption. “It deprives people of real opportunities. It is the thing young people are revolting against and should be revolting against.
“My biggest criticism of transformation, of BEE, is that we haven’t defined the end state – what these interventions are meant to achieve, and we have created a culture of dependency. When you break your leg, you have a crutch to assist you and when the cast is off you have to get rid of the crutch. We are not getting rid of the crutch.
“For me one of the biggest lessons we need to learn is that you cannot have this culture of dependency, otherwise the entrepreneur will remain dependent on big companies for work and for capital,” Lalu says.
He believes it is “far too premature” to be congratulating ourselves on the levels of transformation reached since 1994. “When we spoke of the rise of black diamonds – the relative number that were benefitting was small. Middle classes in the rest of the world are less indebted and have significantly more savings.
“I think we are at a tipping point from a transformation perspective,” says Lalu. “It could go horribly wrong, like Zimbabwe where there are land grabs and declarations that all companies be 51% black-owned. Or we can recognise that current notions and practices (from narrow-based enrichment to resistance and avoidance) have not yielded results. The consequence of that is that we need to revisit or reconstitute how we view transformation.”
For the full research report by Alternative Prosperity, click here. Visit the company's website here.
This is a part of the cover story that originally appeared in the 2 February edition of finweek. Buy and download the magazine here.