Paul Janisch

A reader writes

My good friend Greg Durst of Endeavor sent me an email regarding small business in South Africa.

• 87% of black entrepreneurs are in the informal sector – which makes it hard to find the next black Adrian Gore.
• According to Global Entrepreneurship Monitor (GEM), only 5 South Africans are entrepreneurs out of 100 business people, compared to 15 in China and Indonesia.
• Because of affirmative action white entrepreneurs out number black entrepreneurs 2 to 1, despite only being 15% of the population.

This is interesting stuff.  I know that the last few GEM reports have noted that the levels of entrepreneurship are dropping.  There are numerous reasons for this and I think that the levels of red tape that companies have to go through to be registered and then operate must also play a roll. 

I blogged about who starts businesses some time last year.  And the stats I have confirm Greg's stats.

    White males - 25.5%
    Black females - 19.6%
    Indian males - 18%
    White females - 14.7%
    Black males - 14.6%
    Indian females - 8%
    Coloured males - 5%

The percentages are the number of people per group starting their own businesses.  In other words 18% of all Indian males are now self employed.

Get a little more on HP

I was thinking that when my Dell finally packs it in I would get a HP.  They have been praised from the rooftops for dong this.  Even old jungle jim has offered his two cents in today's Business Day (I know I said I wouldn't talk about him anymore but he is all over the newspaper all the time - I feel it is right to honour him.   However I will keep quiet when he shoots his mouth off in October when the new EE reports are due). 

The best commentary I have read so far came off the Opinion and Analysis section of the Business Day.  The commentary makes the following very significant points:

• There was a strong likelihood that major international IT companies, whose South African operations are estimated to amount to about 1% of their global turnovers, would disinvest rather than share valuable intellectual capital with unwanted partners. In most cases disinvestment would have increased domestic technology costs while reducing employment and the transfer of skills to locals.
• Given the way BEE has evolved in SA, there is also a case to be made in favour of employment equity, skills transfer and affirmative procurement as the most effective means of improving the lives of ordinary South Africans, since so many equity transfers have served only to enrich already empowered blacks.

Regarding the first point,  the dti has always had to tread a fine line between encouraging foreign direct investment and scaring it off by insisting on equity.  I always wondered whether our immediate neighbours (other than Bob's fiefdom) were not making overtures to some multinationals encouraging them  to move shop there because of BEE.   Some multinationals will still find themselves looking for local equity representation - the financial sector is one example where both Deutsche Bank and Merrill Lynch have done equity transactions.

And the second point - anyone who has ever studied the rudiments of B-BBEE would regard this as obvious - it's a pity that so many people in government and corporate SA don't.

The dti gets a lot of flak (much of it well-deserved) for their various initiatives.  But this time they have performed beyond expectations.  Well done to them. 

The rubicon is crossed

The floodgates have opened.  HP are the voortrekkers of equity equivalents ek se.  The front page of this morning's Business Day announced the news  boldly - HP gets BEE equity exemption.  Its equivalent plan is to set up the HP Business Institute.   

The institute, to be launched in November, is expected to train about 300 small black information technology (IT) businesses over seven years. It will upgrade skills, bring unemployed graduates into the sector and provide for job placement . The first class will begin in February.

You'll also notice that the programme is focused on skills development, and I am willing to bet that these skills will be largely orientated around selling or supporting HP products.  This is the only way to do it.  Train people to sell your products and help them become successful.

This is very good news because it means that the dti at least knows how to evaluate these applications and in some cases actually award them. And with Lionel October leaving the department  there isn't much left there to be confident about. 

Perhaps the beleaguered department would like to adopt Delton van Rooyen's witty ode to the humble postman.  Delton was on the JHB leg of Idols (Kath and I have done nothing but watch this show for the last week), and he performed a song called "we deliver whatever it takes".  Click on this link and go to page 2 and then select "The Mail Nurse".   

If you happen upon Cliff Jennings first then you would do well to watch his "I wanna" video.  There is also an hysterical introduction to Cliff (and a few other clips) on YouTube

A few stats

It has been said that every large multinational started out as a small business.  Hewlett- Packard started out in the forties in a garage (more on them a little later).  The Business Times carried an article in yesterday's paper on small business and  government's stance  on this  important sector of the economy.   Carrying the punny title of  "Why small is big in the economy" the story provided us with some interesting statistics on small businesses. 

Like did you know (almost like a Chappies' wrapper)?

• small and medium businesses account for 50% of private sector employment and 80% of formal-sector job growth
• small firms are responsible for about a third of overall GDP (in contrast with developed economies where this is as much as two thirds)
• globally, the trend is that the “next big thing” tends to come from smaller firms rather than larger firms.

There is more in the article on the red tape that small businesses face in getting up and running (have you ever registered for VAT and PAYE?).  You can read it online.  The final paragraph is credited to Goolam Ballim, Standard Bank chief economist.

“From an economic perspective, economies grow only because of productivity growth. Small business is at the epicentre of potential innovation, and because of this, government needs to foster their long-term sustainable economic performance.”

On the lighter side

OK I said in the last post that there would be no more Jimmy-ing the system.  I did notice in the Business Day today that Jabu Moleketi (Deputy Finance Minister) has defended outspoken Public Investment Corporation (PIC) CEO Brian Molefe against claims that he is conducting a racial witch-hunt against corporate SA.  And Tim Cohen did write a very balanced opinion on our man jungle jim earlier this week.

I apologise for the size of this image, my knowledge of images and how to edit them is a little lacking - click on the image to see it.

It's white Jim, but not as we know it

  Alexander Forbes appoints a white executive chairman and the process predictably gets labeled racist by Jimmy.   That was yesterday's news.  This morning the Business Day reports that Alexander Forbes' shareholders reject Manyi’s gripe.  They can do this because Alex Forbes is a private company and our constitution allows them to  operate their business in anyway that they see fit.   The appointment must be a very sound one because Cyril's Shanduka Investments owns 16% of Alexander Forbes and they aren't up in arms.

But if you read the letters page you'll see a bunch of (unfortunately white) readers voicing their concern at this sudden rise in racism.   It is obviously symptomatic of some deep seated discontent but people like Manyi and the PIC's Brian Molefe seem to want black people at all costs.  Where this is heading is anyone's guess.  It is a little discomforting, but discomfort leads to innovation.  And necessity is the mother of invention. 

I think I'll stop blogging about this predictable behaviour.   No more Jimmy on this blog.

Multinationals

I had heard nothing about multinationals applying for equity equivalents.  But the Business Day tells us that numerous companies have submitted proposals to the DTI.

“A lot of them have come with proposals to us on equity equivalents. These include Hewlett Packard, IBM, pharmaceutical companies, and the German Chamber of Commerce and Industry on behalf of German multinationals, and we have also recently heard that the automobile multinationals have plans for alternatives,” Lionel October said.

This is very good news.

BEE news

I blogged about the Presidential Black Business Working Group wanting stronger laws to enforce the implementation of BEE.  The Business Report carried an article yesterday about this.   It would seem that the DTI wants "wants more legislative clarity to deal with fronting of companies by black people."   

I figured that you could only deal with things like fronting because you can't enforce transformation.  So if you criminalise fronting we might see it being curtailed.  I also think we need to start recognising the B-BBEE contributions of all companies and not limiting empowerment to ownership - as ESKOM is known to practice.  If you continue in this narrow-based fashion then fronting will continue.   

I'm in Gauteng Business

When I started out in the BEE bedryf, one of the first publications to carry my articles was Gauteng Business.  I have had a long relationship with both Ryk and Hendri.   These two guys have built this publication into a great mouthpiece for all businesses in Gauteng.  They don't mess around with the sensational - they want real issues and real solutions to these issues.  If you aren't familiar with the publication I recommend you subscribe.

I wrote an article about rating agencies and other options, it's in the latest issue.

Bite size tjanks

Fortunately for me I came across the Star today and was greeted by a startling headline on the front page of the Business Report.  "BEE needs teeth if it is going to bite, state warned".  And I quote:

The government must go back to the drawing board and find ways of giving BEE significant teeth, with possible penalties if firms refuse to transform rapidly. What these penalties will be must be studied by the department of trade and industry, and a task team that includes black business to give empowerment clout.

The report was presented to Mbeki by the Presidential Black Business Working Group which includes Peter Vundla (who has been known to voice the occasional opinion on BEE, transformation and advertising) and my old mate Jimmy Manyi. 

Vundla recognises that the legislation is a "framework" and that the framework is not enforceable.  But he suggests (without being specific) "there should be penalties for non-compliance."

I'm not going to go into any more detail about it.  But there is a very significant paragraph in the middle of the article.

Mbeki is under pressure to deliver to a restive black constituency that has not seen significant progress in BEE.

This is nothing new and it does seem as though there is a fair amount of impatience within the newer players in the business and political arena.  The Springboks are just one example. 

So here's what I think....................

It's early days.  We've only just got a scorecard that can be used to measure stuff.  Up until now it's been guess work.  Give us a couple more years to get into it.

To the best of my knowledge there is no legal vehicle to enforce compliance of BEE.  You can't tell a private company who their shareholders will be, who they should employ, how they should train them, who they should buy from and what causes they should support.  If you do that you might as well nationalise the whole economy.

I'll be very interested to see how they are going to give the whole system the force of law.

On the subject of the force of law

A report on the progress of BEE in the public sector is to be completed by October (year not specified).

Erratum sum meum (latin noticing)

I lamented somewhat miserably in my last post that the Big News website didn't work.  I was wrong - I can't see it on my PC (DNS settings are not happy).  The information about the enterprise development awards is available on their website.  But I still can't see it.

I learned this from Christoff Oosthuysen,  the publisher of Bignews, who politely pointed out that my DNS settings are in their moer in - and then sent me the information via email.  Thanks Christoff.