6 Discussion
6.2 Discussion of Key Findings
6.2.1 Disrupting the pattern of wealth accumulation
to form cross sector social partnerships; and managing business with a high level of ambidexterity when faced with competing economic and social outcome drivers, with the aim of achieving a high degree of Positive Social Change (Stephan et al., 2016). Thirdly, and flowing primarily from the first section, the chapter looks at the implications of the research findings, for companies in the sector and for government.
created great value for their beneficiaries (Theobald et al., 2015) and some cases extraordinary wealth (per Participant #2). 15 years of addressing Employment Equity targets has substantially changed the demographic makeup of the employees of the companies in the sector (see Annexure 6). However, the broadest base of the black population in South Africa seems largely untouched relative to the “success” of these two economic strata. The unemployment and poverty data depicted for the country in Chapter 1, comparing 2008 to 2018, are testament to this, and this may represent one of the underlying reasons that some commentators are not satisfied with the level of transformation in the sector (Carrim, 2017).
In trying to understand this persistent wealth gap, it is possible that it is the very design of the Charter’s convening structures and its core participants that resulted in part in this outcome. In other words, although there was a diversity of stakeholder interests represented in the Charter process, not all possible stakeholders were fully dealt with in terms of Charter targets agreed in the negotiation process. As noted by Participant #17 the key constituencies represented each got (to a large extent) what they wanted out of the negotiations, even if nobody was entirely satisfied with the eventual outcome (per Participant #1), as depicted below:
Constituency Desired Outcome
ABSIP Employment Equity opportunities and participation in company share ownership transactions; Funding for share ownership transactions Funding for black business growth
Procurement opportunities
Government The success of bringing a major sector of the economy under the transformation umbrella
Industry agreeing to implement transformation across a broader set of dimensions/pillars, thereby funding transformation in other sectors Maintaining the financial stability of the sector
Fiscal revenue from taxation of potential from future gains realized on share ownership transactions
Labour (in the sector)
Employment equity targets, especially for black women; Funding for skills development
The prospect of a modest level of share ownership participation
Table 8. Desired outcomes for key Charter constituencies
From this list, the key stakeholder that was not directly represented as an active participant in the Charter negotiation process is the Community group, ironically the most vocal in initiating the Red October campaign through the FSCC. And if the Community can be regarded as a proxy for the broadest base of the economically marginalised black South African population, from a wealth accumulation perspective the Charter clearly did not meaningfully address this group in the way it did for ABSIP and labour. Such a design “flaw” can be traced to three factors: the early days of ownership transactions (see Chapter 2) and their narrow focus on key, politically connected individuals; the 2001 BEE Commission report, which favoured a relatively narrow definition of beneficiaries for ownership participation (namely strategic equity partners and employees); and the concept of “trickle down” economics which was alluded to by several interviewees (Participants #2, #13 and #22 in particular). Perhaps for government, representing in theory this constituency, pursuing empowerment strategies for the broadest base of the population was simply a bridge too far, believing the trickle-down economic effect in a growing economy would achieve an indirect yet positive social impact.
As noted about the ruling ANC however, “It’s always rejected narrow BEE, and yet [it has]
always implemented it, at a huge cost to business” (Participant #22), confirming one of the concerns about the proximity of the ANC to business (Tangri & Southall, 2008), that as a party it was more interested in creating a black elite, industrial and professional class rather than in pursuing poverty alleviation (Hamann et al., 2008).
And while it is true that various corporate philanthropic foundations were spawned from some of the ownership transactions of companies in the sector (Anthony, 2018), it is too early to see whether the deployment of the endowments of these foundations will make a tangible difference to the economic situation of the poorest people in the country.
Trade associations / companies in the sector
Opportunity to regain external legitimacy
Targets that while new were competitively achievable over time, without onerous implementation costs
No major change to prevailing ownership design (e.g. nationalisation) Community
(through ABSIP)
Access to finance via low cost bank accounts, closer proximity to points of presence (e.g. branches, ATMs)
Agreed CSI spend targets e.g. to support NGOs active in poor communities
Thus while the Charter has succeeded in building wealth for the middle and upper echelons of the population in South Africa, by bringing more black people into these categories through the design of the pillars, that very design – in hindsight – predisposed this to happen. In looking ahead, more explicit consideration should be given to the broadest and poorest base of the population and how this group can benefit from a future redesign of the pillars of the Financial Sector Codes. This observation is one of the main contributions of this research and is a key tenet of the praxis element of this thesis.