Beyond Tenderpreneurship: Rethinking Black Business and Economic Empowerment

By MISTRA MISTRA

Black Economic Empowerment (BEE) policies have been a central pillar of attempts to overcome the economic legacy of apartheid. Yet, more than two decades into democracy, economic exclusion in South Africa still largely re?ects the fault-lines of the apartheid era. Current discourse often con?ates BEE with the so-called tenderpreneurship referred to in the title, namely the reliance of some emergent black capitalists on state patronage. Authors go beyond this notion to understand BEE s role from a unique perspective. They trace the history of black entrepreneurship and how deliberate policies under colonialism and its apartheid variant sought to suppress this impulse. In the context of modern South Africa, authors interrogate the complex dynamics of class formation, economic empowerment and redress against the backdrop of broader macroeconomic policies. They examine questions relating to whether B-BBEE policies are informed by strategies to change the structure of the economy. These issues are explored against the backdrop of the experiences of other developing countries and their journeys of industrialisation. The relevant black empowerment experiences of countries such as the United States are also discussed. The authors identify policy and programmatic interventions to forge the non-racial future that the constitution enjoins South Africans to build.

• Language: English
• Publisher: The Mapungubwe Institute for Strategic Reflection (MIST
• Release date: Apr 16, 2020
• ISBN: 9781928509141

MISTRA MISTRA

The Mapungubwe Institute for Strategic Reflection (MISTRA) was founded by a group of South Africans with experience in research, academia, policy-making and governance who saw the need to create a platform of engagement around strategic issues facing South Africa. It is an Institute that combines research and academic development, strategic reflection and intellectual discourse. It applies itself to issues such as economics, sociology, history, arts and culture and the logics of natural sciences.

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Introduction

The future of Black Economic Empowerment and entrepreneurship

KHWEZI MABASA AND AYABONGA CAWE

THIS BOOK CONTRIBUTES TO POLICY DEBATES on Black Economic Empowerment (BEE) and black entrepreneurship in several ways. It provides important updates and research-based policy advice on economic transformation policy areas explored in previous studies (Cargill, 2010; Gqubule, 2006; Southall, 2007). Furthermore, the authors examine themes not adequately addressed in other BEE research or policy debates. The research on BEE in the country is minimal and mostly covers a selected group of BEE beneficiaries. South African political economy policymakers accept that BEE legislation has produced limited results, and failed to overcome racialised inequality over the past 25 years. This broad acknowledgement presents an opportunity to rethink and restructure South Africa’s BEE model. Contributors to the publication initiate this process by exploring the experiences of different black entrepreneurs, using a systemic political economy analysis. In this way, they enrich our understanding of economic transformation.

In this introductory chapter we discuss the publication’s main themes and arguments. The primary aim is not to summarise authors’ arguments but rather to show how their proposals offer alternative approaches to Broad-Based Black Economic Empowerment (B-BBEE) policy implementation. This discussion is organised around the book’s sections, which cover a wide range of contemporary and historical BEE topics. There are four pivotal thematic areas: historical context; the state and economic empowerment; challenges and prospects for inclusive empowerment; and rethinking entrepreneurship.

The World Bank’s (2018) diagnostic report depicts South Africa’s economic transformation in the following words: ‘overall, being white or South African Indian – for whom apartheid legislation was less harsh – remains a strong predictor of wealth’ (World Bank, 2018: 18). This document acknowledges the South African government’s transformation efforts, among others, through various BEE policy iterations aimed at addressing systemic racial socioeconomic inequalities. However, it states that ‘little evidence exists about the extent to which B-BBEE achieves its goals’ (World Bank, 2018: 21). This lack of evidence and the persistent racial inequalities in South Africa motivated MISTRA’s inquiry into BEE and black entrepreneurship broadly.

Some writers have questioned BEE’s legitimacy, pointing to what they view as only a small black elite that has benefitted from South Africa’s empowerment deals in the past 25 years (Southall, 2010; Von Holdt, 2019). The derogatory term ‘tenderpreneur’, coined by the South African Communist Party (SACP) has been used in popular discourse to describe BEE-linked patrimonial networks (Ndletyana et al., 2013; Nzimande, 2010). This conception is expressed in a speech delivered during the SACP’s anti-corruption forum held in 2010 by the Party’s General Secretary, Blade Nzimande (2010) who stated that:

By ‘tenderpreneurs’ we, amongst other things, mean the corrupt collusion between business, politicians and civil servants to capture government tenders. Tenderpreneurship also poses a threat and is an obstacle to especially genuine small and medium entrepreneurs who get deprived of government work just because they do not have political connections.

This book interrogates the claims advanced by Nzimande (2010) and proponents of the black elite thesis (Southall, 2010; Von Holdt, 2019). The authors examine the socioeconomic impact of B-BBEE legislation and diverse black entrepreneur experiences in order to transcend the so-called ‘tenderpreneurship’ discourse. These discussions are contextualised within an evolving post-apartheid political economy that is finance-led. Black Economic Empowerment policy practice has evolved since previous publications, and it is necessary to investigate emerging themes that are not thoroughly examined in existing BEE studies (Cargill, 2010; Iheduru, 2008; Ponte et al., 2007). Throughout, authors show the importance of nuanced analysis in studying the emergence, development and future of black business in South Africa. They address three core questions in this publication:

•What is the socioeconomic impact of BEE?

•What lessons can be drawn from varied black entrepreneur experiences?

•What interventions are required to strengthen the current BEE model, so it addresses systemic racial inequality in South Africa?

The writers in this publication answer these pertinent questions using diverse methodological approaches. These include, first, an analysis of primary and secondary research on BEE and black entrepreneurship. This research includes sources such as academic articles, government policies, economic media reports and books. Second, the book draws on methods and analytical frameworks from various disciplines such as sociology, political economy, history, business studies, economics and political science. It employs some elements of inter- and transdisciplinary methods, which encourage researchers to ‘work between, across and beyond several disciplines’ (Du Plessis et al., 2011: 20). The contributors are not drawn from one discipline, and their analyses show the relationship between socioeconomic, political, cultural and psychological factors in B-BBEE policy practice. As well as drawing on different disciplines, the authors use analytical and conceptual frameworks from different fields to bring these variables to the fore.

These varied methodological approaches also find expression in the publication’s emphasis on incorporating diverse views from ‘non-specialists and stakeholders’ who are active participants in B-BBEE policy implementation and black business enterprises (Du Plessis et al., 2011: 20). To this end, a third approach employed includes extracting knowledge from various types of interviews. These interviews were conducted within an intersectional framework, which accommodates gender, age, business size, geography and class differences. Authors in this book have assessed the findings in the literature on BEE and black business against the lived experiences of black entrepreneurs. The data collection process and analysis take into account the gender dimension in B-BBEE policy debates. Authors consciously identified black female entrepreneurs who want to share their experiences. The case study chapters include black businesswomen who operate in different sectors of the South African economy. This analysis of sector differentiation is complemented by age diversity within the black businesswomen interviewees. The publication factors in how gender intersects with other social identity markers such as class, culture and race.

A fourth methodological approach consists of analyses of comparative case studies to learn from international experiences. This comparative approach enriches this publication and avoids the pitfalls of parochialism that characterise contemporary BEE public discourses (Azarian, 2011: 123).

HISTORICAL CONTEXT: CLASS FORMATION AND POLICY DEBATES

The book’s first two chapters, written by Bryer and Godlimpi, debate historical black capitalist formation in South Africa. These authors adopt a political economy approach, which elevates connections between political, economic and social power relations. Furthermore, they show how race relations in the South African context shaped the evolution of the country’s black entrepreneurial and capitalist classes (Magubane, 1971; Nzimande, 1990). The chapters critique seminal 20th century political economy scholars such as Bundy (1972), Magubane (1971), Wolpe (1972) and Robinson (1983). The authors use these eminent scholars’ theoretical frameworks to historicise and trace South African black entrepreneurial agency from the 19th century.

Chapter 1 addresses a research gap in business and political economy studies in South Africa. It traces historical black entrepreneurship and nascent black capital class formation to the 19th century. The existing literature primarily focuses on the black entrepreneurship that emerged in the 20th century, with an emphasis on the post-1950s period. These scholars link black entrepreneurship to the apartheid government’s attempts to strengthen its separate development strategy and co-opt segments of the black population (Nzimande, 1990; Southall, 1980). Other scholars in this literature argue that the apartheid state supported certain black entrepreneurs to build legitimacy within black communities and defuse the heightened social unrest in the 1970s (Butler, 2007; Iheduru, 2004). This scholarly strand assumes that black business has always emerged on the basis of state support. Furthermore, historical black entrepreneurship is not perceived as organic or driven by conscious black agency. Rather, emphasis is placed on how the colonial state used its regulatory and financial power to develop this black capitalist class. This paternalistic historical account does not afford early black entrepreneurs any form of autonomous economic agency. It also fails to appreciate differences in the groups of black entrepreneurs that operated in various eras of South African history.

Godlimpi counters these underlying assumptions using documented research, which provides alternative accounts of black entrepreneurship history (Atkins, 1986; Walker, 1995). He argues that South Africa’s B-BBEE and black entrepreneurship policy debates have overlooked salient lessons from pre-20th century black entrepreneurial experiences. This has subsequently led to the development of BEE strategies that are overly state dependent, and marginalise the insights to be gained from organic black business traditions. Furthermore, Godlimpi illustrates how debates on black entrepreneurial historiography ignore the significance of pre-colonial knowledge systems in fostering black entrepreneurship (MISTRA, 2013: 20–22).

Godlimpi’s contribution to contemporary debates hinges on two crucial points. First, it shifts BEE discourse from the narrow focus on black business and state dependency expressed in several studies. Second, his contributions encourage society to observe lessons from organic black entrepreneurship (historic/contemporary), which is not dependent on white-dominated value chains or state support. This latter task is taken up in Chapter 10. Breyer’s discussion in Chapter 2 engages Godlimpi’s historical account on black entrepreneurship. However, she examines black capitalist class formation by locating it within the evolution of South Africa’s capitalist system. She argues that one cannot fully comprehend black capitalists without placing black economic agency in this structural context. Breyer concludes that South Africa’s contemporary black capitalist class emerged as a stratum of an inherited elite racialised capitalist system.

Her account initiates a debate on whether South Africa’s black capitalist class has pursued its sectarian socioeconomic interests at the expense of broader national development goals. Breyer argues, in Chapter 2, that the black capitalist class is primarily concerned with its integration into existing market structures. Furthermore, persistent racial inequalities illustrate that BEE has not succeeded in addressing race-based economic exclusion. Corrupt patrimonial links between some state officials and black businesses exacerbate this challenge. Breyer’s chapter departs from other discussions on black capitalist patriotism, which focus on the state’s ability to discipline BEE beneficiaries and prevent crony capitalism ( Southall, 2010). Her proposal for addressing domination by a black economic elite is class agency and oversight. In her view, only the black working and middle classes can hold BEE beneficiaries accountable in order to shift black entrepreneurship toward national development goals.

This theme of creating a patriotic black entrepreneurial class is investigated further in Chapter 5. The major lesson obtained from the two scene-setting chapters is the need to appreciate the diversity of black entrepreneurial experiences. These chapters illustrate the different business development paths and adaptive strategies used by black entrepreneurs throughout history. This crucial analytical observation runs through the entire publication, especially in chapters dedicated to examining black entrepreneurs’ views or lived experiences. Previous BEE studies have been limited because they assess black entrepreneurs as a monolithic social group (Chabane et al., 2006; Iheduru, 2008). There is minimal appreciation for differences in enterprise size, access to capital, sector participation and business strategies.

Chapters 3 and 4 build on the debates about framing class formation. These accounts, penned by Biniza and Rakabe, investigate the policy context for B-BBEE implementation. This contextual debate links BEE to different aspects of macro- and microeconomic trends. Existing B-BBEE policy literature and research studies have not sufficiently interrogated the connections between B-BBEE and these trends. The main focus has been on determining whether B-BBEE deters investment into different sectors (Acemoglu et al., 2007; World Bank, 2018). Chapter 3 evaluates the relationship between BEE and three macroeconomic policy areas: national economic growth, as well as monetary and fiscal policy.

Binza argues that South Africa’s macroeconomic environment was more conducive for BEE between 1994 and 2008. However, this conducive environment was limited to specific sectors (mining, energy and finance), which benefitted from macroeconomic policy choices. During this period, the macroeconomic environment limited the impact of BEE in productive sectors like manufacturing and exacerbated deindustrialisation. The chapter attributes this to monetary policy choices and the nature of growth between 1994 and 2008. Furthermore, some BEE deals crashed in the late 1990s, as a result of macroeconomic policy choices that made South Africa’s economy more susceptible to external shocks. According to Binza, the post-2008 macroeconomic policy environment has not been conducive to effective B-BBEE implementation. He attributes this to declining growth, dwindling public revenue, policy incoherence and weakened state capacity. Binza proposes a set of policy and institutional interventions to address these macroeconomic challenges. These include the following proposals: monetary policy reform to lower capital costs; strengthening state capacity; and addressing structural impediments to economic growth.

Chapter 4, by Rakabe, examines microeconomic trends in order to deepen the debates about policy context. The chapter specifically investigates whether B-BBEE policy has sustained or transformed economic concentration in various sectors of the economy. The author also interrogates the effects of B-BBEE on national implementation of industrialisation policies. These two questions transcend existing B-BBEE studies, which primarily focus on share transfers, ownership demographics, governance and dividend accumulation (Cargill, 2010; Iheduru, 2008; Ponte et al., 2007; Southall, 2010). Broader market structure issues that fall outside demographic ownership or B-BBEE codes have received minimal attention in previous analyses. Rakabe addresses this oversight by linking B-BBEE discourse to national competition and industrial policy priorities. He examines the evolution and business strategies of the four largest BEE holding companies.

This chapter finds that B-BBEE has reinforced South Africa’s rigid market structures, which are characterised by significant entry barriers for black small, medium and micro enterprises (SMMEs) (World Bank, 2018: 15). Furthermore, it illuminates the reasons for B-BBEE making only a minimal contribution toward reviving industrialisation in South Africa: reasons include policy incoherence, financialisaton and overreliance on the traditional minerals-energy complex (MEC). This conclusion is supported in other sections of the book that debate B-BBEE and structural reform (see Chapters, 5, 7 and 9). Rakabe urges policymakers to align B-BBEE to economic structural transformation priorities expressed in industrial and competition policy prescripts. He argues for a more streamlined industrial policy that prioritises sectors in which South Africa has a competitive advantage.

According to Rakabe, this proposal can only succeed if government increases state financial assistance for aspiring black entrepreneurs and limits cross-shareholding in BEE business interactions. These interventions will decrease black entrepreneurs’ overreliance on dividend pay-outs for capital accumulation, and create more autonomy for choices about sector investment. He states that market entry barriers should be decreased through centring B-BBEE in competition policy. In his view, B-BBEE compliance should be one of the important determining factors in mergers and acquisition approvals. These measures add a significant difference to South Africa’s post-apartheid BEE paradigm. They shift the policy focus from a preoccupation with a BEE share transfer model to one that is anchored on the real economy, production and operational involvement. This observation is brought to the fore in different chapters of the book, which argue that BEE must transition from the narrow sphere of financial ‘exchange’ to actual ‘production’ (see Chapters 3, 5 and 9). All these proposals require the efficient and coordinated state intervention outlined in the publication’s second section, The State and Economic Empowerment: International and Domestic Experiences.

THE STATE AND ECONOMIC EMPOWERMENT

The publication draws on a wide range of international experiences. The authors in this book work with case studies from India, the United States of America and East Asian developmental states to expand perspectives on South Africa’s comparative socioeconomic empowerment and redress. This approach departs from previous BEE comparative studies that primarily compare South Africa and Malaysia (Cargill, 2010; Gqubule, 2006). In Chapter 5 Mabasa initiates the comparative analysis with his examination of the debates, articulated by Rakabe and Breyer, about a patriotic black capitalist class. His chapter uses clear political economy indicators to examine whether South Africa has created a black capitalist class that supports national development priorities.

The investigation is framed around policy prescripts discussed in literature on East Asian developmental states. This analytical framework helps to position the South African government’s explicit commitment to building a developmental state. The chapter mainly highlights lessons from East Asia on how to create an indigenous capitalist class, which pursues company and national objectives simultaneously. Mabasa’s account differs from previous studies on this topic, which are largely based on Marxian theoretical debates on the nature of capitalists or the black business elite thesis (Von Holdt, 2019). Instead, he engages with this question using evidence of structural transformation in the political economy and national development policy priorities.

Mabasa argues that South Africa has not created black entrepreneurs that support national development priorities such as employment creation, industrial diversification, decreasing racialised wealth inequality and economic exclusion. He attributes this to the following three factors:

•First, existing B-BBEE policy prescripts facilitate integration into existing economic market structures. This limits B-BBEE’s contribution toward supporting innovation, structural transformation and industrial diversification.

•Second, weak coordination between developmental state policy interventions and B-BBEE implementation at different levels of government, means Black Economic Empowerment is not fully implemented and integrated in government’s economic restructuring interventions.

•Third, a failing social compact between government and black entrepreneurs. This failure is a product of the state’s inability to fully comprehend the diversity of black business in South Africa. Furthermore, there are insufficient policy instruments to ensure that black entrepreneurs, who are BEE beneficiaries, contribute toward national policy objectives.

Mabasa proposes that B-BBEE policy be integrated more efficiently into economic diversification strategies through innovative, sector-specific interventions. He urges government to review the state’s role in B-BBEE so that it complements developmental state policy prescripts. This government intervention must address the challenges that constrain black entrepreneurs in manufacturing and broader industrialisation-related economic activities. The Black Industrialists Programme (BIP), introduced in 2015, attempts to ameliorate market failures through financing and state procurement. But it pays insufficient attention to private sector market barriers, research and development (R&D) support, enforcing local content and implementation monitoring. Mabasa states that the two proposals should be undertaken within the ambit of a renewed, transformative social compact between black business and government. These conclusions support the arguments developed in Chapter 4, which articulate the need to support a black industrial entrepreneurial class pursuing industrial and export diversification.

In Chapter 6 Nontenja and Mavundla examine the socioeconomic redress policies in India, the United States of America and Malaysia. Their comparative case study approach is based on three interrelated variables: state capacity, embedded autonomy and corruption. These authors highlight important lessons from the state’s role in implementing redress policy in the three countries. They assess the successes and shortcomings of redress policy implementation over time. According to Nontenja and Mavundla, redress policies can only achieve intended policy objectives when complemented by an efficient and effective state. Government capacity ensures uniform policy implementation and minimises corruption.

Nontenja and Mavundla use Evan’s (1995: 45) theoretical framework on ‘embedded autonomy’ to assess whether socioeconomic redress can succeed if privileged economic groups challenge it. Evidence from case studies suggests that successful redress policy implementation requires legitimacy within, and buy-in from, privileged economic groups. This was apparent in all cases, which illustrated how these economic actors subvert redress policy where they perceive it as a threat. Nontenja’s and Mavundla’s observation is critical for South Africa because BEE requires support from a white-dominated business class, which, in some cases, perceives this policy as an economic threat. There is ample evidence of large corporations undermining B-BBEE policy implementation using varied methods (B-BBEE Commission, 2019; Dlamini, 2019).

The chapter argues that the challenge requires an approach that combines social compacting and the capacity to discipline companies that do not comply with policy requirements. The authors encourage B-BBEE policymakers and stakeholders to transcend the dominant legal or accounting compliance practices that are pervasive in each sector (Cargill, 2010; Ponte et al., 2007). They find that corruption in implementing socioeconomic redress policies benefits elites or reproduces the power of dominant economic groups in society. It delegitimises redress policy among stakeholders and the broader public. The authors propose that the state introduces more B-BBEE policy monitoring institutions, especially at provincial and local levels, in order to curb corruption.

Spengane, in Chapter 7, tackles the issue of effective B-BBEE policy implementation by analysing the South African state’s regulatory capacity and its use of state-owned enterprises (SOEs). He poses two fundamental questions: Has state regulation been conducive to achieving B-BBEE policy objectives? What impact have SOEs had on B-BBEE policy implementation? The chapter answers both questions using Alice Amsden’s (2001) theory on reciprocal control mechanisms (RCMs). He argues that successful industrialisation and economic development require states to ensure that public incentives are complemented by company behaviour that supports national policies (Amsden, 2001: 4). This chapter uses Amsden’s (2001) economic principle to examine whether state regulation (subsidies, privatisation, licensing, etc.) has aided B-BBEE economic imperatives. It further investigates if the post-apartheid government’s strategy on SOEs has applied RCMs to achieve B-BBEE policy outcomes. Spengane grounds his analysis in two case studies in the state regulation and SOEs policy areas. The first one examines the sale of the Iron and Steel Corporation (ISCOR) and the second discusses regulation in the automotive sector.

This approach of studying SOEs and state regulation in B-BBEE policy implementation focuses on trends and failures in market structures. The discussion on SOEs has been reduced to good governance or compliance with legislative prescripts. These two areas are essential for successful B-BBEE policy implementation; however, the existing literature does not provide much reflection on the long-term strategic use of SOEs and government regulation in B-BBEE policy implementation. Moreover, the studies have been reduced to four main MEC-linked SOEs: Eskom, Transnet, South African Airways (SAA) and Denel (Iheduru, 2004; Southall, 2007; PARI, 2017). State regulation, in discourses about BEE, has also been limited to debates on the B-BBEE Codes of Good Practice, the Preferential Procurement Policy Framework Act (PPPFA) (2000) and B-BBEE legislative amendments.

These analyses of good governance and B-BBEE legislative compliance have made a valuable contribution to B-BBEE policy studies (Cargill, 2010; Iheduru 2004; Southall, 2007). However, they do not provide sufficient insights into how government regulation can address systemic market structure and failure challenges, i.e. uncompetitive market barriers, access to finance, local content provisions, technology transfers and input costs. Spengane’s chapter interrogates deeper market structure issues, which either support or impede B-BBEE policy implementation. His chapter also shifts the B-BBEE state regulation debate away from the confines of the MEC sector by exploring public enterprises and government regulation in automotive and steel value chains. This is essential because both industries are inherently connected to downstream economic activities such as manufacturing and engineering (Zalk, 2017). This publication seeks to shift BEE from the traditional, finance-led MEC toward a model that supports black entrepreneurs in both downstream and upstream productive sectors.

Spengane’s chapter argues that the state has not applied RCMs effectively in its SOEs strategy and regulatory mechanisms. This has limited the effective implementation of B-BBEE, and black entrepreneur small enterprise attempts to enter various value chains. The chapter attributes this trend to the state’s inability to correct market failures such as price fixing and anti-competitive contractual obligations in sector value chains. It also highlights weak monitoring and evaluation capacity within the state to ensure that market players support national development priorities, especially economic transformation. Spengane acknowledges the importance of using public procurement to achieve B-BBEE policy goals. However, he argues that procurement will have limited impact without skills development, innovation, and the addressing of market failures. The emphasis is placed on competition barriers, technology transfer and compliance with local-content provisions. He proposes several RCM policy instruments that can be used to support BEE and small black entrepreneurship in the automotive and steel value chains. These include the following proposals: strengthening competition policy; preserving segments of value chains for black SMMEs; public ownership in the steel value chain; and linking economic rents (like licensing) to small supplier development.

In Chapter 8, Sefalafala contributes to debates about state regulation through an examination of B-BBEE implementation within a local municipality. This account fills a gap in BEE literature which primarily focuses on the national state. Sefalafala’s study illuminates the gap between intended B-BBEE policy outcomes and actual implementation in the local government sphere. Furthermore, policy stakeholders will gain insights from entrepreneurs’ and local state officials’ lived experiences of B-BBEE policy implementation. Sefalafala’s case study is based on experiences in the Matjhabeng municipality. The chapter also interrogates links between BEE and state capture in this locality.

Sefalafala employs Weber’s (1978) analytical framework of ‘crypto plutocracy’ to describe the relationship between black entrepreneurs in the local state and government officials. He argues that these patrimonial relations cannot be reduced to unethical or immoral behaviour. State capture, according to Sefalafala, is also caused by the local state’s inability to implement B-BBEE policy effectively. Therefore, the chapter concludes with several lessons for successful B-BBEE policy implementation in the local state. The primary insight relates to perceptions and conceptions of state capture. Evidence presented in the chapter illustrates that black entrepreneur participants in BEE-linked patrimonial networks view their actions as legitimate. They argue that structural barriers in formal markets make it difficult for them to compete without using these patrimonial relationships. Another lesson obtained from the case study is the need for developing BEE and black entrepreneurship strategies that respond to local political economy opportunities and challenges. There is currently a disconnect between B-BBEE implementation and local economic development (LED) in the municipality studied. The chapter also encourages government to improve strategies for building entrepreneurial capacity so that black entrepreneurs can benefit from B-BBEE policy opportunities without being over-reliant on white business for meeting tender commitments. This enhanced capacity-building needs to be supported by a conducive business environment for SMMEs, which requires a local state committed to development. This chapter shows that the development and sustainability of black SMMEs can only succeed in a local context based on good governance.

Sefalafala provides further insights into PPPFA implementation in the local state. He argues that black entrepreneurs cannot meet the criteria set out in this legislation because of underlying market structure disadvantages. Policymakers are urged to address these impediments so that the intentions of the PPPFA are realised.

The last lesson from this chapter relates to over-dependency on the state for business opportunities. This is fostered by low levels of economic diversification in local municipalities, which means that most economic opportunities reside in state contracts and procurement. Economic development in most municipalities is dependent on a few dominant sectors such as mining, public services or agriculture. According to Sefalafala, B-BBEE and economic diversification policy strategies should be implemented simultaneously to counter this trend. Attempts should be made to increase the pool of B-BBEE beneficiaries by focusing on black-owned SMMEs within the local state. The next section takes this debate further and discusses mechanisms for creating a BEE model that benefits workers, informal economy entrepreneurs and other black designated groups (as prescribed by B-BBEE legislation).

CHALLENGES AND PROSPECTS FOR INCLUSIVE EMPOWERMENT

Cawe’s analysis in Chapter 9 on B-BBEE transactions and deal structures initiates the debates about how to increase the number of BEE beneficiaries. This chapter examines BEE deals that have occurred in companies that are listed on the Johannesburg Stock Exchange (JSE). It covers five economic sector case studies, which are based on B-BBEE economic activities in the post-apartheid era. There are two core research questions in his discussion. First, an attempt to determine whether deal structures substantiate the argument that B-BBEE has only benefitted a small black business elite. Second, how do policymakers develop innovative methods for aligning deal structures to industrial and market diversification strategies? Cawe contextualises his analysis in the contemporary political economy, characterised by financialisaton (Ashman et al., 2013). This informs firms’ business strategies and how they implement B-BBEE. Cawe argues that most B-BBEE deal design structures have limited the opportunities for broad-based beneficiaries to participate (in business operations) and to receive substantial socioeconomic gains from B-BBEE. These deals are designed in a manner that exposes broad-based beneficiaries to a series of variables beyond their control such as share price movements, interest rates and dividend policies. Furthermore, operational control and business development elements are overlooked in these transactions.

Cawe concludes that most post-apartheid B-BBEE deals support the logic of increased financialisaton in the economy. These transactions prioritise share transfers and financial indicators over production. BEE deals have largely focused on existing market structures and have failed to create new productive businesses. This, according to Cawe, explains why B-BBEE contributes minimally toward economic structural reform across varied sectors and industrialisation. His analysis departs from other studies on B-BBEE deals in several ways. One, it links deal structure to reindustrialisation debates and reviving South Africa’s real economic activity, which includes the production of both goods and value addition. Two, Cawe interrogates how stakeholders measure the success of B-BBEE deals. He pushes beyond the confines of narrow financial indicators and demographics. Three, his emphasis on operational control, production and structural transformation is aimed at encouraging stakeholders to connect B-BBEE deal implementation with broader national development imperatives. This contentious issue has been highlighted in various investigations undertaken by the B-BBEE Commission (B-BBEE Commission, 2019).

Hassen expands Cawe’s emphasis on broad-based beneficiary participation and benefits in Chapter 11. He examines worker participation in B-BBEE-related empowerment transactions. His analysis draws on the trends in trade union investment companies and employee stock ownership plans (ESOPs). This area is largely overlooked in BEE literature, which primarily studies enterprise participation in BEE. Cargill (2010) traces the experiences of trade union investment arms in her book and assesses their various investments. Hassan’s chapter adds a new dimension to this discourse using the return-to-workers analytical framework to investigate trade union investments and ESOPs.

The return-to-workers framework comprises the pillars:

•Challenging dominance;

•Protecting and creating jobs;

•Supporting trade union activities;

•Supporting members and their families; and

•Alternative forms of ownership.

Hassan’s study provides useful insights into worker participation in B-BBEE. It reveals that some trade union investments and ESOPs have provided substantial return-to-workers. However, these are outliers, and the general experience is mainly characterised by passive investments in large companies that produce minimal returns for members. The chapter recommends some important steps for improving workers’ returns from B-BBEE related investments and ESOPs. The first recommendation is to establish autonomous finance vehicles within unions, which receive dividends, and channel them to union developmental institutions or activities, e.g. research institutes, bursary schemes and training centres. This will ensure that returns are used for supporting members and essential activities such as capacity-building. These financial vehicles preferably need to be separated from the general revenue base of the union.

The second recommendation is for worker oversight and control of trade union investment arms through the application of basic good governance principles and debates on investment strategy in union structures. Hassan provides evidence of how these two measures improved the return-to-workers in the National Education, Health and Allied Workers Union (NEHAWU). Third, based on his findings, he suggests that trade unions create clear political economy and socioeconomic guidelines for investments. These guidelines should preferably factor in pertinent socioeconomic goals such as employment expansion, decreasing economic concentration and restructuring the economy. Fourth, the chapter encourages trade unions to develop effective development institutions that implement the non-monetary benefits of union investment activity like research, training and post-employment support.

Another crucial set of proposals in Chapter 11 relates to reviewing ESOP design and implementation. Hassan builds on Cawe’s argument and urges stakeholders to include operational control in ESOPs. Employees are encouraged to participate in decision-making structures that discuss the firm’s strategic orientation. Furthermore, it is always essential to differentiate between employees participating in ESOPs in order to ensure that transaction designs do not focus only on the higher echelons of company staff. In addition, ESOP participants are advised to create guidelines for reinvesting dividends to secure long-term financial security.

Both Chapters 9 and 11 confine the debate on broad-based beneficiaries to formal JSE-linked empowerment transactions and business strategies. Dooms, in Chapter 10, adds a dimension that has not been examined in past BEE studies. She investigates whether the post-apartheid BEE model has supported black entrepreneurs in the informal economy. This question is important considering that statistics reveal that black South African entrepreneurs dominate the informal sector (SEDA, 2016; TIPS, 2017). Dooms’ chapter highlights black informal entrepreneurship expansion, even amidst South Africa’s political economy crises (Fourie, 2018; StatsSA, 2019). This expansion of the informal economy occurred outside of B-BBEE legislative and policy prescripts. The trend also questions strategies aimed at integrating informal entrepreneurs into formal value chains. The evidence proves that this formalisation strategy has not produced the desired outcomes. It is within this context that Dooms proposes shifts in South Africa’s BEE planning and strategic outlook.

She argues for a human-centred design approach to reconceptualising BEE and B-BBEE. This strategy builds on the argument advanced in Chapter 1, which acknowledges organic, informal black entrepreneurial activity as a legitimate driver of economic development. An important aim, therefore, is to support existing autonomous black business in the informal sector through decreasing structural barriers for entrepreneurship development. According to Dooms, this process requires stakeholders to transition away from a rigid business strategy framework, within which large-scale integration into formal value chains is seen as a panacea for enterprise development problems. An additional pillar in Dooms’ BEE, human-centred citizen design proposal is reconceptualising regulatory frameworks. She argues that the current B-BBEE legislative regime is based solely on the formal sector, especially integration into value chains dominated by JSE-listed large corporations. This limits the impact of B-BBEE within black communities that are excluded from these value chains because of geographic inequalities and socioeconomic underdevelopment. The chapter encourages BEE policymakers to review regulations so that they address black informal sector entrepreneur challenges.

The barriers to developing black entrepreneurship in the informal sector cannot be overcome if B-BBEE policymakers and stakeholders continue prioritising the demographics of ownership only. Various chapters in the publication articulate the necessity for an alternative BEE model that appreciates black entrepreneurial diversity and systemic market structure issues. Therefore, stakeholders are encouraged to study and understand the specific barriers that exist for informal black entrepreneurs in varied sectors. Their challenges are different from formalised SMMEs that also operate on the margins of South Africa’s economy.

The National Development Plan (NDP) acknowledges the importance of developing township and rural economies. But there is weak synergy between this strategic policy goal articulated in the NDP and B-BBEE policy implementation. Dooms urges B-BBEE policy designers to go beyond the B-BBEE gaze on formal ownership and push for an inclusive model that supports all types of black entrepreneurs. She motivates for society to rethink the popular notion of black entrepreneurship, which does not adequately appreciate diversity in market size, sector participation, access to capital and geographic location. This shift requires a political economy approach based on structural analysis and black entrepreneurs’ lived experiences, as articulated in the case studies discussed below.

RETHINKING ENTREPRENEURSHIP: LESSONS FROM CASE STUDIES

The section containing case studies of black entrepreneurs is based on policy literature and data that emerged from interviews. The authors tested the outcomes of B-BBEE policy objectives in interviews conducted with various black entrepreneurs. The analysis identifies major policy implementation challenges and possible areas for reforming B-BBEE policy. Chapters 12 and 13 highlight preceding chapters’ arguments on market structure issues, black entrepreneur diversity and structural impediments such as finance or infrastructure. The analysis commences with a discussion about youth entrepreneurship that focuses on six entrepreneurs, and two youth entrepreneur funding-policy specialists. This area has received minimal attention in B-BBEE policy research. Debates about broad-based benefits in the other studies assessed ESOPs, non-governmental organisations (NGOs), trade unions, trusts and female participation in BEE (Cargill, 2010; Patel & Graham, 2012).

Pooe, Ngcaweni and Zwane discuss policy literature on