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South Africa: White Business Still Intact

By Nicholas Norbrook
Posted on Monday, 27 July 2009 00:00

The long-established leading titans of the Johannesburg Stock Exchange are still doing just fine. After deftly surviving the transition to multi-party politics in 1994, when they changed both tactics and personnel in a highly-proactive manner, they do not appear to be suffering from the handover to the era of new President Jacob Zuma. The Black Economic Empowerment (BEE) programme that has gradually transformed the face of business in South Africa since the end of apartheid in 1994 still appears to have been a safe gamble for the major corporations.

The model for BEE transactions was very often a loan from the companies to the black entrepreneurs who were about to take up equity stakes. As the stake sold is rarely more than around 10%, no management control of the company is given up. The result is a low-risk way of bringing in token black ownership.

With the collapse of the global economy and the temporary end of cheap money, those loans have been harder for BEE magnates to repay. This has been acutely felt in the mining sector. Similar wobbles were felt during the Asian financial crisis of the late 1990s, but the companies involved are happy to defer payments – often extracting punitive charges on the rescheduling of the debts.?There are now more innovative broad-based black-empowerment schemes being promoted by some of the larger white companies, like SABMiller and Anglo American. The recent SABMiller deal worth R6bn ($750m) saw an equity issue of 10% of subsidiary South African Breweries that would benefit employees, the owners of black-owned liquor stores and shebeen proprietors.

Some are looking for more direct change. Sandile Nogxina, the director-general of the mines department, said the government wanted Anglo American to appoint a black South African as chairman when Sir Mark Moody-Stuart retired in July. The real threat to white-run business will come if the unions get government to nationalise companies to prevent job losses. But for now, the policy of keeping their heads below the parapet and religiously avoiding taking sides in the factional infighting of the ANC seems to have kept them in the driving seat.

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