Is BEE a South African Growth Catalyst? BEE calls for changes to the way economic players interact –How firms engage owners, directors, suppliers across industries, workers, potential managers within –These change the relational fabric of industry When will such change catalyze growth? Are we seeing this kind of change? Matt Andrews, IGAP, June 2008

Relational structures influence economies –Shape opportunities for firms, individuals –Determine insiders and outsiders People, Firms, Ideas and growth opportunities South Africa’s structures have been very limiting –Concentrated ownership, integrated and controlled industries, tight networks –Limited new entry opportunities for People, Firms and Ideas –Constraints on competition, creativity –Created many outsiders-especially at ‘bottom’ When will change catalyze growth?

Opening the relational structures of South Africa’s industry could catalyze growth –Allowing new entrants, of people, firms and ideas –Leads to opportunities –Facilitates dynamic export-led growth –Especially shared growth BEE could be the vehicle for doing this –But note that BEE can only effect change if it changes the macro-culture behind relational structures

Are we seeing this kind of change? Firms are responding to BEE, but beneath scorecard: –Looking for new people in old places Black owners, directors, managers come from old ‘catchment groups’ –Many CAs, MBAs, lawyers, political players –So limited BEE beneficiary pool, few new people –Exacerbating skills constraints as well Even ‘new suppliers’ generally old suppliers that look different –Few new entrants –Few connections to ‘second economy’

Bottom line BEE is causing change –But there are some costs associated Exacerbating constraints at top of economy Creating disincentive for new entrants –And BEE could be so much more Fostering relational structures that bring new entrants into economy –And new ideas, competition Creating relational mechanisms that bring people in from the ‘bottom’ –Jobs, training, new opportunities

Ideas Need strategy with better balance, focus, implementation Rebalancing and refocus: –Add BEE elements focused at bottom (Now points at top) –Focus more on new entry Exempt new firms from ownership requirements Give MANY points for new entrant relationships –Less pressure on high skills areas (rethink quotas) Implementation –Less a quota system, more about value-based targets –Choice, creativity encouraged (a 140 point scorecard, Charters) –Clarity on evaluation (who, when, how) –A sunset clause (when will firms meet the objectives?) All of these require clear thinking about what exactly BEE is meant to achieve: Its value orientation –That connects transformation to growth