Mthobisi Masinga, a young forward-thinking town and regional planner from Pretoria, has been invited to present his innovative research on rural land development to a high-level international city planning congress in the US. He is currently seeking sponsorship to represent South Africa at the event.
"There are a lot of grants available when you are dealing with government – from the dti, and from other development agencies – but the information is not available to the SMMEs at their fingertips." Julius Mojapelo
Moneyweb's Nastassia Arendse interviewed Julius Mojapelo, who is a senior executive at Saica’s public sector division.
The practice by BBBEE ratings agents and practitioners clearly discriminates against African and Coloured mothers
While it is well established that one of the purposes of broad-based black economic empowerment (BBBEE) is to address historical imbalances or patterns of past discrimination in SA, the fact that it is based on a flawed race-based categorisation from the apartheid era means there will always be challenges in applying it.
Black participation in the Johannesburg Stock Exchange continues to be the topic of heated debate in South Africa. This guide explains the different estimates and the methodologies used to arrive at them.
When the president’s estimates of the share of the Johannesburg Stock Exchange (JSE) owned by black people jumped from 3% to 10%, a South African commentator took notice.
Black entrepreneurs need to start owning real assets and manufacturing companies and not just shares in enterprises they did not establish.
The President sold the country. We should return the favour by making him part of a trade-off between black people who want white people to share economic power, and white people who want black people to share political power.
I wish this weren’t about race. But black social media users have accused white people of protesting only when Zuma jeopardises the economy, but never over high tuition fees, minimum wages, or other matters that impact on black people whose economic worlds are permanently in junk status.
Likewise, a lot of white people say if black people don’t join the call for new leadership, those issues won’t be solved even if white people tried to help solve them.
Each of these “sides” has to give something to get something back. Let’s call this the #ZumaTradeOff.
White people could share economic power, not by having their land and assets “expropriated without compensation,” but through Broad-Based Black Economic Empowerment (B-BBEE). This legislation hasn’t failed; it hasn’t been tried. Instead, it’s been abused by the politically connected.
At a layman’s primer on BEE by BEE Novation, consultant Lee du Preez spoke of what he felt was a kink in the Act — its New Entrant provision. A company that takes on a black owner with a net worth of less than R50-million may get bonus BEE points for enabling a “new entrant” to the economy a greater level of participation. Once that person’s net worth exceeds R50-million, the company continues getting up to full points for transformed ownership; they just don’t get bonus points. Du Preez paused his lesson to share his personal opinion on this. “R50-million is way, way too high.”
At the time, I had no idea what was at stake. Still, du Preez argued that once a person’s net worth exceeds R50-million — heck, R10-million! — he should no longer be considered black for BEE purposes because he’d be wealthier than the average white South African. In his experience, the abuse of this high “new entrant” threshold, among other provisions, had led to people distrusting BEE; specifically, it had led to black people believing the slowness of economic transformation was white people’s fault, and white people believing Zuma’s political stronghold was black people’s fault.
Now that I understand, I think the fault line in both instances was that Zuma used tools like BEE to fund a patronage network beholden to himself instead of accelerating real economic transformation. It’s classic divide-and-conquer. The reasons for racial mistrust were two sides of exactly the same coin. You can’t get rid of the one without getting rid of the other. Hence, #ZumaTradeOff.
While Wilmot James was the Shadow Minister of Trade and Industry, he observed that the DTI would “increase the threshold of the value of equity previously held to qualify as a ‘new entrant’ from R20-million to R50-million”:
“The DA believes that steps must be taken to ensure that B-BBEE does not become a tool for elite enrichment — we therefore argued for lowering the threshold in the definition of ‘new entrants’ to R10-million and increasing the points that can be earned by involving new entrants and workers in empowerment transactions.”
Put differently, imagine disaster survivors being triaged for emergency medical assistance. How would we feel if the medical service personnel knew some of the victims personally, and decided to first give those spa treatments and pedicures before moving on to patients who urgently needed life-saving help?
The purpose of medical emergency intervention is to get people fixed enough so they can get their own spa treatments in the future. BEE’s purpose is to give black people a leg-up so they can someday go on to making their millions. Without a cap on the wealth an individual can make through BEE deals, we’ll never get around to benefiting those who aren’t politically connected. Someone with a net asset value of R49-million isn’t a new entrant; he’s an Ancient of Days.
What we have under Zuma’s watch is Bribe-Based Black Elite Enrichment. Zuma is not the way, the truth and the life without which none may come to radical economic transformation. He’s the broad and crowded gate to economic hell for black, Indian, coloured and white people.
Very simply put, if more black people step up to work for Zuma’s removal from the presidency, we’ll have an economy that works. If white people step up to drive lobbying for revisions to BEE, we’ll have an economy that works for black people as well.
To break past our mutual distrust, we need to serve ourselves less and fight for one another more. We need a trade-off with Zuma as a sacrificial peace offering. Jesus has returned. One practical way this can play out is in the lead-up to Parliament’s no-confidence vote on Tuesday the 18th of April. We must publicise and discuss the #ZumaTradeOff to one another – and then fight for it like our country’s future depends on it. Because it does. We can’t win unless we’re clear on what we all stand to win.
By the 18th, our Members of Parliament must have heard of the scandal: in return for selling the country, our whole president would have been sold off to political slaughter for a pro-forma 30 pieces of silver he isn’t worth. And they must vote accordingly.
RE: RADICAL ECONOMIC TRANSFORMATION
Congratulations on your Cabinet reshuffle Mr. President. The appointment of the Honourable Malusi Gigaba as Finance Minister, in particular, is rather encouraging. His performance at Public Enterprises led to the creation of the largest black audit firm and the third largest in the country, Sizwe Ntsaluba Gobodo, through progressive procurement practices.
He also awarded a landmark fuel supply tender worth R15.5 billion to black and female-owned companies through Transnet in 2013. And of course the list goes on. We are looking forward to more of the same because of the strategic nature of the Finance Ministry.
This letter, Mr. President, is not a dismissal, rejection or a form of undermining the ANC and the Government’s vision of Radical Economic Transformation. If anything, I am a firm believer in the party’s stance in this regard since Radical Economic Transformation is South Africa’s last hope at a truly just society. This letter is mere constructive criticism which I believe if taken to heart can go a long way in helping our current situation.
The past 22 years have been characterised by various meaningful breakthroughs in the social and political life of our country. By and large the humanity of black people is recognised in many, if not all public spaces. The indignity of segregated living through separate development as championed by the apartheid government has all but disappeared from South African public life.
What remains stubbornly unchanged, however, Mr. President, is segregation in our economy. We may have, to a large extent, solved the problem of social apartheid but it is now economic apartheid that needs to be dealt with. Someone might say I am merely preaching to the choir since Radical Economic Transformation is the current preoccupation of the ANC and the ANC-led Government. However, some questions have to be asked since the party’s behaviour, and indeed that of Government, seems to suggest some inconsistencies.
In my industry, Advertising, we are saddled with the reality of multinational companies being overwhelmingly dominant. Their dominance has the net effect of raking in profits locally and shipping them offshore. This is of course not unique to my industry since most sectors in South Africa share the same fate. Having said that, this phenomenon of our country being an extractive economy is what is really responsible for poverty, unemployment and inequality.
Our own sector charter, MAC (Marketing, Advertising and Communication Charter), spells out the rules of engagement with regards to the BBBEE Act. In as much as the charter is meant to curb the industry’s exclusionary tendencies, it falls dismally short because of its many imperfections. The charter is in fact the wrong tool to use in an attempt at transformation.
The reason for that is, multinational companies have their own internal safeguards that ensure they extract as much profit from South Africa as possible in spite of local legislation. In our industry, these companies have what can be loosely regarded as a franchise model.
The local office pays the international office royalty fees, licence fees, name usage fees, intellectual property fees, patent fees and goodwill. All these costs are deducted before tax and therefore before profit sharing with BBBEE shareholders. When BBBEE legislation increases the quota from 25% to 45%, the international office also increases their fees accordingly to offset the increase in quota requirements to ensure their profits are not affected by local legislation.
We have a case where the local office made close to R1 billion in revenue. After the international office had taken their pound of flesh, the local office was left with less than R5 million to share with their BBBEE partner.
Even though the BBBEE partner was instrumental in securing the R1 billion and should have been remunerated accordingly, he only walked away with 25% of R5 million (R1,25m) instead of 25% of R1 billion (R250m) while the international office pocketed R995m.
You can impose a 90% BBBEE requirement on multinational agencies and they will ‘comply’, only to inflate their fees to offset the increase demanded by local legislation. If this is not corruption, Mr. President, I don’t know what is. This is the reality of BBBEE in our industry. Multinational corporations are making a mockery of local legislation because they have no interest in transforming our economy, their only interest is to keep us as an extractive economy by bypassing our laws. In other words, BBBEE does not work. If anything, it not only works to lock local players out of the industry but it also marginalises the very people it aims to empower.
With this in mind, please consider that the African National Congress’ advertising and marketing account is handled by Ogilvy and Mather, a multinational advertising agency headquartered in New York, USA.
What that means is, even though O & M services the ANC’s account, most of the monies paid by the party for services rendered disappear offshore with local shareholders seeing very little of it.
Please also consider, Mr. President, that the South African Tourism account is handled by Foote, Cone and Belding (FCB), a white multinational advertising agency headquartered in Chicago, Illinois, USA.
Further consider, Mr. President, that the South African Tourism advertising and marketing account is handled by Havas Worldwide, a white multinational advertising agency headquartered in New York, USA.
But possibly most upsetting, Mr. President, the South African Revenue Services (SARS) advertising and marketing account is handled by the following white multinational corporations: Foote, Cone and Belding (FCB), headquartered in Chicago, Illinois, USA; M&C (Maurice and Charles) Saatchi Abel, headquartered in London, England; and Havas Worldwide, headquartered in New York, USA.
Our hard-earned taxes that could be used at home to build the local economy only serve to enrich Americans and Britons. This is an outright contradiction.
It is therefore pertinent to ask the following questions:
1. If the ANC and Government are serious about Radical Economic Transformation, why are they doing business with white American and British multinational corporations when all these companies are interested in is retaining our status as a colonial extractive economy?
2. Why should we believe in the ANC and Government’s vision of Radical Economic Transformation when the party’s mouthpiece is not local but white American and Government has appointed so many foreign-owned agencies?
3. Does the ANC and Government not think that employing white international agencies to handle their accounts makes the their Radical Economic Transformation vision lose credibility and come across as mere politicking and double-talk?
4. Does the ANC and Government not think that amounts to breach of trust?
5.Why should we then still vote ANC in the next election and continue to trust the ANC-led government when the champions of Radical Economic Transformation are themselves not acting in line with transformation?
I know these are very direct and confrontational questions, Mr. President, but in the spirit of radically changing our economy, they have to be tackled head-on for us to start making meaningful progress. The real root cause of poverty, unemployment and inequality in South Africa is the structure of our economy which has been extractive since the 1650s. The elements responsible for the wholesale looting, raping and pillaging of local resources are multinational corporations.
It is time to send a strong message to multinational corporations operating in South Africa that in as much as they can do business locally, they cannot, however, continue to own our economy. South Africa is not a colony but a sovereign country.
I would therefore like to suggest that the ANC and Government must demonstrate their commitment to Radical Economic Transformation by moving their advertising and marketing accounts from white-owned American and British multinational corporations to local black-owned companies. Black-owned agencies not only understand the market because they are the market, but they will also keep profits locally and spend them locally thus growing the local economy.
What we need therefore, Mr. President, is a strongly-worded piece of legislation that bars all multinational corporations from handling all Government and State-Owned-Enterprises accounts. This legislation must state that all Government and State-Owned-Enterprises accounts must be handled exclusively by black-owned agencies and no one else. That Mr. President is Radical Economic Transformation.
Thank you for your consideration, Mr. President.
A member of the Black Communicators Network (BCN) and the Association of Black Communication Practitioners (ABCP)
To view this article, " http://www.news24.com/MyNews24/bar-all-multinationals-from-state-accounts-20170405 "
Vodafone group CEO Vittorio Colao has thrown his weight behind plans to sell shares in Vodacom to black investors, saying that the deal should be broad-based.
A new black economic empowerment deal (BEE) would further boost Vodacom’s empowerment credentials and help it meet the government’s revised requirements.
Vodafone owns a 65% interest in Vodacom and has no intentions of losing control of the business, said Colao.
"We support any decision regarding BEE. We would also like it to be broad-based."
Vodacom is working on a new BEE deal that is likely to be finalised before its existing empowerment agreement at its South African operations expires in 2018. Vodacom sold shares in the South African operations in 2008 to black members of the public, Thebe Investments and Royal Bafokeng Holdings for R7.5bn.
It is not clear, however, whether the new deal would involve the sale of equity at group level. Another option would be for a deal to be concluded in the South African operations.
Vodacom CEO Shameel Joosub said Vodacom was evaluating options.
"When the BEE deal at SA expires, we have to have a new deal," he said.
The Public Investment Corporation (PIC) was reported to be in discussions to sell a portion of its 13% stake in Vodacom to black investors.
In January, Bloomberg reported that Vodacom planned to buy back part of the PIC’s stake. The shareholding could then be listed as a separate entity restricted to black investors.
The Vodacom BEE deal was estimated to be R15bn, which would make it one of the biggest BEE deals in the country.
In 2016, MTN sold a 4% stake for about R10bn to black investors through a scheme called MTN Zakhele Futhi.
We investigate the risks and rewards of investing in Black Economic Empowerment share schemes
Black Economic Empowerment (BEE) share schemes are various initiatives undertaken and typically facilitated by companies to introduce BEE shareholders to their shareholder base.
Broadly speaking, there are public and restricted BEE schemes. In a public scheme, qualifying individuals are invited to invest in the structure. By contrast, an example of a restricted scheme is an individual participating in an employees’ share scheme at their company.
Riaz Gardee, Principal at MMI Holdings, says BEE schemes are aimed at empowering previously disadvantaged individuals (PDIs).
“The company typically raises debt, issues shares at a discount and raises capital from PDIs to purchase equity. This block of shares is then owned by BEE shareholders and qualifies for points in terms of government’s BEE scorecard and other BEE legislation,” he explains.
WHAT IMPACT HAVE BEE SHARE SCHEMES MADE?
There are many arguments for and against the effectiveness of BEE share schemes as a means of creating wealth for PDIs and diversifying corporate ownership, says Samke Ngwenya, a Private Banker at Investec. One viewpoint is that they’ve have had the positive impact of increasing black ownership in parent companies to a level that couldn’t have been achieved without the funding and discounts afforded by BEE schemes.
“Sadly, not all share schemes have created shareholder value for the BEE investors, usually when the value of the BEE share is equal to or lower than the debt portion of the share,” says Ngwenya.
“This also happens when the BEE share price upon maturation of the scheme is lower than the purchase price. The success and effectiveness of a share scheme depend not only on the parent company’s performance, but also on the investors’ ability to maintain their shareholding long-term.”
READ MORE: Stock exchange for lower income earners gets approved
INVESTING IN BEE SHARE SCHEMES
What should you know?
A potential investor should clearly understand their investment objectives and risk appetite, as these will dictate when they should invest and how much, says Gardee. “Understanding the company and markets in general is a good starting point.”
BEE schemes are open only to PDIs who are classified as black per the BEE Act.
To view this article, " http://www.destinyconnect.com/2017/04/05/bee-share-schemes-101/ "
Small and medium enterprises tend to underestimate the power of branding. This must rank as one of the deadliest mistakes in the world of making business.
You have most likely read about the branding failures of large businesses in the news – those massive errors that spelled doom for once successful ventures. While not making headlines the collapse of small businesses are more common. Studies reveal that 63% of all South African businesses fail within the first two years of trading.
Many of the errors behind the collapse of small and medium enterprises are branding errors – or the result of business owners not understanding the importance of it. Many people think of “brands” as being large, important identities everybody knows about like Nike, Coca-Cola, and Harley Davidson. But building a credible identity for a small business is just as vital, and one of the first steps along the path to success.
Branding need not be a headache or anybody’s worst nightmare but it’s essential to make sure you have a little know-how before you start your business. Ensuring that you have the basics down will allow you to steer clear of avoidable errors and take a significant amount of stress out of running a small business or start-up. Plus, if you do it right, you’ll likely find you enjoy it! And the value of a good brand is quite simply, beyond measure.
Across the board, there are five common branding mistakes committed by small businesses. All can be avoided with a little thought and planning.
Bad business name
We’ve all driven past them: those businesses called “Bob’s lawnmowers” or “The very best nuts and avocadoes”. With the possible exception of The No. 1 Ladies’ Detective Agency, few of these achieve fame and fortune. And the latter is fictitious!
Branding can’t be generic. It can’t be hackneyed. It can’t be repetitive, or something we’ve all seen before. Your business is your baby, so give its identity the same care you would give to naming a child. Recognise that naming your business is a strategic process and requires thought. The name must reflect your purpose, identity and promise. And please, no clichés!
Many small businesses try to scrimp and save wherever possible, and the first place they do this is in the office. Bad idea! You may be glad to save on your overheads, but in the long run it could turn out to be an expensive branding mistake. If I walk into your offices as a prospective client and you offer me a broken chair to sit on, what am I going to think?
But this doesn’t only apply to your customers. Treat your staff well, too. If your staff are sitting in uncomfortable chairs or don’t have proper tools or are dying of heat because you don’t have an air conditioner (or at least a fan) they’re going to be grumpy. You need your staff to be brand ambassadors and to be proud of working for you. How you treat your staff will turn into how your staff treat your customers. Make sure you create a courteous, respectful brand from the inside out.
Too good to be true
One of the most common mistakes made by new business owners is taking bad advice. It may stand to reason that if you’re not a marketing expert, you should outsource marketing, and this certainly does make sense if you need a little help. However, you should put effort to know enough that you can distinguish between good and bad advice. Otherwise you may end up worse off than you were before. A consultant who doesn’t have your best interests at heart – or who simply isn’t an expert – can easily sink your business with a hearty dose of poor advice. And you would have paid them to do it! Empower yourself.
Complicating your brand
Ever heard of the award-winning “clown pants” design? Nope, me either. That’s because many of the most iconic and memorable brands understand the importance of keeping it simple. This doesn’t mean you should make your brand identity completely generic – it’s a fine line to tread between keeping it simple and making it forgettable. But as a rule, be bold, make a statement, but keep it clear. And in order to keep it clear, you should stay away from unnecessary bells and whistles. Keep your choice of colours, words and icons to a minimum. And once you have a clear, simple brand, ensure that you enforce it consistently throughout your company.
Remember – you can rebrand at some stage, or launch a new product with its own distinct brand. But beware of walking before you run, as rebranding is a challenging exercise. So, too, is running multiple brands successfully. Be sure it’s really what you want to do, and perhaps call on a little expert advice before you go ahead.
The herd mentality
Be original, Following the crowd is a fatal error. The ultimate key to your success will be identifying a unique or intriguing selling point and aligning your brand with that, so don’t go with the flow.
You’re hopefully planning to keep your business going for a while, so steer clear of following popular trends – you don’t want your brand to date. If you consider the Coca-Cola logo, it hasn’t changed all that much since the 1800s. Ask yourself: Will your brand still stand up to scrutiny in 10, 20 or 100 years’ time?
It’s remarkable how much of a shitstorm Twitter creates when in the hands of politicians – with serious costs for the rest of us.
Helen Zille, premier of the Western Cape province and former leader of the opposition Democratic Alliance’s (DA), is – according to her acolytes in the press and most of white South African Facebook followers – irredeemably insightful, strong, lover of truth, seeker after justice, Biko champion and barely a whisker away from being canonised.
Championed by luminaries ranging from ostensible liberals and outright righwingers, how could she possibly go wrong?
Well, by making utterly stupid arguments, for starters. And then going on to defend her own stupidity in a piece of breathtaking solipsism. And tweeting all the way down.
Let’s apply some (very basic) logic to what she actually wrote. What should have been Zille’s starting point (somehow, she ended with this), is one we all recognise: that at the end of colonialism, about to elect a strong man leader for 30 years and throw human rights out the window, Singapore was (in her own words) a
dirt-poor country [with] mass unemployment, lack of education, almost non-existent sanitation, a dearth of natural resources (not even sufficient water), squalid shack settlements prone to major fires, opium addiction, the absence of a sense of nationhood and national pride among people with myriad languages, “races”, cultures, religions.
Why not stop there? All that anyone can say for colonialism is that it was barbaric. Zille seems to have an awareness of that fact, and every colonial subject can recognise it.
Defending the indefensible
I presume that Zille would agree that there can never be a defence of one country claiming to own another. The function of colonialism was theft – of resources, labour, rights, freedom, culture, practice, history, bread – everything. It was not a magnanimous sharing of education and culture and sipping tea. It was brutal, violent and murderous.
Bodies – black and brown bodies – were a colonial commodity. Colonies provided the slaves that built much of the vaunted “first world infrastructure” of large swathes of the world. The families of those slaves live with us today. That is already a massive, global psycho-social rent in the social fabric that beneficiaries refuse to recognise. The wealth generated by slave ownership still shapes the power structure of present-day Britain.
Colonial powers have in recent times tried to paint themselves as more or less benevolent – but the truth is that all colonialism is destructive, rapine and hideous. The British populace disagree – over 40% believe Empire was “a good thing”. Old Etonian David Cameron claimed:
I think there is an enormous amount to be proud of in what the British Empire did and was responsible for. But of course there were bad events as well as good events. The bad events we should learn from and the good events we should celebrate.
Some “bad events” like the slave trade, the murder of indigenous people, combined with theft of the natural resources from millions, the simultaneous impoverishment of millions more, and the destruction of local custom and culture that got in the way of “progress”.
Conflating colonialism with post-colonialism
I don’t for a moment assume Zille agrees with this nonsense – so why the fuss? Because she conflates a post-colonial narrative, and of a modernising global economy, with colonialism. Surely even Zille can see that colonialism doesn’t equate with post-colonialism?
I fear not, since her follow-up self-aggrandising piece on “what I learned in Singapore” uses the personal pronoun a remarkable 108 times, suggesting an ego that may do with some of the Buddhism that is the main religion in Singapore. But even with the glaring limitations on human rights in Singapore, surely it is apparent that a post-colonial nation can trade its way to cellphones and microsurgery – it’s not a gift of colonialism, it is how a country manages its affairs after colonialism.
So we hopefully agree – Singapore was stuffed up by colonialism. As was most of Africa and most of Asia. Singaporeans don’t go around lauding colonialism and the gifts it bestowed, and no-one else should either. They talk about what they did after Empire sidled out of the picture. The post-colonial path is what is in fact being discussed.
Zille got it completely wrong, then continued arguing how right she was.
South Africa’s independent judiciary isn’t because of colonialism, which sent black freedom fighters to the gallows. It’s guaranteed by the country’s post-colonial constitution, drawn up in large part by the African National Congress.
The country’s transport infrastructure was a great colonial inheritance – it ensured that white South Africans had buses and trains and tarred roads and traffic lights – and black South Africans had none. Entrepreneurial black South Africans created the minibus taxi industry because blacks felt they may want to go – well, anywhere they wanted – while the authorities felt they only needed to go to work, and then back home.
So, wrong again – South Africa’s post-colonial transport infrastructure created linkages between spatially and racially separate communities, introduced sustainable mass transit systems, the Gautrain, and the rest.
The country’s piped water is a miracle – of post-apartheid delivery.
(In 1995) only 33% of African households, compared with 72% of coloured, and 97% of both Indian and white ones, have the use of running tap water inside the dwelling for drinking purposes.
Yup, that’s colonialism for you. So what did the new South African government do? It made access to clean water a right in the constitution, and since then has connected virtually all urban dwellings to piped water, though rural lags some way behind.
In the examples cited by Zille, not one stands up to her own test.
Through whites-only glasses
So when Zille tells black people how stupid they are for electing the corrupt ANC and for not following the Singaporean path, she’s quintessentially white: rights don’t matter, money does. When you’ve always had rights, you don’t value them or understand why others coo about them so much. You can’t eat or trade them, right? Surely you’d rather have a job now, and not waste time on those pesky freedoms? Much rather be arrested for littering the streets of Singapore, secure in the knowledge that your country has modernised at the expense of human rights – the perfect neo-liberal trade-off.
It takes a spectacularly blind set of whites-only glasses to make this argument. And there seems to be a whole horde of white South Africans ready to support her – to agree that all modern technology in the country is the “gift” of the whites, for which blacks should be grateful.
The justification for this argument? The usual – just look at the ANC.
Be clear, dear reader, this article is not a defence of the ANC. It’s a defence of the right of indigenous people to their own freedom, and to use it however they choose – exactly what colonialism denied. Many used those freedoms to vote DA. I wonder if they will think twice next time, knowing that their glorious former leader seems to feel that colonialism was the white man’s burden, and modernity is the white man’s gift.
Why don’t they thank the whites for it?
On 30 March 2017, President Jacob Zuma decided to purge his cabinet of 9 Ministers and 6 Deputy Ministers in an unprecedented show of disdain and disregard for the economy and the well-being of the country. ENOUGH IS ENOUGH!
Late in 2016 Senegal’s Banque Regionale De Marches announced the launch of the eCFA Franc; a cryptocurrency for the countries of the West African Monetary Union – Senegal, Cote d’Ivoire, Benin, Burkina Faso, Mali, Niger, Togo and Guinea-Bissau. This and similar innovations mark the coming of age of a new generation of applications – an Internet of Intelligent Things – that could provide a new infrastructure for economic development across Africa.
The Internet of Things is a network of physical devices, vehicles, buildings and other items. They are equipped with electronics, software, sensors and network connectivity so they can collect and exchange data. There’s wide enthusiasm about spectacular innovations such as Intelligent refrigeratorsand driverless cars. But a quieter revolution is underway in everyday systems and facilities, such as financial services.
There are particular possibilities here for Africa. The potential for the continent’s economic growth is well established. There’s also an abundance of opportunity for digital innovation. This was clear from a recent continent wide entrepreneurship competition organised by the University of Cape Town’s Graduate School of Business.
More broadly, the new Internet of Things has the potential to compensate for Africa’s legacies of underdevelopment. The key here is the development of the blockchain from a fringe concept into a mainstream digital innovation.
The blockchain and Africa
The blockchain, mostly known as the technology that underpins digital currency Bitcoin, is an almost incorruptible digital ledger of transactions, agreements and contracts that is distributed across thousands of computers, worldwide.
It has the potential to be both foundation and springboard for a new developmental infrastructure.
New blockchain platforms such as Ethereum are supporting the development of distributed applications. These “DApps” can provide accessible ways to use the blockchain. They act like “autonomous agents” – little brains that receive and process information, make decisions and take actions. These new capabilities will have widespread implications when linked to cryptocurrencies through “smart contacts” that are also securely recorded in the blockchain.
DApps provide a practical and affordable means of making Things intelligent and able to interact directly with other Things. They can be programmed to take data-informed actions without human intervention.
These innovations will have particular benefits across Africa. Economic growth is underpinned and enabled by appropriate financial services. Early internet-based innovations such as Kenya’s M-PESA have clearly demonstrated the appetite for accessible, Internet-financial services. But many small and medium businesses are still restricted. Their owners usually can’t access standard loan financing. Banks will not extend credit facilities without traditional title deeds to land and buildings, or a conventional payslip.
Don and Alex Tapscott have shown in their recent book that the new blockchain can be “the ledger of everything”. A house can become an intelligent entity registered on a secure, distributed database once it’s tagged with a geospatial reference and sensors that monitor its continuing existence.
The owner of the asset can, through an Ethereum-based smart contract, secure a loan to expand a start-up enterprise. Intermediary arrangements become unnecessary. Economist Hernando de Soto has suggested this could create “a revolution in property rights”.
Water and energy
Property and financing aren’t the only areas where the new Internet of Intelligent Things has the potential to compensate for Africa’s legacies of underdevelopment.
Economic growth also depends on affordable and reliable services like water and energy. Water is an increasingly scarce resource in many parts of Africa. This is particularly true in cities. Rapid population increases are making old precepts of urban planning redundant.
Technology can help. Autonomous agents positioned across all aspects of water reticulation systems can monitor supplies of potable, storm and waste water. These “little brains” can take appropriate actions to detect and report damage and leakage and close off supply lines. Smart devices can also monitor water quality to detect health hazards. They can regulate and charge for water consumption.
Similarly, for the supply of energy, smart devices are already being deployed across conventional and ageing power grids in other parts of the world. In Australia, for instance, intelligent monitors detect when an individual pole is in trouble. They then report the fault and call out a repair crew. They can also communicate with other poles to redirect the supply and preserve the grid’s integrity.
In parallel with conventional supply systems, new digital technologies can enable full integration with renewable sources of energy and the intelligent management of supply at the household level. The new blockchain is designed for secure peer-to-peer transactions combined with incorruptible contracts between multiple parties. Individual households can manage their own supply and demand to incorporate self-generated energy. A house equipped with a simple windmill and a roof made up of photovoltaic tiles could sell surplus power to a neighbour in need. They could also buy from another house to meet a shortfall.
Such microgrids are already in development. The combination of ubiquitous and affordable bandwidth and low cost autonomous agents could bring affordable energy to communities that have never enjoyed reliable electricity supply.
A new infrastructure built up in this way could be a springboard for economic development – from small enterprises that would have the resources to take innovations to scale, to significant household efficiencies and increases in consumer purchasing power. As has been the pattern with previous digital technologies, costs of production will fall dramatically as the global market for intelligent things explodes. That which seems extraordinary today will be everyday tomorrow.
So what’s standing in the way?
It’s not the technology that’s holding Africa back from embracing the Internet of Things. Rather, it’s the established interests in play. These include state enterprises and near-monopolies that are heavily invested in conventional systems, local patronage networks and conventional banks, and the failure of political vision.
What’s needed is effective public policy and business to ensure that the potential of this next wave of digital innovation is realised. Government and civil society innovators need to be directing much of their attention here.
This is why the West African Monetary Union’s cryptocurrency initiative is encouraging. It’s a step towards the future that Don and Alex Tapscott envision; a move towards an Internet that’s driven by the falling costs of bargaining, policing, and enforcing social and commercial agreements.
In this new space integrity, security, collaboration, the privacy of all transactions will be the name of the game. So too will the creation and distribution of value. And that’s great news for Africa.
There’s nothing radical about trying to fix what doesn’t work by making it work better, which is why the economic transformation discussion document released by South Africa’s governing party, the African National Congress (ANC), is not really radical.
The document is also unlikely to renew the economy, ensure that more people are included and create conditions for sustained growth.
It was released recently as part of the ANC’s preparation for its conference at the end of this year. They’re always preceded by a mid-year policy conference, which is meant to agree on resolutions to be put to the conference.
It’s ANC practice to release policy discussion documents in preparation for these meetings – hence the economic document. The party’s leaders point out that it doesn’t express ANC policy since delegates at the conferences could reject it. But it does give an important sense of the thinking of the party’s economic policy strategists.
In keeping with the current ANC rhetoric, the document stresses the need for “radical economic transformation”. It says proposals for change should be judged by whether they radically and systematically improve the lives of those who are excluded and marginalised.
The document is filled with good intentions and worthy ideas. But it fails the test.
More of the same
The problem is that it ignores calls to seize land or rein in ‘white monopoly capital’ - the themes of today’s “radical” rhetoric. These demands are either ploys by patronage politician’s eager to get hold of resources or slogans pretending to be concrete recipes for change. It’s not radical, nor will it achieve its stated aim, because it doesn’t suggest ways of moving the economy from its current pattern which has produced low growth and continues to exclude millions.
Like both sides in the economic debate, it doesn’t seek a new path which will include millions more. Instead, it keeps alive the forlorn hope that the excluded can be absorbed into an economy built to exclude them.
Perhaps the clearest sign of this is the discussion on employment. The document endorses the National Development Plan’s target of shrinking formal unemployment to 6% by 2030. It says this will be achieved by lowering costs, increasing investment and improving energy generation, transport and water supply.
All would no doubt be widely welcomed. But all assume that the current system can be made to work better and so there’s no need to change it.
Tweaks are not enough
The specific remedies which the document proposes lack the required innovation too. These include minerals beneficiation, incentives for manufacturing, reducing red tape, more training, more emphasis on research and development. They all assume that the economy needs tweaking, not changing.
Even where it proposes measures which seem more radical – “set asides” for black businesses or speeding up land reform within the confines of the constitution – the document doesn’t challenge the current framework.
And so, despite some rhetoric to the contrary, it doesn’t get to grips with the core reality that the formal economy is still an insider club which excludes millions. It’s dominated by too few players engaged in too many cosy networks, many racial patterns persist and potential in the townships and shack settlements is squandered. A core reason is that both the old economic elite and the new political leadership assume that the economy will reach its potential when everyone has what whites had in the 1960s – full employment and a stake in the formal economy.
This ignores two realities. First, the apartheid economy worked for the minority because it excluded most people; it can’t be extended to everyone. A real break with the past would mean negotiating changes which would bring in many new players and dropping the prejudice that wealth can be created only by formal businesses protected by a host of rules. This means accepting that people who make a living outside the formal economy are a potential solution, not a problem, if they receive more support.
Second, the days in which manufacturing and mining could create millions of jobs are gone: the formal jobs the document wants to create are disappearing across the globe. The question is not how to get them back but how to ensure that everyone can make a living without them.
Ducking the key question
A sign that the document ignores inclusion is that it has nothing to say about township business besides a throw-away line about reducing costs. So a key question – how to link people in townships and shack settlements into the formal economy – is ducked. This despite the fact that it offers a far more credible way out of poverty than reviving jobs which are gone.
Nor is there anything about how to revive mining areas hit by the loss of jobs which will never come back. Or on how to stimulate economic activity for people who 20 years ago would have worked in factory jobs which have gone forever. And so there’s nothing on ensuring that formal business and government strengthen economic activity on the ground rather than snuffing it out.
There isn’t much on the education and training needed to help people adjust to new realities. Or programmes to boost grassroots livelihoods – such as grants and local infrastructure.
Only two proposals address these issues: the document calls for more effective rules to boost competition, and for changes to the settlement patterns in cities, which relegate the poor to the fringes where they are shut out of the mainstream economy.
But neither proposal is fleshed out. It’s therefore fair to question how much of a priority they really are.
The ANC discussion document on economic transformation isn’t radical enough not because it refuses to substitute slogans for thinking. Rather because it doesn’t break with an economic debate which – on the left, right and centre – is about how to keep current patterns alive, not how to change them.