From the Chief Executive Officer’s desk – September 2014

It is important that we understand why economic transformation features so prominently in the Government’s plans, what is intended by it and how business – but especially the metals and engineering sector – stands to be affected by it. Failure to understand the strategic importance of this matter and the urgency with which it is approached would leave our sector ill prepared for the changes that certainly lie ahead.

For understandable reasons, political freedom was prioritized above all else both in the run-up to and after our founding democratic elections of 27 April 1994. Given our ignoble history and background, it made sense for our political leaders to focus all their energies on securing political freedom and equality for all, with the black majority whose rights had previously been trampled upon with impunity over the years suddenly enjoying the same rights as fellow citizens.

Again, for understandable reasons, a great deal of emphasis was placed on ensuring that a common national identity is forged from the different racial and ethnic groups that had previously been described by officialdom at the time as different nations within one country. It was in that context that our founding father, President Nelson Mandela, and the irrepressible Archbishop Desmond Tutu repeatedly preached the gospel of A Rainbow Nation.

As a country, we reaped the rewards of the sterling leadership that had been provided primarily by former president FW de Klerk and Mr Mandela, and we basked in international glory and welcomed the praise and ringing endorsement of the civilised world. We had done very well, thanks to the wise leadership that we had at the time. We had managed to eschew a political Armageddon that many had considered an inevitability.

On the sporting front we hosted the Rugby World Cup, followed by the Cricket World Cup and the FIFA World Cup, while on the political front we hosted many important international events, among them meetings of Heads of States who had previously been at the forefront of calls for sanctions against apartheid South Africa.

Despite the numerous challenges that continue to stare us in the face, men and women of goodwill will accept readily that South Africa has made considerable strides in the first 20 years of its democracy. We are certainly not the country that we were in the mid-1980s and early 1990s, which was considered a leper among civilised nations.

Sadly, however, a different picture emerges when we take a look at the state of our economy. Not only have we seriously under-performed in this area in our first two decades of democracy (especially in the past decade), but, more worryingly, the vast majority of the formally politically excluded remain on the periphery of the economy, with most of them continuing to be mired in poverty. Indeed, many of them are worse off now than they were in 1994.

Admittedly, that is a reflection on our Government, which could have done much more for the poor than it has so far. Where the educated have taken up opportunities that were previously unavailable to them and benefitted from the new dispensation, regrettably the rate of economic change has been relatively slow. This is the case not only when it comes to general business ownership patterns, but also with regards to occupation of senior leadership positions in the private sector.

While there are commendable exceptions, by and large the majority of private-sector executive appointments announced in the media each week continue to be those of white males. Admittedly, some sectors of the economy are more transformed than others, with our own metals and engineering industries being among the poorest performers. During its meeting on 27 August, the Parliamentary Portfolio Committee on Trade and Industry expressed grave concern about the state of transformation in our sector.

We at SEIFSA would not be doing our job properly if we failed to sensitise the industry to the need to embrace change and advocate transformation. If we failed to do so, we would not be preparing our members for the inordinate pressure under which they are certain to come in the months and years ahead.

There are three reasons for this agenda of “radical transformation”. The first one is the growing disillusionment of the poor, some of whom have participated in various violent protests across the country, with their anger directed at the different tiers of government. As their disillusionment grew, they have either abstained from voting or voted for the growing number of opposition parties, at the expense of the ruling party. It follows logically that the ruling party would want to advance economic transformation in order to placate its members and stem the flow of support to the opposition.

Secondly, parties to the left of the ruling ANC, most notably the Economic Freedom Fighters, have taken maximum advantage of the disillusionment on the ground, painted the ruling party as a weakling that has sold out and propagated radical economic agendas which include nationalisation without compensation. In such a situation, the ANC had no choice but to come up with a radical economic agenda of its own.

Thirdly, it cannot possibly be right or in the interest of South Africa that, more than 20 years into our democracy, our economy continues to be skewed predominantly in favour of our previously privileged compatriots. Such a situation can only fuel growing resentment and aggravate racial tensions.

It is very important, therefore, that companies within the metals and engineering sector appreciate the fact that economic transformation will be one of the Government’s priorities over the next five years. In particular, there will be an emphasis placed on the need for transformation when it comes to business ownership, in addition to the other areas of the Broad-Based Black Economic Empowerment.

Failure to embrace and implement transformation at the work place will not only have legal and financial implications, but it will also negatively affect companies’ ability to compete for public-sector business. The latter point would mean that these companies would not be able to take advantage of opportunities that will arise as part of the ambitious infrastructure development programme envisaged in the National Development Plan.

SEIFSA stands ready to assist companies to embrace transformation in order to place themselves in a position where they can comply with the new BBBEE legislation and be in a position to compete for business from Government and State-owned companies. Our Transformation Specialist has all the experience necessary to help companies to comply with the country’s laws, and we are in the process of exploring the setting up an Enterprise Development Fund that would facilitate black shareholding in companies that are interested in bringing black shareholders on board.

Our Commercial Manager and the Transformation Specialist, who are an important part of our Economics and Commercial Division, stand ready to work with companies that need their services.

Kaizer M. Nyatsumba
Chief Executive Officer


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By Kaizer M. Nyatsumba | Chief Executive Officer

On Tuesday, 24 February we hosted a briefing session at the Johannesburg Country Club on the state of the metals and engineering sector in 2014 and the likely scenario in 2015-16. We used the occasion to launch our State of the Metals and Engineering Sector 2015-2016, an impressive, must-read report compiled by our Economist, Taffie Chibanguza, and our Chief Economist, Henk Langenhoven.