October

Conference“…Increasing Capital Flows to Africa …” Black Empowerment and investment in South Africa30 September 2004LIONEL OCTOBERDEPUTY DIRECTOR-GENERAL, ENTERPRISE AND INDUSTRY DEVELOPMENT DIVISION, DTI: 

Conference '…Increasing Capital Flows to Africa …' Black Empowerment and investment in South Africa 30 September 2004 LIONEL OCTOBER DEPUTY DIRECTOR-GENERAL, ENTERPRISE AND INDUSTRY DEVELOPMENT DIVISION, DTI

Outline : 

Outline Introduction Economic Development strategies Brief background to BEE Act Broad based empowerment Sector Transformation Charters Codes of Good Practise Increasing capital flows Impact Questions

Transformation/growth Imperative: 

Transformation/growth Imperative Rationale essentially 'economic' Double bind of low growth , slow transformation Not possible to raise growth rate without expanding entrepreneurial and skills base Growth/redistribution trade-off not relevant 4% Growth with significant empowerment possible in short /medium term

Economic context: 

Economic context Non-racial democratic society consolidated Education successfully de-racialized Modest growth 2 –3 percent growth since 1994 Improvement over negative growth rate of 1980’s, but insufficient to address social challenges Income inequality amongst highest in the world Massive disparity in white and black incomes, ownership and access to employment opportunities Economy has undergone major transformation – macro economic stability, global integration Improvements Externalities exist - macro-economic policy and industrial strategy are beginning to positively influence investor attitudes, not yet translated into increased employment rate and poverty reduction

Principles: 

Principles Broad based Equal societies grow faster because of effective demand/consumption patterns Growth effects to be broadly distributed Equity base/shareholding to be broadened Balance operational control andamp; passive investment Implementation entails higher transaction costs

Other Principles: 

Other Principles Growth Inclusivity Good governance

Instruments: 

Instruments Legislation Regulations/procurement Charters Scorecard Finance

Transformation Charters [section 12]: 

Transformation Charters [section 12] 9. (1) In order to promote the purposes of the Act, the Minister may by notice in the Gazette, issue codes of good practice on BEE that may include—(e) guidelines for stakeholders in the relevant sectors of the economy to draw up transformation charters for their sector; and 12.The Minister must publish in the Gazette for general information and promote a transformation charter for a particular sector of the economy, if the Minister is satisfied that the charter— (a) has been developed by major stakeholders in that sector; and (b) advances the objectives of this Act.

Slide9: 

Balanced Scorecard A basic and objective framework against which Transformation and Empowerment Achievements can be measured Provides a balance between imperatives for sectoral transformation and black economic empowerment Equal weighting to equity, management/ control, andamp; enterprise development Application of scorecard License in regulated sectors – e.g. gambling or mining Concession to operate an asset on behalf of state Sale of state assets or SOE Enter into a PPP

Slide10: 

DTI Scorecard 'The dti scorecard … will allow for a measure of flexibility…'

Black Investment opportunities: 

Black Investment opportunities South Africa , offers exciting investment opportunities Investment risks are moderate and can be mitigated Superior investment returns are being achieved in BEE firms South Africa’s integration into the global economy and domestic socio-economic transformation are key drivers of deal flow for BEE

Slide12: 

Slide13: 

Share prices of largest retail banks

Conclusion and the way forward: 

Conclusion and the way forward Although much has been achieved to date,taking up the opportunity presented to us. Increasingly moving from dialogue to collective action Securing the long-term sustainability of growth, employment and equity in our economy. Processes in place to support Black Empowerment and investment in South Africa. Ensuring significant increases in capital flows to Black firms through charters.

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