11 February 2016

Several commentators, namely Anne Bernstein and Sara Gon, have recently harshly accused business leaders of temerity in facing up to government.

Whilst South Africa has a proud history of producing world class business leaders, innovators and entrepreneurs such as Elon Musk, Anton Rupert Roelolf Botha and many more, there is a need to explain the sudden dearth of entrepreneurs in South Africa today.

To me, as a businessman and entrepreneur, there are several obvious explanations;

First and foremost is that the state has interfered with the most sacrosanct of institutions, the family business. Everywhere in the world, from Taiwan to Italy, family businesses have been the most basic cog in the provision of job creation, innovation and competition. Almost all of the large enterprises in South Africa, other the the State owned enterprises, were started by families, like the Ackerman’s, the Presses, the Searll’s, the Frame’s and the Rupert’s and once these enterprises flourished, they morphed into corporations.

The ANC with its Black Economic Empowerment policies has dealt a mortal blow to this, most fundamental of capitalist institutions. As soon as a family business, starts to gain traction, it is now required to transform its intrinsic nature to incorporate non family shareholders, in order to comply with BBEE legislation. Although we all understand and accept the need to uplift the majority of previously disadvantaged South Africans, private family business should fall outside the bounds of this legislation.

This legislation, in its existing form is racist, as it requires all companies to categorise staff into racial and sexual categories, White, Black, Indian and Coloured. It is also racist to deny a family business that tenders on state tenders, an equal opportunity to win the tender, only because it does not comply with BBBEE Requirements. It is furthermore onerous, as the reporting requirements are very demanding for small businesses.

The ANC Government has created a business environment that does not reward excellence, and free competition based on the usual standards of competitive pricing, high service levels and competence and replaced these with a system that rewards companies that comply with a random and ever changing set of racially based requirements: racial profile of owners, racial profile of suppliers and racial profile of management staff. This is the single biggest cause of corruption and the rise of ‘tendertreprenuers”.

Flowing from the above, almost all goods and services currently being provided in South Africa now incur a ‘handling charge’ premium. This charge is to oil the palms of the class of people, that are required to fit the profile, of ‘approved vendors’. We have seen how costs escalate beyond the intrinsic worth of large projects, like Medupi, Inkandla and many more.

The ANC government has thrown huge amounts of taxpayers money at uncompetitive and dysfunctional State enterprises, like SAA, that serve only the egos of some members of the ruling party and their cronies, at the expense of private enterprises. Why the competition board has not cast its gaze on these inefficient and anti-competitive organizations, and allowed the demise of many private entities that tried to compete against these SOE’s, has dismayed and baffled me.

What should the state be doing;

All the government (DTI) talk of encouraging manufacturing entrepreneurship is wasted and a lot of hot air. No family entrepreneur is going to invest in his/her own business, only to lose control once it starts to grow. What Zuma says tonight, at the State of the Nation, about creating jobs and creating an enabling business environment, will be meaningless unless he frees private enterprise to be entrepreneurial yet again.

Ben Levitas is Director of African Pipes Valves and Fittings