BEE Promotes White Entrepeneurs, Discourages Black Entrepeneurs

Farrel — Mon, 19 Mar 2007 14:23:00 -0400

We’ve written before on this blog about the seemingly contradictory effect that BEE might actually be good for white South Africans by forcing them to be more entrepreneurial. A 2003 survey by the Bureau of Market Research found that between 1998 and 2002 the growth in entrepreneurs across racial divisions was as follows

Racial Grouping	Growth Rate
White	+5%
Coloured	+18
Indian	+58%
Black	-18%

That’s not exactly encouraging numbers for black entrepreneurship and because the black segment accounts for 80% of the population a decrease that large in black entrepreneurs will lower the total number of entrepreneurs in South Africa. That is a definitely not a good thing.

A new survey by Finscope has found that most black small businesses are trapped in “survivalist mode” and that only 8% of all small businesses were taking advantage of government small business support. Black entrepreneurs who do succeed quickly find themselves targets to be hired or bought out by large firms looking to source talented black executives.

If small business and entrepreneurship is to be the saviour of the South African economy as government keeps on saying it will be then the growth in entrepreneurship amongst the black segment of the population needs to reverse course and head into positive territory extremely quickly (if it hopefully hasn’t done so already). Government will also need to start supporting small business earnestly, the focus on multi-billion Rand BEE deals with multinational corporations is a bit too much for my liking.

Update: On a partially related tangent: South Africans join the ANC to advance their economic interests

"BEE Promotes White Entrepeneurs, Discourages Black Entrepeneurs" by DA Mal

Tue, 20 Mar 2007 02:12:09 -0400

No, that’s not good.

My limited second-hand experience of start-up business suggests that the biggest problem entrepreneurs in South Africa face is trying to get hold of capital. It just can’t be found. Most people who save money by investment – and there are few enough of those – go for unit trusts, RAs and pension funds. Big capital firms won’t invest in start-ups. There are very few government or NGO-backed capitalist organisations. There are almost no venture capital firms operating in South Africa.

What’s the answer? Alt-X is interesting, seems like a step in the right direction. Some revival of the Small Business Development Corporation would be extremely helpful. If black-owned SMMEs are going to the wall for reasons unrelated to their core business – such as lack of business skills – then this could be answered by using all that SETA money constructively (what chance, though).

Also important to recognise that a lot of micro-enterprises are below the visibility line; like the many cafes and spazas operating in the townships. They really count as businesses, most especially as training grounds for the tough cookies that own and operate them. The situation is probably not as desperate as all that, if you count them.

Note: being the target of a buyout is not necessarily a bad thing; it’s a valid exit strategy for an entrepreneur. I know a successful entrepreneur in Knysna (a whitey, it’s true) who specialises in starting firms solely with the aim of selling them when they’re running well. Made him rich.

Politics.za: BEE Promotes White Entrepeneurs, Discourages Black Entrepeneurs

BEE Promotes White Entrepeneurs, Discourages Black Entrepeneurs

"BEE Promotes White Entrepeneurs, Discourages Black Entrepeneurs" by DA Mal