Mining’s B‑BBEE divide

Much of what governments and national bodies try to suppress is kept secret not to avert public harm, but to spare themselves embarrassment.

That is particularly true of those suckling at the abundantly flowing teats of the broad-based black economic empowerment (B-BBEE) sow.

Modification of B-BBEE resisted

Any attempt to curb tenderpreneurial corruption or modify B-BBEE to make it more transparent and genuinely transformative is bitterly resisted.

It is plainly in the public interest that controversial ANC policies should be debated with as much information as can be laid open to rigorous scrutiny.

That is why I am publishing – as an adjunct to this column – the full “confidential” analysis of B-BBEE prepared by audit firm SizweNtsalubaGobodo and Rand Merchant Bank for the Chamber of Mines and kept under wraps for more than a decade, despite leaked copies having formed part of a fiery public debate for months.

While white critics of B-BBEE can simply be dismissed as racists wanting to hang onto ill-gotten privilege, other tactics have to be found for the increasing number of black critics who challenge a policy that public surveys consistently show enjoys only minority support, including in the black communities that are supposed to benefit from it.

Criticisms of B-BBEE

Foremost among them is Prof William Gumede, of the School of Governance at Wits University, whose unremitting criticisms of how B-BBEE has been implemented so as to benefit a tiny group of ANC-linked individuals disproportionately have made him a particular thorn in the ANC’s flesh.

As I wrote in an earlier column, nothing has infuriated Gumede’s opponents more than his claim that mining B-BBEE made a tiny circle of beneficiaries spectacularly rich.

Until now, he has had to fend off vilification while unable, for professional reasons, to publish the confidential Chamber of Mines report on which the claim rests. That excuse has now vanished. His critics and defenders alike can read the document for themselves and arm themselves accordingly.

By my reading of the source document, the broad direction of Gumede’s critique was sound.

Report not ideologically driven

The report is not an ideologically driven document designed to discourage B-BBEE or impede economic transformation. Quite the opposite.

It is an internal industry document, expressly designed to help the chamber formulate its position on empowerment and to demonstrate that mining had met – indeed exceeded – the ownership targets required by the Mining Charter negotiated with the ANC.

In other words, this was a brief for the defence. Yet its findings, when one gets to the fine details, are politically devastating.

Its headline conclusion is flattering to the industry. On the chamber’s calculation, mining had achieved average historically disadvantaged South Africans (HDSA) ownership of 38% by the end of 2014, comfortably above the 26% target.

Economic participation by HDSAs

But buried within that defensive narrative is an important admission. Of the economic participation by HDSAs, the report states that, on its value-based measure, 60% went to 46 B-BBEE entrepreneur participants; 29% to 31 community structures representing 6 915 449 people; and just 11% to 210 116 employees grouped in 18 employee share ownership plans.

That is an extraordinary distribution. It shows that enormous wealth was transferred – in mining alone, by 2015, an initial value of R116 billion, with at least R47 billion in subsequent dividends, amounting to a net value somewhere between R155 billion and R282 billion, depending on the valuation method used – but, contrary to the rhetoric of mass upliftment, the commanding share flowed to a tiny elite.

There are, to be sure, caveats. Gumede is specific about 46 politically connected individuals securing 60% of mining B-BBEE deals. But the report itself does not name 46 ANC grandees, nor does it claim that everyone of those beneficiaries was politically connected in the narrow partisan sense.

Minimum 46 B-BBEE entrepreneurs dominated participation

What it does say is that a minimum of 46 B-BBEE entrepreneur participants accounted for the lion’s share of HDSA economic participation, while the figures for communities and employees are likewise framed as minimums.

That allows for some numerical flexibility, as one would expect when dealing with structures representing millions of people – but nothing that negates the essence of the finding. That number may be somewhat higher than 46. It might, say, be 60. But it is not plausibly 600, 6 000 or 600 000.

That is why Gumede is at the eye of a storm driven by a powerful political caste determined to cow and silence him.