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=Flexibility is Pityana's key ingredient for BEE success=

Business Report, Johannesburg, February 12, 2006

 * Nick Segal, Conversation with Sipho Pityana**


 * Sipho Pityana**, Izingwe Capital's executive chairman, is a former labour director-general who says the inflexibility of labour laws may be burdensome for small businesses, but the main impediment is bureaucratic red tape.

Pityana, who also served as the director-general of foreign affairs, turns his attention to South Africa's role on the continent and the unwieldy nature of Nepad, where he served on the steering committee of the the New Partnership for Africa's Development (Nepad) business group. On black economic empowerment (BEE), which is the focus of Izingwe, he rails against the negative perception of wealth accumulation.

He spoke to Nick Segal, an international development consultant who has served as a senior economist in the World Bank and as president of the Chamber of Mines


 * How do you feel about the labour laws and regulations, with their emphasis on workers' rights rather than on wealth and job creation?**

It is fair to say that 10 years ago government did not have the experience it now has in managing the economy. We were concerned about wealth creation but, given the deep inequalities, we also had to give priority to redistribution and employment conditions.

With hindsight, I feel our approach was too universal with insufficient recognition of the capacity of different parts of the economy to cope with change. Perhaps, too, we overcompensated for the previous harsh regime; retrenchment procedures are burdensome for new and small firms, and this could inhibit their willingness to hire.

Having said that, given the shocking legacy we faced, I remain comfortable with the broad spirit and main thrust of the 1990s legislation. My concern is to see it more flexibly applied and also, where warranted, modified.


 * Amplify your response, if you would, with respect to the persistently high rate of unemployment.**

I am pragmatic about the adverse impact, in some respects, of the new regime on the labour market. But it is crazy to assert that "inflexible" labour markets are the principal cause of high unemployment and the main impediment for small and medium-sized enterprises (SMEs).

From where I now sit I can see numerous other regulations that are onerous for SMEs. To give two practical examples: to acquire a small vehicle dealership I have to comply with complex competition rules; and in exploring the abundant opportunities in farming, forestry and tourism in the poverty-stricken Eastern Cape I am horrified by the formidable procedures necessary to acquire land, even though much of it is state-owned.

More generally, I am dismayed that not enough is being done to make the bureaucracy more accountable.

The efficiency of government is critical to the business sector. As a final comment, I feel the tax regime could be creatively used to provide real incentives for SME development.


 * What are your views on Nedlac? Do you see it as temporary or as an institution for the long term?**

In its early years Nedlac was vibrant - there was a real sense of finding one another and of helping navigate the early and choppy legislative waters of the transition. But there are now a number of mechanisms through which the president regularly consults the government's social partners.

It has also become plain that you cannot negotiate every detail of proposed legislation outside parliament.

There are two defects in Nedlac's structure: its "location" in the labour department, when its agenda is far wider; and the composition of the community chamber, which has not allowed the flexibility to introduce new members as the agenda has evolved.

Despite the importance of the land and HIV/Aids issues, neither the Landless People's Movement nor the Treatment Action Campaign is represented as they were not original members.

Nedlac, however, is or should be far from redundant. There is still much on the national agenda that requires a shared understanding.

Given its firm foundation, Nedlac is uniquely placed to serve as a multilateral sounding-board and consultative forum. This will require a high-level review of its purpose, structure and modus operandi. In such an exercise I would like to see how to connect Nedlac to the presidential working groups and bodies such as the Millennium Labour Council.


 * Do you think Nepad is beginning to make a difference?**

Nepad has done well in focusing attention on the challenges facing Africa and on the progress towards peace, political stability and democratisation. But much remains to be done, especially in the economic sphere, and Nepad's capacity to implement needs to be greatly strengthened.

Unfortunately, a collaborative project of many partners inevitably moves at the pace of the slowest. I believe Nepad, and Africa, can't afford that.

It would have been far better to have constituted a smaller group of like-minded countries to drive the project and serve as exemplars, provided mechanisms existed for subsequent admissions. The impact on the ground would have been faster and the credibility with international partners enhanced. This would also have served to isolate so-called rogue states. I do not think it is necessarily too late to pursue this route.


 * We in South Africa like to think we have a special role to play in Africa because of our duality. Do we risk being seen as the new economic colonialists?**

In commenting on South Africa's role, President [Yoweri] Museveni of Uganda tells of his school days, growing up among short and tall boys; there was no suggestion of cutting off the legs of the tall boys, he says, and it was always understood that effort should go into growing the short ones.

South Africa has to recognise that it is the critical bridge for internationalisation and modernisation of the continent, and it must accept the responsibilities that go with this. It must also accept that as the major power it will be resented and must thus be sensitive to local circumstances.


 * What are your views on broad-based BEE and its implementation?**

I strongly endorse the multi-dimensional approach formulated in the codes. I resonate too with the principle of broad-based BEE, but I must express three deep concerns.

First, the expectation that leaders of empowerment groupings must assemble many partners is expensive, clumsy and time-consuming. It runs the risk of bringing in people who are not like-minded, or who are unable to add value. Many individuals will have trivially small stakes and disappointed financial expectations.

Second, it limits the scope for capital accumulation by principal investors. In our society, there has to be space for as many seriously wealthy black individuals as possible, and we should not artificially prevent this. We must build a culture that celebrates individual financial success, along with the responsibility to put back into society, and we must not allow this to be portrayed as violating the principles of the struggle.

Third, an unfortunate confusion is creeping in between BEE and corporate social investment (CSI). They must be kept separate, and it is unfair to oblige the BEE partners to commit part of their dividend to CSI. I don't need to be forced by legislation to support my communities. Izingwe has yet to take off, but I am putting money into township schools in Port Elizabeth and Mamelodi.


 * What makes Izingwe distinctive? What inspired you to set it up?**

BEE is an instrument for deep transformation, not just capital accumulation. Izingwe is distinguished by active participation in its investment portfolio and constantly seeking to advance the frontiers of transformation.

At Nedcor I gained a keen appreciation of market opportunities but I felt there would be limited scope for personal growth. The challenge to start a business became overwhelming.


 * What things are important in your life? And the values you live by?**

All of us must experience the rising prosperity our country is enjoying and all of us have a duty to ensure that. I've never experienced failure in my life; I have a powerful sense of responsibility to ensure that my business succeeds.

My generation must ensure that our children have a better start in life. I believe in justice, equality of opportunity, sharing, integrity and honesty.

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 * From: http://www.busrep.co.za/index.php?fArticleId=3107447&fSectionId=552&fSetId=662