# Regulatory Compliance Category > BEE and Employment Equity Forum >  BEE ruined man's life!

## Dave A

This clearly shows one of the scenarios envisaged in the BEE submission coming to life. The incentive exists to sell/give equity away even when it is in fact a liability:




> Nelspruit - Paulos Msibi thought he'd struck it rich when his employer of 10 years offered him a 25% shareholding in a new "black employment" (sic) company.
> 
> But Msibi's dream was short-lived. Within months he was out of a job, black-listed both by credit reference companies and government development agencies, and is being sued for over R250 000 in unpaid loans.
> full story from Fin24 here


Do we blame the "entrepreneur" or do we blame the system?

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## duncan drennan

Well depending on what truth comes out I think the seller of the shares should get his paddle ready for the very deep brown stuff that he is about to start going through. If this is true,




> "When I realised something was wrong, and confronted Bayliss, he simply fired me and ordered me off the company premises. How can you fire a shareholder? Government's programme to empower black people was defrauded, and someone needs to be held accountable," Msibi insists.


then he should be very afraid. The system may decide to make an example out of him.

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## Marq

I have not read the whole article but here's my thoughts:-

Shareholding and management are two different things.
This shows a couple of the problems of the system -
Raised expectationsInexperienced businessmen / employeesGreed
Duncan is quite correct - this guy should be afraid - this is similar to the "racism card" being brought out when things dont go the expected way  - and he is batting for the wrong side.

To answer Dave, I think the system is mainly to blame as I don't believe there are many "entrepeneurs" out there in the first place - only quick buck artists. The stats on black empowerment groups on the listed side doesnt show much sucess. In asking around small business about new partners the moans and groans have it. 

We need to have a plan in place to grow the management base first to a properly experienced qualified level before we let loose on the real business world. Theoretically there is only a maximum of a 12 year unqualified base  - assuming there is all these disadvantaged managers out there . I have 30 years experience with degrees and a masters and even I would think twice before taking on these roles in the current boardrooms. I think we are now seeing through the BS, posturing, greed and game playing as the momentum of business starts to slow down as a result of being milked with nothing being returned. 




> One of the glaring realities of present day South Africa is that governmentÃ¢â¬â¢s redistributive black empowerment policies empower the already established black elite. The policies do not benefit, and will conceivably never benefit, the marginalised rural and urban poor. In fact, those unfortunates are likely to once again be the victims of a slowly-growing economy burdened by costly social engineering. High economic growth should be governmentÃ¢â¬â¢s top priority. It is the only proven way to pull the non-participating into the economy and rapidly increase per capita incomes, especially for those at the bottom end of the income scale. - FMF Article november 2002


We talk about 20/30 year economic models and that it takes time to turn things around. Apartheit and racism is still a major factor 12 years on and yet this government is insistant on driving a wedge home within the first period, instead of creating a new block over time. They are getting edgy about not performing and delivering and this could be their downfall. They are bending to to the outside forces of labour and opposition more and more. BEE is starting to crumble as it is not sustainable and situations such as the one that started this thread are going to become the order of the day if they are not careful over the next year or so. It does not auger well if Manual does not get out of automatic.




> He feels that South AfricaÃ¢â¬â¢s so-called new black elite is not truly empowered, but that they have simply taken the bait extended by white business to comply with BEE requirements.
> 
> He suggests that the previously-disadvantaged are trying to fit into a financial system and structure which they do not understand and which was designed by and for established white businesses, and points out that there has been little true transformation in these BEE companies.
> 
> He suggests that the turning point in the BEE process will be when it is commonpractice for black business owners andpartners to design their own BEE deals and approach white business owners withpropositions.
> 
> Although ownership equity has produced somewhat disappointing results to date, other elements of the BEE programme, such as employment equity, skills development and preferential procurement, are proving more successful.
> _BusinessMap Foundation - Colin Reddy_





> Black empowerment does not promote economic growth
> DTI's Ntsika Enterprise Promotion Agency has a CEO, Lefa Mallane, who may have been contemplating the collapse of Zimbabwe's commercial farms. She wisely notes that, for black empowerment to succeed in SA, whites should not be excluded as they still have skills and expertise that blacks don't have. That could be good news for insecure white male employees, not to mention white students planning to graduate and emigrate. It may not comfort transnational oil giants who hope 25% black-shareholder stakes qualify them as 'empowerment companies' and not just 'empowering' or 'black-influenced'. Never mind that black-owned players lack buy-in funds at present. Municipalities and parastatals use various definitions, some requiring over 50% empowerment, when awarding contracts. Selling over 50% and giving up management control would 'de-globalise' a global firm. This just deters them from further investment here. However defined, racial discrimination by government should be unconstitutional and, more to the point, is insane economics. (BD 25.4, BT 28.4) _More from the Free Market Foundation_


OK - so my view this morning is that we will not get very far by issuing shares to those who do not know what to do with them. Its one thing to create two teams (BEE Vs Many others) and say choose one side to support and then we can all play nicely. It's another thing when you are limited as to which side you can support. Suddenly we are not playing.............we're surviving and as the Highlander says "there can be only one".

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## duncan drennan

> OK - so my view this morning is that we will not get very far by issuing shares to those who do not know what to do with them. Its one thing to create two teams (BEE Vs Many others) and say choose one side to support and then we can all play nicely. It's another thing when you are limited as to which side you can support. Suddenly we are not playing.............we're surviving and as the Highlander says "there can be only one".


The article and Marq's post make me think of some wise words that another well know small business writer has used, "When someone with money comes together with someone with experience, the person with the experience gets the money, and the person with the money gets the experience."

In this case the black investor brought the money (through loans, and BEE percentages), unfortunately the experience could bankrupt him.

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## Dave A

I've got a lot of time for Trevor Manuel. But I'd like to pick up on a part of the quote that I think is leading to many of our challenges:



> He suggests that the previously-disadvantaged are trying to fit into a financial system and structure which they do not understand and which was designed by and for established *white* businesses, and points out that there has been little true transformation in these BEE companies.


Now if I was writing his script, the report would have been this:



> He suggests that the previously-disadvantaged are trying to fit into a financial system and structure which they do not understand and which was designed by and for established businesses(1) which by virtue of our history is predominantly white(2), and points out that there has been little true transformation in these BEE companies.


(1) A problem that every struggling small business owner knows only too well
(2) True - but largely anecdotal to the real challenge

To my mind Trevor is largely on the mark. But his words give away an underlying paradigm that I consider an obstacle to identifying the real problems and solutions. The _thinking_ is that the business structure is a "white" or eurocentric creation. It isn't. It's a global phenomenon and has nothing to do with race.

The *real* challenge is we need to *equip* the previously-disadvantaged so that they are better able to participate in a capitalist economy. Easing access on its own is only going to produce weak capitalists. 

And that, as Marq has put so well, is going to take time.

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## duncan drennan

> The _thinking_ is that the business structure is a "white" or eurocentric creation. It isn't. It's a global phenomenon and has nothing to do with race.


This is an interesting thing to pick up on....does anyone have any ideas about say eastern culture and how it integrates with western economics?

There are definitely cultural differences between whites and blacks when it comes to money, but does that imply what Manuel has said?

(PS. anyone got an email address for Trevor where we can ask him personally about this? Maybe get him to come give his view here  :Big Grin:  )

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## Dave A

> This is an interesting thing to pick up on....does anyone have any ideas about say eastern culture and how it integrates with western economics?


Maybe a quick list of countries might help. India, Japan, Taiwan, all the "Asian tigers".... Look at where China is heading, or even where China was before the red revolution. 



> There are definitely cultural differences between whites and blacks when it comes to money,


I'd be interested in what you think those differences are. And then take a closer look and see if those differences are really based on race/cultural heritage.

I think we are too hasty to colour label differences.



> (PS. anyone got an email address for Trevor where we can ask him personally about this? Maybe get him to come give his view here  )


Maybe post something at Tips for Trevor 2007.  :Detective: 
Or here's the Contact Us page at Department of Finance.

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## duncan drennan

> I'd be interested in what you think those differences are. And then take a closer look and see if those differences are really based on race/cultural heritage.


Thinking about it you are probably right. It is difficult to differentiate between cultural differences, and wealth differences (in SA the lines are a bit blurry). I'll think about it a bit more.

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