Transformation programmes in other countries

BEE is completely unique to SA, but several countries have also implemented transformation measures to address inequities of the past. Countries that most closely resemble SA’s BBBEE strategy are Malaysia and India and several lessons can be learned from their successes and failures. Other countries have also implemented particular employment-related elements, several of which closely resemble SA’s AA policy.

4.9.1 Malaysia

Malaysia shares an analogous past with SA, since it also needed to address domination from a minority group after it gained independence from Britain in 1957. It faced the challenge of redressing economic inequalities between the Malays and Chinese (Mandla, 2006:9). Southall (1997:3) reported that the Malaysian population consisted of Malays (49.8%), Chinese (37.2%) and Indians (11.3%). This population diversity, not unlike SA, has major cultural differences in terms of language, religion, education and social, as well as economic perceptions and world views (Abdullah, 1997:192).

Malaysia’s New Economic Policy (NEP) was an ambitious twenty-year plan (1971-1990), which was created by the Malaysian government to address inequities of the past by redistributing wealth and eliminating poverty (Case, 1995:95). The NEP closely resembled BEE, since it predominantly focused on economic growth by setting long-term targets for Malay ownership, education, eliminating race identification, according to economic activity, and promoting equal opportunities for employment in an endeavour to replicate the country’s demographics (Athukorala and Menon, 1999:1119-1123).

• Malay share ownership - the NEP set a target of 30% of Malay equity ownership by 1990.

The Malay estimated equity ownership was 2.4% in 1970, Chinese 33.8%, Indians 0.8%, while 63% was held by foreign companies (Klitgaard & Katz, 1983:335). The new ratio of equity ownership was set at 30% for Malays, 40% for non-Malays (mainly Chinese) and 30% for foreigners (Searl, 1999:67).

• Education was a primary focus of the NEP and, therefore, aimed to establish an educational system to advance Malays; consequently, considerable amounts were spent on education over the twenty-year period. Education was regarded as a vehicle to promote social mobility in modern economies and a way to achieve equal opportunities for all in order to promote national identity (Faaland, Parkinson & Saniman, 1990:58). A quota system was implemented, which stipulated that 55% of university enrolments should be Malays. The increase of Malays in higher education was considered to be essential for skills development and employment (Mandla, 2006:22).

• Employment and eliminating race identification according to economic activity (the Malays were stereotyped as farmers and unskilled labourers) - education, by itself, was insufficient to remove identification of race according to economic activity, and also required the creation of jobs (Emsley, 1996:43). The NEP set a target to change the racial representation across all occupation categories in order to match the country’s demographics by 1990 (Takashi, 1997: 213). Chinese made up 60% of all employees in the secondary or industrial sectors and held a majority of professional, technical and managerial positions in the late 1960s, whereas 75% of Malays worked as unskilled employees, predominantly in the agriculture industry (Emsely 1996:36).

Results, successes and failures of the NEP are outlined below.

• The NEP was largely successful at decreasing poverty among the Malays, but at the expense of increasing intra-Malay inequality. Class differences appeared and individuals close to the ruling party benefited the most from the NEP, which ultimately culminated in a major political crisis (Roslan, 1996). This result is a mirror image of what has happened and continues to happen in SA in terms of its BEE strategy.

• The bridge between poor and rich Malays increased and several sold their opportunities (licences and contracts) to wealthy Chinese. Malays who had connections with government quotas and incentive schemes also obtained preferential treatment (Mandla, 2006:78-79).

Again SA is mimicking what has happened in Malaysia.

• Malaysia experienced a high economic growth rate (8.3% per annum) during the NEP period, but primarily as a result of favourable global conditions (Hart, 1994:48). The Malay equity ownership grew from 2.4% in 1970 to 20.3% in 1990 (Searl, 1999:67). In recent times, SA has also experienced reasonable economic growth, but this has begun to decline with the global financial crisis.

• In the late 1960s the Malay enrolment in higher education was only 25%, whereas by 1985 it had climbed to 79%, which was far more reflective of the nation’s demographics (Tzannatos, 1991:184). An emphasis on education began producing Malay engineers, lawyers and doctors, which helped to reduce racial identification according to economic activity. Consequently the Malaysian government relaxed its quota system in 1990. The enrolment of PDIs at SA universities had also increased since 1994, but the same degree of emphasis has not been placed on education by the SA government.

• Employment of Malays increased to 50% in the manufacturing sector and 64% in technical and skilled positions, but this occurred mainly at the lower levels and only accounted for 26% of professional and managerial employees. Therefore, inequities have continued even though some progress was made by the NEP (Mandla, 2006:26-27). This result is completely comparable to the SA situation.

The National Development Policy (NDP) replaced the NEP in 1991 and intended to create wealth instead of redistributing it. Ethnic policies and work permits for foreigners were eased, while entrepreneurship, managerial expertise and skills development were implemented to address the intra-racial divisions. Economic growth provided means for transformation and SMMEs emerged.

Simply stated, during economic growth, companies are more prepared and able to implement new policies and to increase EE, whereas the converse is true in recessionary periods (Athukorala and Menon, 1999:1122-1123). Therefore, it is essential that the SA economy should also grow in order for BEE to work and subsequently only limited success has been reached at reducing poverty amongst the Black majority.

Other lessons that SA can learn from Malaysia’s experience (Mandla, 2006:76-79) include the following:

• The SA government should recognise that education was critical to empower the Malays, but BEE has not been directly connected to higher education and, therefore, will not succeed in uplifting the Black majority unless this issue is addressed in the near future.

• The SA government should allocate vast resources to Black-owned SMMEs, instead of favouring big business interests in order to ensure sustainable BEE and an effortless transition of Black entrepreneurs to bigger companies.

The Malaysian experience teaches SA that broad-based economic participation of the Black majority can be guaranteed if it directs its efforts towards education, employment and ownership.

4.9.2 India

India also faced several challenges when they gained independence from British rule in 1947. India (like SA) is a diverse country in terms of social, religion, economic, language and other cultural dimensions. The new democracy promised economic, social and political justice and the new Indian constitution made provision for dealing with historical inequities and certain underprivileged groups. The government aimed to improve education, provide equal opportunities and raise basic living standards. Religious, class, race and gender discrimination were rendered criminal offences under the new constitution. The Indian government also implemented legal and institutional measures to promote participation of previously disadvantaged persons in the economy (especially in terms of employment and education) to be reflective of the population’s demographics (Jodhka, 2006 & Mahajan, 2000). The following successes and failures resulted.

• India has accomplished much since independence by implementing domestic economic reforms to reduce bureaucracy and obstacles to trade, as well as improvements in infrastructure, which resulted in the emergence of a substantial middle class group. Its tertiary education produces two and a half million graduates per annum; it has an independent legal system and healthy political relations with the West (Ninian, 2006).

India is the biggest democracy with a population of just over one million one hundred thousand and is the twelfth largest global economy whose growth is only surpassed by China (Koenderman, 2008h:10).

• However, there are problems with a large democracy, which is similar to SA’s present situation. There is a huge and growing disparity between the poor masses and the wealthy minority, with India’s GDP per capita revealing that a majority of the population are amongst the poorest in the world in spite of their large economy (Koenderman, 2008h:10).

Public health has shown little or no improvement for the masses of rural and urban poor, whereas good quality health care is readily available to the wealthy and urban middle class in the form of costly private hospitals (Baru, 1998). The same phenomenon occurred with

India’s school education system, since quality education was available via expensive private schools and inter-regional and -gender disparities persist in the public schooling system (Jodhka, 2006).

• India's success in empowering masses of rural poor and development of power, transport, telecommunications and healthcare infrastructure, will ultimately decide the degree to which it will become a global force and the speed at which this will happen (Ninian, 2006).

India and SA share several similarities since they are both developing countries with emerging economies, are culturally diverse, have an emerging middle class and the same agenda to eradicate historical inequities and empower PDIs (Fauconnier, 2007: 78-79). Both countries are attempting to use diversity as a means to advance economic progress and raise their citizens’ general standard of living, hence the Indian and SA governments could and should attempt to learn from each other’s successes and failures.

4.9.3 Other countries

Several other countries have also implemented transformation elements that closely resemble SA’s AA policy. Although a majority of these countries’ initiatives address discrimination of minorities, the converse is true for SA. Nevertheless, their experiences offer some value (Nel et al., 2004).

• United States of America (USA) was the first country to implement AA and anti-discriminatory legislation in the early 1960s. Although the USA does not have targets, companies are required to meet goals that are realistic and flexible. The focus on AA was directed at promoting equal employment opportunities generally at lower positions, but not at management levels (Charlton & van Niekerk, 1994).

• Namibia's legislation on AA is similar to SA’s, but appears to be more realistic and practical. The Namibian government based its AA on the following principles:

o The objective of AA is to promote equal employment opportunities;

o AA target groups include disadvantaged Namibian groups, Blacks, women and persons who have disabilities;

o Employment measures that require hiring unqualified persons are deemed to be unacceptable;

o Preferential treatment under AA must only be given to aptly qualified individuals, but benefit the least well off persons from applicable target groups;

o AA should not be used as the only instrument for employment of those who are not members of designated groups; and

o AA covers both public and private sectors (Namibia. Ministry of Labour, 1995).

SA should thoroughly examine these principles, as well as the positive effects that they have in terms of EE in Namibia.

• South East Asian countries commenced with their radical economic turnaround from a much lower level of industrial development than SA. A large number of their population had also never participated in the global economy, yet they have completely surpassed SA in terms of engineering and manufacturing high-tech products. These countries’ massive economic growth was primarily based on two simple strategies, namely technological innovation and significantly raising education levels in business, as well as in skills development.

SA should learn from these countries’ mistakes and successes. Consequently SA, should advance the following elements on a considerably larger scale: education, skills development, equal employment opportunities and wealth creation (for example, via SMMEs and strong economic growth) if sustainable BEE and meaningful empowerment of those PDIs that genuinely need it, should transpire by 2014.

4.10 Summary

Several attempts to uncover comprehensive information on the advertising industry’s progress in terms of BEE have failed, but the ACA has been successful in measuring the same two quantitative BBBEE elements under the spotlight in this BEE study, namely ownership and EE. BEE has been criticised for its misgivings and commended for its progress in recent years. A couple of national quantitative surveys have revealed that progress has been made in terms of some BBBEE elements, whereas others have faltered. Important views on BEE were obtained from a Harvard University study, as well as valuable data from other theses that examined BEE progress and challenges across several industries within SA. The SA government and advertising agencies can also learn from other countries in terms of what has worked to promote real transformation, while they should also take cognisance of challenges and benefits raised by BEE stakeholders. All of the aforementioned research is used to substantiate the findings and to bolster the discussion of this BEE study that has investigated transformation progress in the Cape Peninsula advertising industry.