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BBEC Opinion of Richlist

The Sunday Times Rich List for 2009 is positive proof that, despite its shortcomings, black economic empowerment is slowly helping create the role models that we need to encourage more black people, especially the youth, to start their own businesses.

The list shows 18 black people, with wealth of more than R100 million each, making it to the top 100. Number two on the top 100 is mining magnate Patrice Motsepe with wealth of R14.25 billion as at the end of March 2009. He is followed by Housing and Settlements Minister Tokyo Sexwale (number 16 overall) with R1.2 billion and Cyril Ramaphosa at 17, with R988 million. The other black people in the top 100 are Phuthuma Nhleko (27), Sipho Nkosi (29), Lazarus Zim (30), Saki Macozoma (38), Zweli Mntambo (39), Peter Malungani (43), Marcel Golding (42), Regi Moonsamy (61), Nkululeko Sowazi (65), Gary Morolo (67), Mikki Xayiya (68), Mzolisi Diliza (72), Sifiso Dabengwa (78), Dalikhaya Zihlangu (80), and Robert Gumede (84).

The Rich List shows an increase in the number of wealthy black South Africans, but most importantly, it reflects a base of BEE beneficiaries that is much broader than the list of the so-called usual suspects, proof that the benefits of BEE are being spread wider than the critics would like us to believe. Of course, how to spread the wealth wider remains a big challenge.

Besides the spreading of the actual wealth to more black South Africans, BEE, as the Rich List shows, is creating a growing pool of role models. Studies, both locally and overseas, have found a strong correlation between entrepreneurship rates and the existence of role models. On that score, the growing number of black people who are being profiled as having made it into the wealth league will surely spur more young black South Africans to create their own business ventures.

Patrick Turner, the Insead affiliate professor of Entrepreneurship and Family Enterprise makes the point that one’s environment has a big influence on whether one becomes an entrepreneur. "You are more likely to become an entrepreneur if someone in your environment is, or have been one – your father for instance, or some other family member."

Beyond the family, a vibrant entrepreneurial community also encourages more entrepreneurship. "It's a matter of entrepreneurship appearing to you in those you see around you as a perfectly normal and widely accepted practised way of pursuing a career," says Turner.

In comparing India and China, Turner finds that India has an advantage in that it has developed a number of entrepreneurship-oriented bodies whose mission is to promote entrepreneurship in the country.

Turner's point is backed by the report, Entrepreneurship and local economic development: Programme and Policy Recommendations, published in 2003 by the Organisation for Economic Co-operation and Development (OECD). The report highlights the impact of role models on the level of a community’s entrepreneurial activity. It notes that the diffusion of entrepreneurship appears to involve an element of imitation. It cites surveys which found a strong inter-generational component in the transmission of entrepreneurship, with entrepreneurs often being drawn from families with a history of business ownership.

Written by OECD staffer Alistair Nolan, the report added that people who know an entrepreneur are more than twice as likely to enter business as those who do not.

Research by the Autonomous University of Barcelona also found that role models were a positive stimulus for entrepreneurial activity.

"This would tend to imply that entrepreneurship support policy should lay the grounds for a greater social interaction on the part of existing entrepreneurs, promoting networking possibilities with potential entrepreneurs, glorifying the role of the entrepreneur in the community, as well as socially celebrating the entrepreneurial successes of existing entrepreneurs.

"The local administrations must magnify the visibility of positive entrepreneurial examples within their communities. Entrepreneurial role-models can help instill the appropriate entrepreneurial atmosphere within a community's informal institutional framework that will then permit formal entrepreneurship support policy to have a much more potent impact upon local entrepreneurial activity levels."

The Barcelona study adds that self-confidence is a driving force guiding individuals through the different stages of the starting and running a business. "Entrepreneurial self-confidence is a natural consequence of prolonged exposure to positive entrepreneurial examples. An individual with entrepreneurial ambitions can gain the necessary confidence in his/her own entrepreneurial skills by being in close personal contact with individuals who have themselves successfully established their own businesses."

Other studies too, link the preference for entrepreneurship to parental role models in particular. This is based on the social learning theory which says that learning can occur through observation of the behaviour of others, often referred to as role models.

Entrepreneurship in South Africa, especially among black people, is not sufficiently celebrated, which explains why South Africa lags its peers on entrepreneurial activity. "While politicians and sporting heroes receive much adulation, most South Africans have little appreciation of what it takes to build a successful business. Few entrepreneurs are household names," says the Western Cape Status of Youth Report published last year.

That's why the Black Business Executive Circle (BBEC) has chosen to shine the spotlight on the growing number of black South Africans who have made it onto the Rich List. We do so, however, being mindful of the fact that the black men and women who have made it into the Rich List represent a very small percentage of the total black population. We still need to do much more to open up the space and pull in more black South Africans to participate in the creation of wealth and job opportunities. Raising the profile of successful black businessmen is one way of achieving this goal because it shows young people that it is possible for black people to create wealth.

On their own, however, role models cannot create the necessary groundswell of entrepreneurial activity in the country. We need to fix public education. Various Global Entrepreneurship Monitor (GEM) reports have pointed to problems with education and training as one of the major inhibitors of entrepreneurial growth in South Africa, especially among the 18-34 year olds.

The legacy of poor quality education has meant that vast numbers of black people have missed out on the opportunity to acquire skills.

"Apartheid education was damaging to people’s confidence and self-esteem," says the 2008 Western Cape Status of Youth Report. “The kind of passivity and learning helplessness that apartheid education deliberately inculcated into so many South Africans is inimical to the drive and initiative required by successful entrepreneurs. Critical thinking and questioning were not encouraged and most certainly entrepreneurial education was not evident."

There is a strong relationship between education levels and entrepreneurial activity as well as the success of the business venture. That's why we should encourage entrepreneurship education in our schools to boost the learners’ self-confidence about their ability to start a business, understanding of financial and business issues, the desire to start their own business, and the desire to undertake higher education.

International studies of entrepreneurship also show that the building blocks of s successful small business are the expertise, the skills and the work experience of the owner. For South Africa, this means that the expansion of opportunities for black people through affirmative action policies and other measures must continue apace.

"Absent appropriate skills and tools, hard work and initiative alone are often not enough to create successful businesses. People lacking the prerequisites, who nonetheless choose to start businesses, generate high business-failure rates," says Timothy Bates, Distinguished Professor of Labour, Urban Affairs, and Economics at Wayne State University.

Well-educated and skilled people with lots of financial capital to invest in their ventures are indeed likely to build successful small businesses, says Bates of small businesses in the US.

So, as we celebrate the Patrice Motsepe’s, the Gary Morolo’s and the Nkululeko Sowazi’s of today, let’s redouble our efforts to create more of black entrepreneurs.

Hlengani Mathebula
Chairman
Black Business Executive Circle

For Enquiries:

Sharmayne Venkatsamy
011-783-1528
083-254-1469
sharms@masake.co.za