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Black Economic Empowerment

Markets

After the end of apartheid, the South African government set about trying to encourage economic equality through a mechanism called Black Economic Empowerment (BEE).

Control of big business rested primarily in the hands of white individuals who made up 10% of the population, meaning that most of the country's economy was controlled by a very small minority.

The BEE agenda forces companies to achieve targets for employment, management and ownership by previously disadvantaged groups and this has a signicant impact on the construction industry.

Scott Wilson has achieved this by going into joint venture with local rm Masetloaka.

'All government contracts go to rms that are satisfying the BEE agenda, ' says Masetloaka-Scott Wilson director Ian Hargreaves.

Government exercises preferential procurement meaning that companies majority owned by previously disadvantaged persons are most likely to win work.

'The only way to work here is to grow as a Black Empowerment company, ' he says. 'We are planning to grow with local staff.' The joint venture works well for Masetloaka which couldn't access the larger opportunities because of its size, says director Raymond Madi, who engineered the jv with Hargreaves. 'We needed a good big brother to help us work on major projects.

We also have our own construction company and networks that mean we can really access the market. Scott Wilson brings us expertise and experience, along with investment and allows us to develop local engineers.' Joint venture working is not the only solution. WSP operates under 13 companies in South Africa, three of which Nyati Engineering Services, Ubunye and Ithusi are owned by businessmen classed as previously disadvantaged.

Group HR manager Heather Kinghorn explains: 'We have shares in three local businesses. They manage their own companies and we provide support and nurturing. For government tender we either go into joint venture with one of these companies or we bid as WSP Group Africa.' But setting up new companies for new jobs is time consuming. 'The accountant currently has 11 books to run, ' she says.

The system is also open to abuse. Since the introduction of BEE many rms have been accused of 'window dressing' - setting up partnerships with ctional companies, employing local staff in menial capacities but pretending they were managers and board members. In some cases companies give away parts of their business to silent local partners from previously disadvantaged groups, who are paid but who take no part in the running of the rm.

'There are always companies that will nd ways to manipulate the system and some are not embracing change, ' says Madi.

But others are sceptical about the system. 'I would have liked it if the government had not automatically given black companies the immediate edge. They should have enforced better training over a longer time. The emphasis is on ownership not on training. In general very few companies meet all of the BEE criteria, ' says WSP's Nel.

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