Tinker, tailor, but never tycoon

Press, 5 July 1983, Page 20

Tinker, tailor, but never tycoon

South Africa’s blacks are trying to get into business. This report, from “The Economist,” London, looks at the stumbling blocks the Government has put in their way.

Soweto’s second black-owned supermarket has just opened. A black businessman has gained a licence to run the townships’s first legal bar. Unlicensed drinking places, called shebeens, flourish, but until now the only legal drinking spots for blacks in the townships have been run by local authorities, who rely on beer sales for much of their income.

South Africa’s first bank major-ity-owned by blacks has reduced to 15 per cent the stake of the five big white banking groups which helped to set it up a decade ago, and Afribank’s first black managing director was installed last year. A black-run building society is planned, because blacks are frustrated by the high — and expensive — standards for construction imposed by societies which lend to whites.

A recent boom in black housing has produced dozens of small building firms, many of them headed by men who learnt their trade by watching — and gradually replacing — their white bosses. The Soweto Black Builders’ Association, formed last year, has more than 50 members. By mid--1984, blacks are due to take over the management of a building contracting company which, like Afribank, was started with white help.

The growing struggle for recognition by black businessmen is similar in part to efforts by their white political masters, the Afrikaners, to break the grip of Eng-lish-speakers on South Africa’s

commercial life half a century ago.

Racial prejudice stifled advancement by both groups in business. Each had to begin by selling mainly to its own community: an advertisement for Blackchain, a supermarket group with about 800 black shareholders, argues that “being a black-owned supermarket, we know better what people want”.

The Government, however, has helped AFrikaner companies with contracts and protection from imports, and by encouraging new Afrikaner ventures to complete with Anglo-South African firms. Black business, by contrast, is kept on a short leash.

“The whole system is geared to making you fail, rather than assisting you,” says Mr Moses Maubane, Afribank’s chief executive.

Some restrictions have been eased in recent years. Though entrepreneurs in the remote tribal “homelands” are still given much more help than those in the urban areas, city dwellers are no longer forbidden to form partnerships. They are now allowed to own more than one business and are no longer confined to small-time occupations like tailor, general dealer and butcher.

The Government is giving a hesitant nod to black-owned light industries in urban areas. The small business development corporation, formed jointly by the Government and the private sector three years ago, has spent R2O million ($22.4 million) over three years on industrial parks and

commercial centres for black businessmen near Johannesburg, Pretoria, Cape Town and Port Elizabeth. The corporation introduced a soft-loan scheme this year to nurture the already vigorous growth of backyard businesses run by blacks. It has made almost 100 loans (with a ceiling of R 1000) to woodworkers, photographers, panel-beaters, welders and dressmakers. Despite the high risks, only a few borrowers have defaulted. The success of the programme stems from its simplicity and from the corporation’s willingness to waive some apartheid rules. Though two Government officials sit on the corporation’s executive committee, the corporation says it never asks applicants whether they are legally entitled to live in urban areas or pay taxes.

the corporation’s loans go to blacks. @ Sites for black businesses are in the gift of often hostile local authorities. Applications from black businessmen to own guns to protect their property are frequently turned down by police. @ Black-owned businesses are forbidden in “white” areas — the central business districts, industrial parks and suburbs where almost all blacks work and where over 80 per cent of their wages are spent. Exceptions are occasionally •made. The National African Federated Chamber of Commerce (Nafcoc) has been allowed to open an office in central Johannesburg; a black-owned company occupies a suite of officees in another part of town previously rented by the white-run Kwazulu Development Corporation. White householders frequently hire black painters and repairmen without asking whether their businesses are legal. The Government also allows blacks to apply for trading sites in a few overcrowded areas on the edge of cities where coloureds and Indians are still allowed to own shops. These are a lucky few. Local authorities have refused to give Afribank permission to open branches in central Pretoria and in Pietersburg, the largest town in the northern Transvaal, even though neighbouring businesses - the Government insists they be consulted — have raised no objections. The Government has no such inhibitions about letting whiteowned banks open branches in black residential areas. It shrugs off Afribank’s plea for similar treatment in the cities with the

The South African Government still insists that black businesses should serve only black customers, even though whites account for almost two thirds of consumer spending. The slogan of many black sportsmen — “No normal sport in an abnormal society” — is echoed by businesssmen. They cannot compete with white businessmen because:

® Blacks cannot buy freehold rights to urban property. In consequence, black businessmen are often unable to give adequate security to their creditors. Afribank has to accept less solid collateral for its loans than its white competitors. The small business development corporation gives soft loans to black businesses when the entrepreneur’s share of the equity is as low as 15 per cent, instead of its usual minimum of 30 per cent. But fewer than a fifth of

excuse that “assistance by blacks to whites in white areas is not required and there is no justification for demanding a quid pro quo”. Afribank says that its big white competitors, including the South African subsidiaries of the British banks Barclays and Standard Chartered, have ignored its pleas for support. White business interests have also entered black townships through joint ventures with black businessmen. For the past three years, the Government has tried to improve shopping centres and other businesses in black townships by promoting partnerships in which blacks hold at least 51 per cent of the equity. Whites get a minority stake in return for financial backing and management skills. Construction began recently on the first of these joint ventures, a R 37 million shopping complex in Soweto in which checkers, the largest supermarket chain in the country, will be a minority partner. Some black groups believe these joint ventures are a good way of tapping white money and knowhow. Others, including Nafcoc, which claims 10,000 members, say white companies should not be allowed to profit from consumer spending in black townships while black businesses are barred from the cities.

Opposition to joint ventures has discouraged several white companies from following Checkers’ example. The managing director of spar, a wholesale group with about 40 black-owned retail outlets, says the scheme “is a good system for large white traders to get into black areas, but there is no benefit for blacks.”