RE: RADICAL ECONOMIC TRANSFORMATION
Congratulations on your Cabinet reshuffle Mr. President. The appointment of the Honourable Malusi Gigaba as Finance Minister, in particular, is rather encouraging. His performance at Public Enterprises led to the creation of the largest black audit firm and the third largest in the country, Sizwe Ntsaluba Gobodo, through progressive procurement practices.
He also awarded a landmark fuel supply tender worth R15.5 billion to black and female-owned companies through Transnet in 2013. And of course the list goes on. We are looking forward to more of the same because of the strategic nature of the Finance Ministry.
This letter, Mr. President, is not a dismissal, rejection or a form of undermining the ANC and the Government’s vision of Radical Economic Transformation. If anything, I am a firm believer in the party’s stance in this regard since Radical Economic Transformation is South Africa’s last hope at a truly just society. This letter is mere constructive criticism which I believe if taken to heart can go a long way in helping our current situation.
The past 22 years have been characterised by various meaningful breakthroughs in the social and political life of our country. By and large the humanity of black people is recognised in many, if not all public spaces. The indignity of segregated living through separate development as championed by the apartheid government has all but disappeared from South African public life.
What remains stubbornly unchanged, however, Mr. President, is segregation in our economy. We may have, to a large extent, solved the problem of social apartheid but it is now economic apartheid that needs to be dealt with.
Someone might say I am merely preaching to the choir since Radical Economic Transformation is the current preoccupation of the ANC and the ANC-led Government. However, some questions have to be asked since the party’s behaviour, and indeed that of Government, seems to suggest some inconsistencies.
In my industry, Advertising, we are saddled with the reality of multinational companies being overwhelmingly dominant. Their dominance has the net effect of raking in profits locally and shipping them offshore. This is of course not unique to my industry since most sectors in South Africa share the same fate. Having said that, this phenomenon of our country being an extractive economy is what is really responsible for poverty, unemployment and inequality.
Our own sector charter, MAC (Marketing, Advertising and Communication Charter), spells out the rules of engagement with regards to the BBBEE Act. In as much as the charter is meant to curb the industry’s exclusionary tendencies, it falls dismally short because of its many imperfections. The charter is in fact the wrong tool to use in an attempt at transformation.
The reason for that is, multinational companies have their own internal safeguards that ensure they extract as much profit from South Africa as possible in spite of local legislation. In our industry, these companies have what can be loosely regarded as a franchise model.
The local office pays the international office royalty fees, licence fees, name usage fees, intellectual property fees, patent fees and goodwill. All these costs are deducted before tax and therefore before profit sharing with BBBEE shareholders.
When BBBEE legislation increases the quota from 25% to 45%, the international office also increases their fees accordingly to offset the increase in quota requirements to ensure their profits are not affected by local legislation.
We have a case where the local office made close to R1 billion in revenue. After the international office had taken their pound of flesh, the local office was left with less than R5 million to share with their BBBEE partner.
Even though the BBBEE partner was instrumental in securing the R1 billion and should have been remunerated accordingly, he only walked away with 25% of R5 million (R1,25m) instead of 25% of R1 billion (R250m) while the international office pocketed R995m.
You can impose a 90% BBBEE requirement on multinational agencies and they will ‘comply’, only to inflate their fees to offset the increase demanded by local legislation. If this is not corruption, Mr. President, I don’t know what is.
This is the reality of BBBEE in our industry. Multinational corporations are making a mockery of local legislation because they have no interest in transforming our economy, their only interest is to keep us as an extractive economy by bypassing our laws. In other words, BBBEE does not work. If anything, it not only works to lock local players out of the industry but it also marginalises the very people it aims to empower.
With this in mind, please consider that the African National Congress’ advertising and marketing account is handled by Ogilvy and Mather, a multinational advertising agency headquartered in New York, USA.
What that means is, even though O & M services the ANC’s account, most of the monies paid by the party for services rendered disappear offshore with local shareholders seeing very little of it.
Please also consider, Mr. President, that the South African Tourism account is handled by Foote, Cone and Belding (FCB), a white multinational advertising agency headquartered in Chicago, Illinois, USA.
Further consider, Mr. President, that the South African Tourism advertising and marketing account is handled by Havas Worldwide, a white multinational advertising agency headquartered in New York, USA.
But possibly most upsetting, Mr. President, the South African Revenue Services (SARS) advertising and marketing account is handled by the following white multinational corporations: Foote, Cone and Belding (FCB), headquartered in Chicago, Illinois, USA; M&C (Maurice and Charles) Saatchi Abel, headquartered in London, England; and Havas Worldwide, headquartered in New York, USA.
Our hard-earned taxes that could be used at home to build the local economy only serve to enrich Americans and Britons. This is an outright contradiction.
It is therefore pertinent to ask the following questions:
1. If the ANC and Government are serious about Radical Economic Transformation, why are they doing business with white American and British multinational corporations when all these companies are interested in is retaining our status as a colonial extractive economy?
2. Why should we believe in the ANC and Government’s vision of Radical Economic Transformation when the party’s mouthpiece is not local but white American and Government has appointed so many foreign-owned agencies?
3. Does the ANC and Government not think that employing white international agencies to handle their accounts makes the their Radical Economic Transformation vision lose credibility and come across as mere politicking and double-talk?
4. Does the ANC and Government not think that amounts to breach of trust?
5.Why should we then still vote ANC in the next election and continue to trust the ANC-led government when the champions of Radical Economic Transformation are themselves not acting in line with transformation?
I know these are very direct and confrontational questions, Mr. President, but in the spirit of radically changing our economy, they have to be tackled head-on for us to start making meaningful progress. The real root cause of poverty, unemployment and inequality in South Africa is the structure of our economy which has been extractive since the 1650s. The elements responsible for the wholesale looting, raping and pillaging of local resources are multinational corporations.
It is time to send a strong message to multinational corporations operating in South Africa that in as much as they can do business locally, they cannot, however, continue to own our economy. South Africa is not a colony but a sovereign country.
I would therefore like to suggest that the ANC and Government must demonstrate their commitment to Radical Economic Transformation by moving their advertising and marketing accounts from white-owned American and British multinational corporations to local black-owned companies. Black-owned agencies not only understand the market because they are the market, but they will also keep profits locally and spend them locally thus growing the local economy.
What we need therefore, Mr. President, is a strongly-worded piece of legislation that bars all multinational corporations from handling all Government and State-Owned-Enterprises accounts. This legislation must state that all Government and State-Owned-Enterprises accounts must be handled exclusively by black-owned agencies and no one else. That Mr. President is Radical Economic Transformation.
Thank you for your consideration, Mr. President.
A member of the Black Communicators Network (BCN) and the Association of Black Communication Practitioners (ABCP)
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