Uncategorized 1.4.2014 06:17 am

BEE lessons from Malaysia

Image courtesy stock.xchnge (KillR-B)

Image courtesy stock.xchnge (KillR-B)

There is constant debate about the success of government’s BEE policies and whether they will achieve the desired long-term goals.

SA’s BEE policy has drawn inspiration from the Malaysian model and we can draw parallels between the two as they share many similarities. Malaysia’s ethnically diverse population comprises Malays (50%), Chinese (38%) and Indians (12%) with government’s aim of eliminating the association of race with social function.

The Malaysian model

Malaysia gained independence from Britain in 1957 and faced issues of inequalities between the majority Malays and minority Chinese who controlled the economy. In 1970, the government commenced its ambitious 20-year National Economic Policy (NEP) aimed at eradicating poverty and redistributing wealth to the indigenous Malays known as Bumiputeras. During this period poverty declined from 50% to 15% and Bumiputera ownership increased from 2.4% to over 20%.

In 1990 then Prime Minister Mahathir Mohamad described his Vision 2020 of Malaysia being a self-sufficient industrialised nation by 2020 through a National Development Plan (NDP). But how did they achieve all of this?

Significant focus was constantly placed on education on science and technology education. This transformed the economy into one of the world’s largest exporters of semiconductor components and devices. They also commenced a space programme in 2002.

Today its GDP per capita is $15 000; significantly higher than SA’s $10 000. Unemployment is about 3% compared to SA’s 30%.

The first wave of Malaysia’s empowerment created a narrow wealthy elite who had close political ties to the ruling party. A similar scenario occurred in South Africa with billionaires like Patrice Motsepe, Cyril Ramaphosa and Tokyo Sexwale emerging.

The second wave created a Bumiputera business class, ruling all businesses over a certain threshold need apply for a license with a requirement to sell 30% ownership to Bumiputeras.

In spite of its shortcomings, a predominantly rural Malay population was converted into an urban working class, a middle professional class and a business capitalist class.

Education was a key enabler which allowed social mobility and reduced class inequality.

The SA comparison

South Africa has not yet produced satisfactory results in its education system and economic growth levels. Furthermore there is a lack of co-ordination between the education department and the BEE policies. The education department seems to be focusing more on the number of candidates passing whereas it should also have a target of maths and science passes at an international standard.

The class inequality is further exacerbated by better equipped private schools. When pupils travel over an hour from Soweto to attend schools in Johannesburg, intentionally avoiding schools on their doorstep, it highlights a serious problem.

The irony is South Africa has the resources and infrastructure to provide the relevant standard of education; Curro Holdings has seen a business opportunity in this and its share price has recently reached all-time highs trading at dizzying PE’s over 215.

Further development is required in the number of medium sized businesses owned and operated by black South Africans. This may be due to many factors, but is a necessary ingredient if BEE is
to succeed.

The Malaysian experience shows three ingredients are essential:

A strong national education system accessible to the previously disadvantaged with a particular emphasis on maths and science subjects.

High growth rates in the economy providing opportunities to those who have been educated.

A black business class owning and operating their own medium to large businesses

South Africa has the potential and ability to replicate Malaysia’s success but will it happen?

 

 

 

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