There is growing criticism of SA empowerment initiatives that involve co-opting well-known black oligarchs onto the boards of companies, offering them and their surrogates share options and then sitting back and waiting for government tenders to come rolling in.
Many of these schemes are rather cynical and few, if any, lead to the rewards of the initiatives filtering down to the people who need them.
Few companies have been active in the empowerment arena for as long as SAB has. SAB's main initiatives started in 1971. The essence of SAB's approach is sustainability, at all levels of the business.
SAB has remained absent from many commentaries on empowerment, which is surprising since the company has developed a comprehensive empowerment programme, including equity ownership, procurement, enterprise development, employment equity, skills development and corporate social investment (CSI).
Black consumers account for more than 90% of the beer drunk in SA, so it's not surprising that SAB was one of the first companies to embrace broad-based empowerment.
What is surprising, however, is that empowerment was contemplated in the dark days of apartheid.
"In a developing country, enterprise development is essential, it's not philanthropic," says SAB corporate affairs director Bongiwe Njobe.
The company views empowerment as value-creating and all projects and programmes are designed to produce win-win solutions based on access, sound business principles and fairness.
As far as equity ownership of SAB is concerned, MD Tony van Kralingen says: "We have no objection to a direct BEE [black economic empowerment] equity holding in SAB. Our main concern is and always has been that in any initiative we must create value and capability. An action must be intellectually honest and rigorous."
Some observers have criticised SAB for apparently not addressing the question of ownership in its empowerment strategy. This criticism ignores two value-creating ownership transactions that have occurred in the past 20 years.
The first was Amalgamated Beverage Industries (ABI), which was listed on the JSE in the late 1980s.
Concurrent with that listing, 11m shares were offered to employees and independent dealers, most of whom were black.
And in early 2003, SABMiller completed its Tsogo Investments transaction. SABMiller restructured its hotel and gaming investments through Tsogo Sun Holdings (TSH), in exchange for cash, preference shares and a 49% interest in TSH.
The remaining 51% interest in TSH is held by Tsogo Investment Holdings (TIH). Jabu Mabuza, CEO of the gaming division, Tsogo Sun, said at the time:
"The most fulfilling part of this arrangement has been the journey from being small to becoming SA's second-largest casino group, combined with the fact that there have been no handouts. It's an example of how two willing partners, in this case SABMiller and TIH, can achieve a lot on the empowerment front, especially as it's underpinned by strong commercial principles."
As part of a drive to motivate SA liquor retailers to become licensed, SAB recently announced an increase to R18m in its investment in the national Taverner Training programme for 2005. The programme is available to taverners who are licensed, have temporary permits or have applied for licences.
This year the programme will provide business management training for 5 000 taverners.
The department of trade & industry estimates that there are 200 000 shebeens in SA selling liquor illegally. SAB research shows that the average SA shebeen owner - usually a female sole proprietor - relies on the shebeen as her only source of income and sustains three to five other working people. Thus the number of people involved in the shebeen industry is estimated at between 600 000 and 1m. They are counted as "unemployed" in official statistics.
Legalising the shebeens will not only reduce official unemployment statistics but will also allow operators to sell their products without fear of police intimidation. They will become "taverners" and will have access to credit from banks to upgrade their establishments.
"The process of retail licensing is not centralised - each province has a different approach - which results in unevenness and differentiation," says Njobe.
One group who may feel marginalised by the normalisation of shebeens are the bootleggers - the independent retail distributors (IRDs), who supply the shebeens. Like the shebeen owners, the IRDs are illegal and in a new dispensation would no longer supply many of the resulting taverns. But necessity is the mother of invention and many IRDs will find alternative outlets to ply their trade. In practical terms, SAB could never supply all shebeens/taverns in the townships.
The IRDs don't supply only beer - they also supply a range of alcoholic products, including wines and spirits. If they can adapt their business models to the new circumstances, they will be able to provide a mixed bag of products to smaller outlets.
In implementing the project, SAB has joined forces with the Tourism, Hospitality & Sport Education & Training Authority (Theta) to form the Mahlasedi Project, which is aimed at capacity building for taverners. The partnership will invest R23m into implementing the project - R18m from SAB and R5m from Theta.
"We need to align tourism with taverner strategies," says Njobe.
SAB started investing in the training and mentoring of black staff and outsourcing procurement to black suppliers, in the mid-1980s. One of its most successful schemes has been the SAB owner-driver programme, introduced in 1987 to enable former employees to start their own distribution companies. With an investment of R2bn, SAB has set up 248 owner-drivers who distribute more than 50% of its product volumes to retailers.
Key components of SAB's success are its logistics network and distribution capabilities.
It is one of only a few companies that can deliver its products to any area in SA quickly. This empowerment programme was designed to ensure good customer service and high productivity. Each of the drivers employs a crew of at least four people. As a result, this R200m/year project has provided at least 1 000 jobs and created 250 independent, sustainable businesses. Each truck owned by an owner-driver is worth about R700 000. Learnerships are also in place for the unemployed to train as owner-drivers.
SAB, with the land affairs & agriculture department, also supports 178 black barley farmers in the economically depressed Taung and Vaalharts regions. The project aimed at developing barley farmers in Taung, North West, is helping to uplift the area, where unemployment is about 80% and per capita income only about R200/month.
SAB finances the project's operating costs (such as technical expertise and fertiliser). The infrastructure belongs to the provincial government.
Since the project's inception in the early 1990s, the number of barley farmers in Taung has increased from 55 to 178. Revenue from their harvest has risen almost tenfold, from R2,4m in 1998 to R20,6m in 2003.
"Barley is an integral resource for SAB and the industry needs to be nurtured," says Van Kralingen. He says the SAB Maltings division is "investing heavily to help to grow the SA barley industry and reduce the tonnage of imported barley". This also highlights SAB's commitment to the local barley industry, despite the strong rand - local barley is more expensive than imported barley.
SAB gains by securing a steady supply of raw material and the farmers are able to make a reasonable living. "Empowerment has to work for everyone," says Van Kralingen.
Barley growing commenced in the southwestern Cape in the early 1970s. Before this, SAB imported all its barley requirements. Caledon Maltings was built to process the barley in 1981 and is now the biggest malting s in the southern hemisphere. There is another, smaller malting s at Alrode Brewery near Johannesburg, where the barley from Taung is sent.
Barley production in the Western Cape uses natural rainfall, rather than irrigation. This often results in erratic harvests and low yields. In recent years, the barley crop in SA has averaged 250 000 t/year, of which about 90% is of malting grade.
Taung produced about 10 000 t last year.
More than R31m has been invested in the SAB KickStart competition since 1995. This has equipped many young adults with business skills and seed capital. KickStart has helped to launch more than 2 000 businesses, some of which have grown into multimillion-rand concerns.
KickStart celebrates its 10th anniversary this year. It is one of the largest entrepreneurial development projects undertaken by a private-sector company in SA. More than 22 000 people have been trained and more that 3 000 business have received funding. The competition is aimed at both start-ups and existing businesses. At first the focus was on alleviating poverty, but KickStart now helps to create sustainable enterprises by placing more emphasis on mentorship. The KickStart competition has also worked with entrepreneurs at more advanced levels, particularly those at technikon level. Often these individuals have inventions or good ideas, but not the know-how to commercialise them.
Since joining KickStart, Boy Zake Nzimande, who sold his only assets - three cows - after being retrenched, to raise start-up capital for his industrial cleaning business, has grown his revenue from R300 000 to R1,4m. And Trevor Muller of Imvelaphi Food Supervising in Cape Town hopes to increase his annual turnover from R3m to R5m next year.
SAB says 90% of entrepreneurs who started their businesses three years ago are still in business today.
SAB favours the business ideas that have the potential to become companies that supply SAB. The ability to ultimately compete in the global market is also considered an advantage. The aim is to mentor and fund businesses that have the potential to contribute to the country's economy and create jobs. Many KickStart participants have become SAB business partners.
Since its inception, the competition has made major inroads in promoting entrepreneurial awareness among the previously disadvantaged youth.
By focusing on this sector, KickStart has elevated its profile from being involved in only microenterprise development to that of stimulating the creation and growth of new businesses, which may be able to compete globally.
All these initiatives should position SAB well for the liquor industry empowerment charter, which should be available for discussion shortly. "Once the charter is out," says Van Kralingen, "we can adopt a holistic approach."
Already, the number of blacks in management at SAB is higher than the requirements stipulated in the financial services charter.
