South Africa: State Participation, Indigenisation And Economic Empowerment In Africa

Last Updated: 15 May 2013
Article by Sébastien Thouvenot

Most Read Contributor in South Africa, September 2018

What does it all mean?

History is constantly repeating itself and hopefully with each cycle we correct at least some of the mistakes of the past. This effort can be seen in the case for economic empowerment policies in Africa. The issue of State participation, indigenisation and what has come to be known as economic empowerment was immediately raised as African states gained independence, mainly in response to their colonial history and resulting economic systems, such as the example of apartheid in South Africa, which saw economic participation determined along racial lines. Today this topic remains at the heart of many economic policies.

Definitions

State-participation can be defined as a mere obligation that private companies which operate in certain reserve a shareholding to public entities. This participation is generally attributed at the creation of the company and cannot be diluted. State participation can also be decided at a later stage through nationalisation, giving the right to indemnities.

Economic empowerment, in this context, refers to the goal of restoring economic power to sections of the population that social discrimination processes had previously excluded from decision-making based on race and gender among others.

Indigenisation is one mechanism by which governments may seek to achieve economic empowerment. It defined as the increase of local participation in or ownership of established entities. Indigenisation has proven to be one of the most popular measures of implementation of economic empowerment to the previously disadvantaged through either the granting of shares to national individual or entities in a company or obligation to reserve a certain quantity of employments to nationals or reserves certain commercial or industrial activities to nationals.

Many states in Africa have at one point or another tried to implement one or several of the above measures and today some of them seem to tend towards a new model inspired by South Africa's Broad-Based Black Economic Empowerment (BBBEE) policy.

In the past Indigenisation has been expressed as a return to African identity as well as the idea of restoring the economic power taken from African peoples by their colonisers. This was the case in Zaire (Democratic of Congo) through "Zairisation" and in Cote d'Ivoire through "Ivoirisation". The result of these policies much more than a series of nationalisations, giving birth to huge state-owned companies, in all sectors, including agriculture, industry and services.

Apart from a few exceptions, these state-owned companies did not have enough experience to successfully meet the economic challenges of the 90s and this lead to significant restructuring, liquidation or privatisation. To this extent therefore, these policies failed and gave birth to a situation that is, at best, opposite to their original intent.

Trends

It appears that State participation, indigenisation and economic empowerment are still applied in various parts of the continent in a manner distinctive to each region, possibly as a result of the different historical backgrounds of the countries in which they are implemented. As a general overview, indigenisation does not seem to exist in Francophone Africa and more generally in West and Central Africa. In these countries, State participation seems to be mandatory only for companies created for the operation of mining projects. This is the case for all member countries of the West African Economic and Monetary Union (UEMOA) where the State must have a shareholding of 10 per cent (Benin, Burkina Faso, Mali, Niger, Senegal...). This is also the case in Guinea, where this shareholding may be as much as 35 per cent, 5 per cent for the DRC or 15 per cent for the Central Africa Republic.

Indigenisation and economic empowerment appear to be a trend in Southern and Eastern part of Africa and although several colonial influences exist in these regions, the Anglo-Saxon and Portuguese heritage remains a common feature, as does the fact that colonialism lasted far longer in this region than elsewhere on the continent. As a result, these States faced severe and potentially destabilising disparities of wealth and resources between rich and poor at the attainment of their independence from colonial rule which, because of the economic policies of colonialism, was based on the colour line. This has been the case in the more commonly discussed examples of South Africa and Zimbabwe, but also to some extent in Namibia, Botswana and Indigenisation, such as in Zimbabwe, aims at giving a "controlling interest" of not less than 51 per cent of the shares or interest in an enterprise to black indigenous Zimbabweans. Every company in respect of which 51 cent of the shares or a controlling interest is not held by indigenous Zimbabweans and whose net asset value is above certain thresholds (depending on the industry) must submit an indigenisation plan detailing how and when a controlling interest of its business will be transferred.

Indigenisation in other countries has been a relatively smooth process. In Angola, the "Angolanisation seeks to ensure preferential treatment of Angolan Businessmen and also stipulates that companies must conform to a ratio of 70 per cent national workers to 30 per cent foreign workers.

In Botswana, the Government proactively encourages Citizen Businesses and Entrepreneurs. Certain of tenders are restricted to Citizen-owned companies only and Citizen-owned or Majority Citizen-owned companies enjoy preference during tender evaluations. Certain manufacturing activities are also restricted to Citizens and Citizen-owned companies. The Government has set up the Citizen Entrepreneurial Development Agency to provide fledgling citizen-based companies with technical, financial and managerial assistance. Other countries tend to apply this policy for very specific and strategic sectors. This is the case in the DRC where land concessions for agriculture shall only be granted to Congolese individuals or companies having the State or Congolese individuals or Companies as shareholders.

The more sophisticated policies appear to be Namibia's New Equitable Economic Empowerment Framework (NEEEF) which aims to provide a clear overarching policy framework into which all other policies will promoting transformation in business through the five pillars of: Ownership, Management Control and Employment Equity, Human Resources and Skills Development, Entrepreneurship Development and Community Investment; and of course South Africa's BBBEE.

We will, however, continue to keep an eye on the evolution of the Economic Empowerment Policy in Tanzania and Zambia's Citizen Economic Empowerment, which seem to be very influenced by the South African system. These trends are a good sign and show that States have learnt quickly from the past, seeking to amend policies to take cognisance of previous successes and failings in implementation elsewhere on the continent. In the rise of African States will go hand in hand with their re-appropriation of their economies.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions