JOHANNESBURG, South Africa - When Peter-Paul Ngwenya, executive chairman of Makana Investment Corp. decided to buy a new car last month, he paid cash for a BMW 5-Series and had the dealer deliver the gleaming automobile to the front door of his spacious home nestled in the formerly all-white Johannesburg suburb of Fourways.
When he was handed the keys, Ngwenya says, he had to pinch himself to
believe how his fortunes had changed.
Born in a black township during the most oppressive days of apartheid, he
grew up smuggling grenades, AK-47s and bombs for the struggle against white
rule before getting caught and banished to Robben Island prison, where he
dreamt of political freedom, not the economic success he enjoys today.
"Sometimes I wonder whether I'm going to wake up and find out this has been
a very long dream," says Ngwenya, sitting in the boardroom of his company's
Ten years after the demise of apartheid, Ngwenya, 50, is at the forefront
of South Africa's next revolution, seeking to transfer control of an economy
still dominated by the white minority into the hands of the underprivileged
Ngwenya's company is one of South Africa's most celebrated examples of new
black business enterprise. Started in 1997, Makana Investment has interests in
more than a dozen businesses, including telecommunications, shipping, radio
stations, an airline and a ferry service that transports tourists to Robben
Island, a museum that draws 500,000 visitors each year.
Owned in part by a trust of former Robben Island political prisoners, the
company uses part of its profits to benefit the 4,000 former inmates and their
families. Its success has made Ngwenya a millionaire.
Ngwenya is part of a small minority. For most blacks, the economic struggle
continues. President Thabo Mbeki describes South Africa as two countries, one
largely black and poor, the other rich and mostly white.
More than 40 percent of the people are unemployed, the majority of them
blacks living in the squalor of townships where there is often no electricity,
no running water and no toilets.
Whites, who make up 10 percent of South Africa's 45 million people, hold
the best jobs, live in the most expensive homes and control the bulk of the
"We are still faced with the challenge of overcoming economic disparities
and entrenched inequalities that characterize our economy and act as a
deterrent to growth, economic development, employment creation and poverty
eradication," Mbeki said in speech last month.
Merging South Africa's two economies into one is the goal of South Africa's
Black Economic Empowerment program, which encourages South African companies
to hire more blacks, promote blacks to senior management and executive
positions, use black-owned subcontractors and suppliers and form joint
ventures with black investors.
In the past two years, the initiative has sparked dozens of partnerships
between black investors and white-owned businesses in mining, banking,
financial services, wine-making and other sectors.
Last month, Makana Investment paid more than $6 million for 10 percent
ownership of the top-rated financial-services group Cadiz Holdings.
The deals are mutually beneficial, Ngwenya says. The black investors secure
a foothold in the economy, gain experience in the marketplace and accrue
capital to invest in other industries. By proving that they are empowering
previously disadvantaged South Africans, the historically white-owned
companies are allowed to compete for lucrative government contracts.
In some industries, the government has set ownership targets. It wants 26
percent of mining capital to be in black hands within a decade, for example.
At first, these empowerment proposals caused market jitters as business
leaders worried that there would be too much government interference in the
marketplace. But after negotiations between government and business leaders,
corporate South Africa has embraced the idea. According to a recent Ernst &
Young survey of empowerment deals, more than $6 billion worth of mergers took
place last year, up from $1.9 billion the year before.
"In Africa, this is the way you do business. You have to have partners,"
says Brian Croock, managing director of BD Sarens, a crane rental and
transportation logistics company that sold a $7.6 million share of its company
last month to Bowman Trading, a new, black-owned company.
"It made so much sense to do this deal," says Croock. "If we didn't, we
would have stagnated at the level we are at now."
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