Why robbing ‘Pieter’ to feed ‘Sizwe’ will not work – transformational entrepreneur

Robbing ‘Pieter’ to pay ‘Sizwe’ will drown us all. Almost daily, economic and political analysts tell us that the government has got it horribly wrong by focussing primarily on redistribution of wealth rather than wealth creation, and here ‘transformational entrepreneur’ Patrick Kuwana puts it more directly and simply than most. Accepting the baseline of gross historical inequity (and the more recent blatant distortion of its correction to benefit the Zuptoids), Kuwana uses almost comic-book stereotypes to make his point so effectively. The two main actors, ‘Pieter’ and ‘Sizwe’ interact in a way that will benefit us all. What he’s positing is no great mystery, but he does it so eloquently, perhaps inspired by his daily real-time immersion in the subject matter, that the reader ends up wondering what on earth the ruling party is playing at by ignoring such basic advice. It’s a refreshing break from the inexorable (and tragically highly credible) rising tide of experts who warn us that continuing to walk along the beach of increasingly regulated redistribution below an ever-present fiscal cliff will drown us all. Perhaps it’s a case of none so blind as those scrambling in the surf for gold doubloons washed up from the wreck of the apartheid pirate ship – especially while chanting ideological slogans. – Chris Bateman

By Patrick Kuwana*

The road that we are on of ‘radical economic transformation’ (as coined by government) is one that can lead to economic ruin if it is based on a consumption based regime of economic resource redistribution. The case for economic resource balancing is one that does not need justifying based on the history of the country – the big question is how should it be done in a way that multiplies wealth rather than divides and erodes it?

Patrick Kuwana, founder and CEO of Crossover Transformation Group

Let me also define my use of the word transformation so that we don’t get trapped into an emotional racial discussion. Transformation is ‘a process of profound and radical change that orients an individual, organisation, community, city or nation in a new direction and takes them/it to an entirely different level of effectiveness’.

Redistribution for consumption or production will determine SA’s economic future

The danger that SA faces is to enter into a redistribution economic regime that will fuel short term unsustainable elitist consumption and therefore suck production capital that should be used to fuel growth into the stomachs of a few. The only way redistribution can work is if it is based on an intentional strategy to unlock dormant resources (financial and other) for investment into production based activities that are started and owned by the previously excluded so that more of the population become producers within the economic system. This becomes a self-sustaining system that brings more of the country’s number one resource (people) into productive activity. It brings people who previously had no access to capital into the economic production cycle. Robbing ‘Pieter’ to feed ‘Sizwe’ will not work. What we need is for ‘Pieter’ to invest in ‘Sizwe’ so that ‘Sizwe’ can produce to feed himself and produce a surplus so that he can uplift his community and invest in other budding ‘Sizwe’s’. Any plan for radical economic transformation should offer real incentives (tax and otherwise) to drive this multiplier effect.

The reality is that a nation’s economy cannot grow if resources are forcibly taken from one group and given to another. Likewise, a nation’s economy cannot grow if a large section of the population does not have access to resources and thus cannot participate.

Feeding ‘Sizwe’ or investing in ‘Sizwe’

For this to work, ‘Sizwe’ must be willing to be productive and find innovative services and products to offer the market; and ‘Pieter’ must be willing to invest in ‘Sizwe’ and help him with capital to start and grow his venture. The two must work together so that the principle of economic multiplication kicks in which leaves both parties in a better off position (relationally, socially and financially) than they were before they met. Both generate new wealth through their collaboration which can be reinvested in the next ‘Sizwe’ or up and coming young ‘Pieter’. For as long as ‘Pieter’s’ resources are used to feed ‘Sizwe’ (or worse still line the stomach of some elite politically connected person), we will see erosion of economic value which will leave both (in fact all of South Africa) poorer as time goes on.

Collaborative Co-Creation

The strategy for Radical Economic Transformation should focus on identifying the ‘Sizwe’s’ and ‘Pieter’s’. The ‘Sizwe’s’ need to be discovered and incubated, and likewise the ‘Pieter’s’ need to come to the party and make available the generational capital (financial, networks, access to markets, etc.) they have access to, which are required to bring the ‘Sizwe’s’ into the production and wealth creation cycle. The fact that we all need to recognise is that the ‘Sizwe’s’ out there don’t have generationally accumulated access to financial assets, capital, networks and markets because they were previously excluded from ownership participation.

One of the biggest challenges we face is that the ‘Pieter’s’ and the ‘Sizwe’s’ do not trust each other and we currently lack a conducive environment for the two to engage in mutually beneficial conversation and the exploration of creative opportunities. More platforms for this type of collaborative co-creation are essential to SA’s long term economic growth. What this means is that the growth of the South African economy is dependent on healthy relationships and trust being built.

Private sector proactivity

Economic resource balancing is absolutely a must for the future of SA, but what is key now is wisdom – the ‘how’ to implement in a way that will grow the economy and not implode it. This calls for private sector proactivity so that ‘Radical Economic Transformation’ is not government forced but is based on market forces. The ‘Pieter’s’ need to proactively go out and search for the ‘Sizwe’s’ and the ‘Sizwe’s’ need to proactively go out and search for the ‘Pieter’s’ and co-create opportunities and engineer deals that will multiply what they individually bring to the table. Deals done on mutual consent are so much more successful than deals done through legislative pressure (as we have already seen through the many BEE deals that have gone south).

Who will run the show?

The truth of the matter is that most deals done due to legislative pressure are not sustainable and normally tend to feed the consumption habits of a few elite, thereby wasting and sucking valuable capital that should be used to kick start and drive real production based economic growth.

So, the big question is – “are we going to wait for government to determine the strategy for ‘radical economic transformation’ so that they can run the show on their terms, or are we (the citizens) going to be proactive and co-create the economic future of South Africa?” South Africa’s future is not in the hands of government, it’s in the hands of the ‘Sizwe’s’ and the ‘Pieter’s’.

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