Skip to: Content
Skip to: Site Navigation
Skip to: Search


US Consultant Aims to Boost Black-Held Firms in S. Africa

By Guy HalversonStaff writer of The Christian Science Monitor / February 16, 1994



NEW YORK

ROLAND PEARSON JR. is the first to admit the difficulty of his task: When he returns to South Africa in early March, he must help develop strategies for creating ``a flourishing black business and entrepreneurial class'' in that nation - ``where blacks have largely been excluded'' from the mainstream economy.

Skip to next paragraph

And he must do so against the press of time: Blacks are expected to win control of the South African government in the country's first free election this April.

Mr. Pearson is executive director of Ebony Development Alternatives Ltd. (EDA), a brand-new firm based in Johannesburg. EDA is an enterprise development corporation; it specializes in helping new black-owned businesses gain access to management and planning services, as well as bank financing.

EDA is a joint venture of Ebony Financial Services, a black-owned South African financial services company, and Development Alternatives Inc. (DAI), an international consulting firm based in Bethesda, Md. DAI has undertaken economic development projects in 113 nations.

A number of management firms such as Ebony Development are expected to be established throughout South Africa to help create a new black business community, says Tony Barclay, president of DAI. Some US accounting firms, for example, have already established offices there.

Yet the changeover from a white-controlled economy to a truly multiracial one will be formidable. Although whites make up only 13 percent of the total population, they control most business activity, as well as 55 percent of the nation's wealth.

White-controlled national holding companies, for example, comprise about 1 percent of the total number of business entities in South Africa, yet account for 80 percent of all trading activity on the Johannesburg Stock Exchange.

Although there are now thousands of black-owned businesses, ``most are small shops, or professional offices,'' such as accounting or law firms, Pearson says. ``The potential exists for thousands more.''

Creating new black businesses is imperative, Pearson says, given population pressures. About 42 percent of the black population is younger than age 14, compared with only 25 percent of the white population. And the population growth rate for blacks is 2.85 percent, compared with 0.8 percent for whites.

``Black unemployment already runs around 40 percent; underemployment is estimated at 50 percent,'' Pearson says.

According to the South African Reserve Bank, the South African economy now produces only seven jobs for every 100 new job seekers.

``What's encouraging,'' Pearson says, is that ``there is a history of entrepreneurial activity by South African blacks.'' Most of that activity, however, has been outside the mainstream economy.

IN addition to targeting potential new black-owned companies - and then developing management strategies for those businesses - EDA will seek to find financial services and loan monies for the new firms.

One recent study, Pearson says, shows that the South African financial sector, including banks, has ``excess liquidity'' of 45 billion rand ($15 billion), that could be used for business or professional loans.

Moreover, ``stokvel,'' black community-based savings programs, are worth about $5 billion. A large percentage of these assets are deposited in white-owned South African financial institutions and could be used for loan programs.

``All the ingredients are in place for a large and robust black business sector,'' Pearson says.

Pearson, an African-American, has a background in finance, working, for example, at the Mellon Bank in Pittsburgh. He is not worried that a government controlled by the African National Congress would stress a socialist economic agenda, including widespread nationalization.

Most black South Africans are natural capitalists, Pearson says, an inclination that stems from decades of having to survive economically while living on the fringes of society.