One of South Africa’s brightest, richest and most well-connected entrepreneurs, Sandile Zungu, has taken on the head of the passenger rail service, Lucky Montana, over its R126-billion fleet renewal programme.

Zungu, who runs his own investment company and helped bankroll Jacob Zuma to the presidency, is general secretary of the newly reconstituted Black Business Council (BBC) whose members left Business Unity SA, accusing it of favouring the interests of white business over black.

He attacked Prasa’s approach to black economic empowerment, saying that the way Montana was driving the rolling stock acquisition programme favoured foreign equipment manufacturers and left black South African companies on the sidelines.

The bluntly spoken Montana, who has led Prasa for nearly 10 years with little evident success, called Zungu arrogant and asked him who he thought he was to lecture Prasa on empowerment.

He accused Zungu of trying to “influence and politicise” the procurement process to benefit the “black bourgeoisie” members of the BBC.

He said the aim was to get black and black-empowered companies to supply at least 65% of components for the new rolling stock, and to warehouse a BEE stake of between 26% and 40% for black firms or individuals.

“This reduces black players to window dressing,” retorts Zungu. “To hand-outs. We don’t want hand-outs.”

Zungu says to give true meaning to the concept of empowerment, black companies need to be brought in at the ground floor so they can participate as principals involved in bid proposals, design and costing, not just as subcontractors “picking up small pieces here and there”.

“The pre-bid stage is, from a technical and financial point of view, possibly the most fascinating aspect. Prasa is saying to our engineers, you must not be involved in that. Our people are saying they want to be involved at all stages of the bidding process. They don’t want to wait until it’s been awarded and then be told come and get your BEE percentage. Bring your mama, your gogo, your church, and come and get your BEE freebie. We don’t want freebies.” Zungu has never been a fan of broad-based black economic empowerment.

“It makes all of us feel good to say we’ve brought in the churches and mamas, because they also need the money. But the truth is those people don’t necessarily want to run businesses. “Those who do need to be involved at the very early stage of the value chain or they will never learn.”

True empowerment is about developing sustainable black businesses and this will not happen if they must wait for crumbs from the major overseas players’ tables, he says.

“Broad-based empowerment is a means to an end, not an end in itself. Its success will depend on how well we create a culture of entrepreneurship and develop entrepreneurs who can stand on their own.

“This Prasa process will do massive damage to our endeavour to create entrepreneurs and a class of real black business people.”

Getting involved in the early stages of a bid is notoriously expensive and time consuming, with no guarantee of success at the end of the day. Where will the money come from for black companies to play this role, and will they not squeal if they spend a fortune and get nothing in return?

“Empowerment players would go in with their eyes wide open,” says Zungu.

“It’s a free market. You go in, you compete, you win or lose based on what you’ve submitted. They’re prepared to take the risks.”

Besides, they would not be on their own, they’d be part of a consortium of different players who would share the costs.

Montana has suggested this would take time, which Prasa does not have.

His priority is to get the new rolling stock up and running as quickly as possible.

“We smell a rat in the haste, in the manner that this argument is being articulated,” says Zungu.

“Original equipment manufacturers (DEMS) love it when you say you’re in a rush. Because then you don’t cross your Ts or dot your Is and you end up having overruns that you pay for. You have no room for penalties.

“Prasa must be saved from itself. Haste leads to excesses and inefficiencies in terms of how this thing is structured. With most of these big capital projects our people have tended to get the short end of the stick when it comes to dealing with OEMs.”

Montana says Zungu is trying to bring the ANC and government into the process in order to benefit politically connected members of the BBC.

Zungu says of course he wants the process to benefit his members, but denies he is bringing his political connections to bear.

He says the BBC is uneasy about Montana’s central role in the procurement process.

“Our impression is that Montana has presented himself as the godfather of this thing; his role is too central. There have got to be absolute checks and balances. Our view is that government needs to take a very close look at the governance process around this thing.”

Is this what he told deputy president Kgalema Motlanthe when he met him recently?

Zungu refuses to say what was discussed, but says the meeting had nothing to do with his unhappiness about the procurement process. The timing was “absolutely purely coincidental”.

“We were just meeting him to update him on what we’ve done since forming BBC. It had nothing to do with the Prasa thing.”

Zungu, 45, grew up and was educated in Umlazi in Durban. He won a scholarship for post-matric at Hilton College, completed a mechanical engineering degree at the University of Cape Town and an MBA, then a leadership course at Harvard business school in the US.

He worked as a merchant banker before starting his own investment company.

His contemptuous attitude to BEE hand-outs is rich given that he himself was only too keen to accept what would have been one of the biggest hand-outs in the history of BEE through a stake in the Ayigobi consortium which he was invited to join shortly before it scored an R800-million deal with ArcelorMittal SA.

Sadly for him, and for one of Zuma’s sons who was another member of the well-connected consortium, the deal went sour.

Zungu was widely reported at the time as conceding that it was “money for jam”.

He denies that he said that, but there is little doubt that he is, in the words of BEE authority Reg Rumney, “one of these guys who’s always been in the right place at the right time”.

 

 

Source:  http://www.businesslive.co.za