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Economic empowerment and African expansion

Gordon Cairns is a freelance journalist based in the UK.

A new government policy in South Africa, which aims to redistribute wealth created by its growing economy, has been embraced by a family business. Gordon Cairns finds out why SEW Eurodrive got involved and what it means for other firms with interests in Africa

A family-owned business has broken new ground in sealing a Black Economic Empowerment (BEE) deal with an investment holding company in South Africa.

SEW Eurodrive, which has been in the Blickle family for over 60 years, aims to be the leading BEE distributor of drive solution technology in the African country. The German firm has selected BEE company New Seasons Investments Holdings, which has acquired 26% of the entire issued share capital of SEW, as its partner.

BEE is a policy that was created by the South African government in February of this year in an attempt to redistribute the wealth created in South Africa's economy to those races still struggling to cope with the legacy of apartheid. It aims to give economic opportunities that were previously unavailable to these groups and includes measures such as employment equity, skills development, ownership, management, corporate social investment and preferential procurement.

Not only does BEE demand that certain positions within businesses be chosen according to the race of the candidate, it also sets quotas for black ownership of companies across various significant economic sectors in South Africa, including mining, financial services, IT, tourism and agriculture.

Rainer Blickle, president of SEW Eurodrive worldwide and son of Ernest Blickle who drove the company's international expansion in the late 1940s, said: "We basically saw a need to expand and extend our client base in Africa; that is why we decided to enter into this type of relationship."

The company, which has a turnover of €1 billion and employs 10,000 people in five continents, has great expectations of the BEE deal, as it believes it will serve as a perfect opportunity for the company to seal lucrative contracts with public companies. As Blickle notes, "in the past this was not possible because we were a privately-owned family business."

Like many foreign companies, SEW Eurodrive, which at present has a small presence in South Africa with only six offices employing about 150 people, believes there is room for growth in Africa, and South Africa in particular, which BEE deals can help them exploit. Urs Roos, SEW managing director in South Africa said: "The empowerment announcement is a vital component in the future growth of SEW Eurodrive in Africa."

Dr Colin Coulson-Thomas, professor of direction and leadership at Lincoln Business School and author of Winning Companies: Winning People is an expert on South African business. "This is a boom period for the South African economy, which is perhaps healthier than it has ever been, due to the exploitation of the country's mineral wealth coupled with an expanding internal market due to the trickle down benefits to the black population of the end of apartheid," he said.

However, he firmly believes BEE can put companies in the private sector at a huge competitive disadvantage as companies feel they have to employ staff based on race before ability. He also says the new legislation could weaken the role of family businesses in South Africa. "For many, the culture of South Africa is a tribal culture and this spills over into family businesses. However, the BEE legislation means that people will prefer to move into an already established business rather than build their own small business.

"Despite this, the South African economy is growing very rapidly and organisations will put up with this legislation as it allows a route into South Africa, which in turn leads to a route into other African countries," he said.

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