Publication: Business Day Date: 2004-10-22 Reporter: Tim Cohen

Shaik Trial : Should Political Links Help Bridge the Wealth Gap?



Business Day

Date 2004-10-22


Tim Cohen

Web Link


As the trial of businessman Schabir Shaik unfolds, I'm sure there are dozens of groups and constituencies appalled by what they read in the press about his business methods (which, as Judge Hillary Squires keeps reminding us, are as yet unproven). But I'm willing to bet there will be one group with a sneaking respect for, if not his methodology, then at least his predicament: entrepreneurs.

The predicament facing all entrepreneurs was inadvertently well described recently in the pages of Business Day not by a businessman, but indirectly by a student of the remarkable Cida City Campus. According to Cida CEO Taddy Blecher, when he asked why students did not go to university they complained of the costs of a university education. "It's like there's this huge, raging river between you and the economy. If you can't cross it, you can't get into the economy," he says they told him.

I'm willing to bet all entrepreneurs from street-sellers to international businessmen will instantly recognise that telling phrase, "the huge raging river" between you and the economy. To bridge that river, you need, well, what? I don't know. What I do know is that it is as elusive as riches.

The reason I know this is that my much-beloved but now-deceased father, an itinerant businessman of note, started a whole range of businesses with spectacular verve but with unspectacular profitability. Out of filial loyalty, I should say I think he was far too clever to do anything as focused and commonplace as run a business. He was irritated at being so clever but only moderately wealthy. But the truth is that some of his business ideas were just plain embarrassing.

I remember telling my friends at one point that my father ran a "fishing tourism business". The truth was that he liked to fish and consequently he tried to arrange things so that other people would pay to accompany him fishing on the St Lucia coast. As a lifestyle this worked, after a fashion. But as a business, it flopped. The few paying customers there were thought it a bit odd that he concentrated less on their needs and more on the needs of the fish.

But he did say one good thing about business. He said the only way to make money in business was to do something no one was doing, or do something others were doing, but do it better. In fact, I learned later in life from textbooks that there are actually five basic ways of making money. There are more, of course, but there is a root to it. They are often described in different ways, but they come down to basically the same two things: offering products or services cheaper, or producing new stuff.

They are akin to the laws of competitive advantage, which are: you could take advantage of a technological leap; you could discover a better method of production; you could have or gain advantageous access to producers, customers or finance; you could discover, or create, a new need; or you could take advantage of an administrative change.

And then, of course, there is that other thing: you could cheat.

In a sense, this is the grand question (if there is one) being asked in the Shaik trial. Is political connectivity a competitive advantage and if it is, should it be? The testimony before the court so far suggests Shaik knew only too well, very early on, something that is now almost taken for granted in SA that political connectivity is an important part of taking advantage of the new opening-up of the post-apartheid business landscape.

His approach was shotgun in its scope, and cannon-like in its intensity. There are 10 businesses of different descriptions on the charge sheet before court, but this is only part of the full spectrum of his business interests.

The businesses, actual and planned, include: toll-road administration; provision of drivers' licences; construction; assisting in the construction of aspects of the navy's corvette programme; and even health services. He was planning more, including tourism projects and even supplying patrol craft for the navy. You name it, he was out there pitching.

A lot of these businesses seem to have a link to the transport department, but Shaik has been quick to affirm that they had nothing to do with his friendship with former transport minister Mac Maharaj. Probably his most lucrative contract is the N3 toll-road contract, which is granted by committee, at arm's length from the transport department.

But through all this wheeling and dealing, the irony is that one of his most successful businesses was not based (at least as far as we know at the moment) on political connectivity but on law number five above, an administrative change. Shaik's most valuable business is his investment in Kobitec, which has a 3% stake in Cell C. The administrative change that created the cellphone industry jettisoned Shaik across the huge raging river. And now his businesses together are probably worth about R100m.

In a way, Shaik peaked before his time. Now that black economic empowerment has gained traction, businessmen everywhere are choosing their new partners, not on the basis of rectifying the past but on the basis of future opportunity. Political connectivity is not mentioned in black economic empowerment charters. But it is everywhere in people's minds. After all, you don't see any black member of the Inkatha Freedom Party or Democratic Alliance or United Democratic Movement or even the New National Party suddenly being offered a munificent stake in, say, Anglo Platinum.

If the Shaik trial does nothing else but demarcate the borders between politics and business, it will have provided SA with a useful service.

With acknowledgements to Tim Cohen and the Business Day.