BEE-ing earnest is important
The Department of Trade and Industry recently announced, and launched, the proposed amendments to the Codes of Good Practice for Broad-Based Black Economic Empowerment (B-BBEE).
The question on everyone’s lips is: How valuable is B-BBEE, in its current state, if the codes need to be amended already?
Rumours are rife that the codes need to be amended because the B-BBEE legislative framework hasn’t promoted transformation.
However, this is not the case.
Why did the current B-BBEE system fail?
1. There is a trend for businesses to put more emphasis on lowering B-BBEE implementation costs rather than focusing on actual transformation results.
2. Business has not developed sufficient economically-aligned medium- and long-term transformation plans. Although the current codes outline two five-year implementation periods, the constant and unrelenting reinterpretation, redefinition and redesigning of the B-BBEE framework make it exceptionally difficult for businesses to plan concrete transformation goals.
3. The industry-specific B-BBEE Charters further complicate implementing B-BBEEE policy. The lack of aligned, long-term overall transformation goals results in year-to-year, knee-jerk reaction implementation programmes being applied and guided solely by the B-BBEE scorecard and its targets.
In a recent TV exposé, a prominent mine’s BEE ownership structure was brought into question, specifically because it did not benefit “broad-based” recipients. It was made clear that a small group of wealthy black business people formed the major component of the current transformation implementation plan – to the detriment of those who actually need to benefit from B-BBEE policy.
What can we see from this case?
1. A capitalist is a capitalist, irrespective of their race or gender.
2. The second lesson is that the narrow-based ownership (BEE) framework will consistently be abused for the benefit of a small minority of benefactors.
4 Things you must know about the proposed B-BBEE legislation
Here is where the issues with the proposed amendments start to appear:
1. Instead of combating the existing loopholes that allow the present nepotistic and elitist practices at ownership levels to occur, with the proposed amendments if your organisation does not meet the required ownership equity targets you will be fined – heavily.
2. Broad-based recipients will not receive as many benefits as under the current dispensation (except in the skills development arena).
3. Established black business people will get further access to procurement opportunities.
4. Very little consideration has been paid to incentivising developing new black entrepreneurs and small-micro black business.
5. Changes to how the BBEEE calculations are carried out ultimately bring into question how you test to see which race group a person falls into. The ramifications for the implementation of this kind of methodology result in going back to some kind of “pencil-in-the-hair-test” made famous in the apartheid years.
Overall, there is no doubt more needs to be done in terms of current transformation. Fronting needs to be seriously addressed and combated while businesses need to acknowledge their important role in the transformation process. However, having reviewed the codes, you cannot move away from the distinct sense that business is being singled out and chastised for the overall lack of transformation implementation. All stakeholders need to take responsibility for their roles and the legislative framework needs to encourage (incentivise) transformation as opposed to enforcing it. As South Africa faces greater competition from its continental neighbours, we desperately need transformation systems that support collaboration and economic growth.
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Author: Jason Stewart is the managing director of BEE Prepared Consulting & Advisory which advises clients on all aspects of Broad-Based Black Economic Empowerment. BEE Prepared Consulting & Advisory is a member of ABVA. |
