Mkhuseli Jack: Current BEE policy a failure

Mkhuseli Jack

The broad-based black economic empowerment (B-BBEE) amended codes and scorecards of 2013 are central to the slow pace and the near collapse of the government policy of transforming the South African economy.

The B-BBEE was introduced to remedy what the authorities said was the narrow economic empowerment policy that had operated in 2003-04.

The 2013 amendments sounded very radical, but were equally difficult to implement.

In the early days of our democracy, black empowerment was seen as a strategic economic imperative for business by corporates in South Africa. Companies across the board supported this imperative on the basis that they believed “it was the right thing to do”.

In those days large, small, medium and family businesses were actively looking for potential partners of their own choice with whom to enter into strategic partnership or joint ventures.

There were no huge thresholds. These partnerships and joint ventures were adhered to even for contracts to the value of R20 000 upwards.

Many of us entered the business space when civil servants were strictly implementing the black empowerment objective.

An example of the illogical approach to black empowerment is exposed in the black industrial programme, where the threshold is R30-million.

Surely it will be a daunting task for someone who aspires to build a business from the ground and who has never been exposed to any manufacturing, to handle such a huge amount. This could be suicidal. In recent years the government has been obsessed with multi-billion-rand empowerment deals. That level of empowerment is not geared towards the small man in the street.

At the time of the proclamation of the 2013 Broad-Based Black Economic Empowerment Amendment Act, Trade and Industry Minister Dr Rob Davies said the release of the revised (B-BBEE) regulations “symbolise a new beginning in the re-orientation of the transformation policy . . . To focus more on productive B-BBEE and the growth of black entrepreneurs through enterprise and supplier development elements.”

Practitioners in the black empowerment space beg to differ with the minister’s optimism.

Since the proclamation of the 2007 codes and 2013 amendments to the act, established businesses have found or developed loopholes to abandon the empowerment project.

The current policy is open to manipulation by government officials. Business people, particularly established white business, have had a field day in scorning and disregarding black economic empowerment.

They have long dropped the idea of partnering with local small entrepreneurs.

Instead they cut corners and deal directly with top government managers, in some cases with ministers and premiers.

In other words, at all levels: local, provincial and national.

The first weakness of the amendments was the relaxation of the threshold for compliance to R5-million.

This relaxation made it very difficult for the small aspiring black entrepreneur to compete on his own against established white-owned businesses.

This was a major handicap, since most of the municipal goods and services business falls within this bracket.

To enforce empowerment at levels of above R5-million meant that the barriers of entry had been extraordinarily hiked. This loophole also allowed some, and in most cases white, business owners with turnovers of R30-million to break up their companies to create entities that fell just below the threshold of non-compliance to B-BBEE.

The frustrations of the small and medium black businesses emanate from this weakness.

In some instances, greedy and corrupt officials get bribes to turn a blind eye, to allow a business not to adhere to the policies.

In some cases, the government officials allegedly advise the white business people to drop their chosen partners for what they call the “right people”.

“Right people” are those favoured and handpicked by the dominant political faction in the ruling party.

They will be made up of party lackeys, relatives or girlfriends of party bosses and senior officials.

The empowerment in the current regime is no more about black people, it’s about the “right people”, that is the proxies of the corrupt politicians and civil servants.

Significant progress could have been made if the amendments had been implemented and monitored through the Black Economic Empowerment Advisory Council, instead of the smoke-and-mirrors current approach to black empowerment.

Blatant tokenism, fronting and general flouting of the codes of good practice are the order of the day.

The president is supposed to be the chairperson of the Advisory Council.

If that is the case, given the irrefutable evidence floating around about the president’s own alleged business shenanigans, who can have trust in such a body?

Another weakness of the amended act is its complications. One has to employ a consultant to comprehend them.

Most companies employ consultants to advise them about the implementation and compliance measuring. This is certainly geared towards established businesses.

Due to its complexity, ordinary black aspiring entrepreneurs find themselves completely out of place.

BEE was the government’s plan to level the economic playing field in South Africa.

Its aim was to allow blacks to play a meaningful role in the economy.

It was geared to do that for small, medium and big business.

Legislation was directed at enabling easy access to all sectors of the economy for black people.

Through this programme, the government intended to reduce poverty, racial inequality and economic bias. The success of the programme was also intended to uplift people from the working class to a strong middle class.

It is unfortunate to note that the BEE programme has regressed in real terms.

Fewer blacks from the working class have been able to make a breakthrough since the government implemented the current sophisticated, but lame BEE policy.

It was also anticipated that most of the driving force of this programme was to be government procurement. To date the government has failed to effect a broad equitable distribution of economic wealth and to redress the inequalities, especially in the economic sphere.

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