Benchmarks for measuring whether listed South African companies have adequate black ownership need to be reconsidered.
This is according to a report prepared for the National Treasury and submitted to lawmakers discussing transformation in the economy, reports Bloomberg.
The report, which was prepared for Treasury by independent researcher Lynne Thomas, found that black economic empowerment codes have failed to fix inequalities, partly because of the focus on shareholdings rather than on black management of companies.
It further found that BEE deals tend to favor direct owners over indirect owners, who hold their stakes through vehicles like pension funds.
“It is strongly recommended that BEE codes must recognize indirect black ownership, and ensure that future deals do not transfer shares from indirect black owners to direct black owners,” Thomas said.
These concerns were echoed by treasury itself, reports BusinessDay, with deputy director general Ismael Momoniat stating that, should the codes continue as they are, they are likely to fail.
“If transformation only focuses on ownership and does not look at management and control of companies – frankly, it will fail,” he said.
“We are interested in a broad-based approach to transformation and the obsession with percentages often means black people don’t actually get rich.”