The DA wants to change BEE laws – here’s how

 ·29 Jan 2016
DA South Africa

The Democratic Alliance has launched its own interpretation of Black Economic Empowerment – which it says must economically empower black people, not a small, well-connected elite.

Leading commentators in the country have expressed misgivings about the ability of the current BEE policy to lead to real broad-based black economic empowerment.

DA leader, Mmusi Maimane said that the opposition party ‘unequivocally supports truly broad-based black empowerment’.

He said that the DA is committed to making South Africa a fairer society. “This requires a targeted effort to correct for the inequities that persist in our society as a direct result of Apartheid’s injustices.

“An explicit BEE mechanism, if well-designed for practical implementation, is in everyone’s best interest – it is the fastest way to unleash the massive untapped black talent and energy in our society, and to unite us all around common interests.”

Some, he said, maintain that empowerment should be poverty-based rather than race-based. They want to move away from using race in public policy.

“But combating widespread poverty will not in itself succeed in helping black people to become successful entrepreneurs, or give them a stake in the economy. To normalise our society we must break down race-based structural inequality at every level.”

Current BEE system

BEE compliance is currently measured by means of a points system, in which companies earn points based on their performance in 5 areas: ownership, management control, skills development, enterprise and supplier development (through preferential procurement policies – those which favour BEE compliant businesses for government tenders and contracts), and socioeconomic development.

Unintended negative consequences

Maimane said that the current system is certainly well-intentioned, but to date, BEE has not delivered meaningful broad-based empowerment – neither in scale nor pace.

This, he said, is largely because the system has been captured by a well-connected elite within the ANC that abuses it to become extraordinarily wealthy.

It has also had an impact on everyone outside of the ‘golden circle’ by fostering corruption, discouraging investment, retarding economic growth, and squandering skills.

“As a result, BEE in its current form is almost universally distrusted and disliked by South Africans. It has come to be seen as nothing more than a venal, corrupt, crony enrichment scheme.”

Maimane said that the system needs to be overhauled.

DA’s approach to BEE

The DA said it supports a much-simplified system that measures real empowerment:

  • Award significant weight to Employee Share Ownership Schemes (ESOS), so that employees as a group become substantial stakeholders in the business. This would grow black equity while the company would benefit from the increases in productivity that ownership confers. Employees should be represented at board level to reflect their position as shareholders in the business.
  • Recognise all spending on growing the skills and expertise of your workforce, be it schooling, skilling, training, bursaries, mentoring, internships or apprenticeships, whether conducted in-house or not.
  • Reward companies for growing their work-force. This would mitigate against the incentives to mechanise and makes sense – ultimately, if you can’t be an entrepreneur, the best form of real empowerment is to get your foot on the ladder of opportunity through a job.
  • Reward companies for their development of new black entrepreneurs, whether achieved through direct mentoring of sub-contractors or suppliers, or through donations to organisations whose core competency it is to identify, incubate, finance and nurture black entrepreneurship, such as the National Empowerment Fund.

This would incentivise local procurement from a wider number of diverse suppliers, rather than from a single large, established supplier.

“Importantly, there must be in-built incentives for businesses to go out and find people who have not yet benefitted from the BEE system, so the metric needs to be based on the number of new successful entrepreneurs,” Maimane said.

All businesses in the SMME sector should be automatically classified as having the highest empowerment status. “This would effectively accelerate the growth of this sector, which has the combined effect of growing both entrepreneurs, innovation and, mostly important of all, jobs,” the DA lead said.

[Photo credit: Jurgen Marx]

More on BEE

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How many black South Africans benefit from BEE

BEE benefiting only a few

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