Bring BEE closer to the poor
THANDISIZWE MGUDLWA The New Age | 4 Sep 2014
An area which regrettably does not get the attention it deserves, is the question of economic transformation and development, in the context of the Black Economic Empowerment (BEE) policy, aimed at uplifting historically disadvantaged people.
One thought it wise to explore this very important subject and attempt to deepen the debates, discussions and dialogues which must lead to the grass-rooting of BEE framework.
The commission definition of BEE is, "It is an integrated and coherent political process. It is located within the context of the country's National Transformation Programme, namely the RDP (Reconstruction and Development Programme). It is aimed at changing the imbalances of the past by seeking to substantially transfer and confer ownership, management and control of South Africa's financial and economic resources to the majority of the citizens. It seeks to ensure broader and meaningful participation in the economy by Black people to achieve sustainable development and prosperity."
With that, it would be worthwhile to look at what is preventing South Africa from its mission of renewing itself from the tyranny of colonial oppression and apartheid, considering that 60% of the 51 million our citizens still languish in poverty and underdevelopment 20 years after the end of colonial rule.
As a fact, the legal equality of all South Africans was achieved with the end of Apartheid in 1994. However, the elimination of the aftermath of the former social and economic discrimination of Blacks, Coloureds, Indians and Chinese has yet to be realised.
In order to promote and accelerate the economic equality of the Black population, the post 1994 democratic government devoted itself to the politics of BEE, which in 2003 had broadened into Broad-Based Black Economic Empowerment (B-BBEE), in effort to reach the majority who did not benefit from BEE.
Fundamentally, BEE as an economic development strategy, ensures that there will be no area in the economy, which will not be affected by B-BBEE.
Also important to remember is that an integral aspect of the apartheid project was the planned and deliberate exclusion of non-whites from the mainstream of the economy.
Moreover, Blacks were selectively hampered to achieve self-employment
and to establish own enterprises, with a large majority of Blacks settling in the so-called 'Homelands'.
It has been the declared goal by BEE proponents to actively integrate Black entrepreneurs into the private economy via the transfer of company ownership, management and control functions.
And in order to implement these goals, and to make them measurable, in particular, the legislator introduced Black Empowerment Scorecards.
Notably, these elements have already begun and will gain even more importance in the coming years.
To its credit, the post 1994 democratic government demanded a coordinated strategy in regards to BEE in the mid-1990’s.
And in 1998, the BEE-commission was established to meet these stated demands. It was its task to develop a commonly accepted definition of BEE as well as proposals of methods for restructuring.
BEE archives can confirm that even though the government had already previously enacted multiple laws to reduce the unequal treatment in the economy, a coordinated and holistic approach with regards to BEE was lacking.
An in October 2000, the BEE-commission presented its final report. This report was the basis for the government’s strategy paper, which was published three years later.
The legal foundation regarding BEE was created in January 2004 as the Broad-Based Black Economic Empowerment Act came into being.
According to many BEE stakeholders, this law replaced, reformed and coordinated the previously enacted laws and support programs. The exact description of the law’s regulations and the relating actual provisions for the implementation in practice took place via conduct guidelines in particular.
The government defines BEE as, "An integrated and interrelated socio-economically process, which contributes directly to the economic restructuring South Africa’s and to a significant rise of the Black proportion who will lead, control or own companies within the South African economy. Furthermore, this process shall lead to a significant decrease of income differentials."
It must also be noted, that the term “Blacks” according to the prevailing legal framework includes all Blacks, Coloureds and Indians as well as Chinese.
This has changed with the recent amendments of the Codes of Good Practice in 2013 in favour of a more exact definition differentiating between gender and specific ethnic groups that used to be treated the same under the old term definition.
People living with disabilities also form part of this.
The BEE strategy still aims to achieve the following goals by 2014, "A significant rise in the proportion of Blacks as owners and managers of existing and new companies; a significant rise in the number of Blacks in executive positions, a rise of Blacks’ capital share in companies; the increase in Blacks’ share in factors of production, for example land; the expansion of economic activities in underdeveloped areas; expedited economic growth available equally to all segments of the population; and the increase in the level of income for Blacks resulting in the reduction in income differentials."
Essentially, the concept of Direct Empowerment in terms of BEE comprising the ownership of company shares and voting rights as well as the right of participation in management and therefore in corporate governance.
In this context and in consideration of direct empowerment, the possibility of participation of Black employees needs to be mentioned. Instead of having outsiders participate in businesses it is often in times preferred to have the own employees participate in the company.
However, this does not take place via the transfer of employee shares but via the creation of a Employee Share Ownership Scheme (ESOP) in form of a BEE Employee Trusts (BET).
Companies ought to comply with the guidelines of the Employment Equity Act. This law was enacted in order to employ an amount of Blacks in all business areas and in all levels at comparable work and income terms according to the composition of the population within a specified point in time.
The South African National Government has introduced multiple programs for advanced training and support for Black employees in order to reach this goal and to improve the rather low level of training.
A company will be awarded with up to 20 points on the scorecard, if it actively promotes advanced training of its employees within the framework of the official Skills Development Programmes. And such programme have been drafted by a Skills Development Facilitator as well as been approved by the respective Sector Education & Training Authority (SETA).
For example, 2% disabled people ought to be employed in order to collect 2 of the possible 15 points from this area. The majority of the points is awarded by reaching the targets for Blacks in various management levels.
Please note, that full points are only awarded if an approved Workplace Skills Plan has been approved by the respective SETA prior to the financial year measured.
Further, the Black empowerment element preferential procurement has under the new Codes 2013 been included in the newly amalgamated element “Enterprise and Supplier Development”.
Therefore, debates, discussions and dialogues must continue to rally all stakeholders towards national consensus and action.
Thandisizwe Mgudlwa writes for AfricaBusiness.com
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