BEE Watch

In the crude, muddled world of BEE apartheid is back with a vengeance

Rob Davies, reintroducing apartheid-like measures
Rob Davies.jpg

In the just gazetted “clarification” of amended Black Economic Empowerment (BEE) codes whites in South Africa have been reduced to a species not even worthy of charity.

At the same time the amended codes are helping to lay the foundations of a future revolution in the broader community by amending all pretentions to be ‘broad-based’, strengthening the position of a new ‘insider elite’.

In its reaction to the amendments, The South African Institute for Advancement (INYATHELO) warned that the proposed amendments to the broad-based black economic empowerment code could have a serious impact on charities and the non-profit sector as a whole.

The revised Code of Good Practice rules that only companies that donate to organisations with 100% black beneficiaries will qualify for full points on the socioeconomic development element of the code. 

A statement by INYATHELO in part reads: “Inyathelo Executive Director Shelagh Gastrow says the unintended consequence of these amendments will be corporates shifting their focus from some organisations to others that do not support any white beneficiaries.

 “The NPO sector is already on its knees with anchor organisations like Rape Crisis and The South African Red Cross battling to keep their doors open due to severe cuts in local and international funding. The amendments will prevent companies from claiming full points on their BEE scorecard if they give to organisations that assist even one white child or foreign national.” (Our emphasis.)

In terms of the existing code corporates can qualify for BEE points if they give to NPOs whose beneficiaries are more than 75% black. A pro-rata calculation is made if the number of black beneficiaries fall below 75%.

But under the amended code, companies can only earn full points if every single beneficiary is black, the pro-rata calculation shifting from there. Gastrow says the amendments would further “racialise poverty and need”.

“They provide a perverse incentive to charities and organisations to turn away needy people who are not black or who are refugees in order to secure much needed funds.

“It also encourages corporates to do a racial audit of an organisation’s beneficiaries before contributing towards much needed socio-economic development in South Africa. You simply can’t discriminate on the basis of colour when it comes to need. We should not be forced to ask a child who has been raped what colour they are before offering assistance,” the statement reads. 

The implication of this development is clear: The ANC government has become at least as racially obsessed as the apartheid system was.

Polarising broader society

The amended code also dramatically downgrades the value of ‘broad-based’ BEE schemes, like share schemes, aimed at benefitting employees of companies and broader communities.

Under the present code companies can claim the full available 25 BEE points for “black ownership” if it has a substantial and properly designed share or ownership scheme.

Under the amended code the available points from such schemes drop to three points. On the other side of the spectrum, if 51% of the shares in a company belong to a black individual or group it will automatically receive a level 2 broad-based BEE status and need not comply with the rest of the score card criteria.

Presently a company can be entirely white-owned but achieve good BEE levels by doing well in areas such as employment equity, skills development, preferential procurement, socioeconomic development or enterprise development. That will now be reduced to only five, of which three are priority elements and must be complied with, including at least 10% direct black ownership. How heavily the amended code will impact on the business environment in the country is illustrated by the estimate by Gavin Levenstein, director of consultancy EconoBEE, that more than 80% of all companies have less than 51% black ownership.

In an article on fin24, Dewald van Rensburg writes: “Lawyers and black economic empowerment (BEE) consultants are running scared after the department of trade and industry (dti) this week, out of the blue, jettisoned much of the ‘broad-based’ part of the broad-based black economic empowerment codes.”

And: “The move could make countless companies’ existing BEE scores crash and burn – and in effect stop the practice of including workers and community groups in empowerment deals.

“It is a big victory for the organised push towards a notion of BEE centred on large, active shareholdings in the hands of ‘black industrialists’, as advocated by a resurgent black business lobby.”

Small wonder that organised black business, in the words of the Rand Daily Mail , has come out swinging in favour of a controversial new empowerment rule, which critics said would only entrench the power of fat-cat businessmen at the expense of the truly disadvantaged.”

Themba Dlamini, MD of the Black Management Forum, said his organisation “wholeheartedly support the clarification. We need to get capable black professionals in positions where they are decision-makers”.

On the other side of the scale the National Union of Mine Workers (NUM) in a statement expressed its “shock and disdain” in the “clarification” of the amendment to the code, saying it “neither encourages or compel (sic) industries to advance and promote broad-based economic empowerment (with workers and communities in mind).

“This begs the question on how are we going to win the fight against the triple threats facing South Africans of inequality, poverty and unemployment, when a government department mandated to spearhead economic transformation issues such regressive and backward notices. The broad-based element was introduced upon the realization that black economic empowerment benefited a select few individuals, thus also contributed to vast inequalities in our society.

“Ownership of the economy cannot be focused on individual wealth, but societal wealth through co-operatives and employees. What is also ironic is the same DTI is mandated to promote and support these cooperatives, as the NUM we are not going to allow workers to continue enriching monopoly capital and DTI sanctioned few black elites.”

Coming from the top

Some commentators, almost hopefully, expressed the opinion that the ‘clarification’ was a mistake and will soon be rectified.

This, however, seems highly unlikely as indications are that this change in direction came right from the top. President Jacob Zuma himself paved the way for what has happened now when in his February State of the Nation Address (SONA) to parliament he claimed that black-controlled companies account for as little as 3% of the Johannesburg Stock Exchange, clearly ignoring indirect ownership via pension and trust funds.

The latest move will, however, impact more on smaller, non-listed companies who will now need direct black ownership.

One white businessman we spoke to told us he would rather close his business than be forced to just give it away. If he does, some 30 families will be left without an income. The new measures will also do nothing to address inequality in the country. It will only change the complexion of it, creating new areas of potential frustration and conflict.

In the final analysis it seems to add to the huge and dangerous programme of social engineering the ANC has apparently embarked on in recent years, calling it “radical economic transformation”, while it leaves the majority of the population stranded on the fringes of the modern economy.

Since the amendments are clearly in conflict with the Constitution and, some lawyers claim, even the enabling legislation in terms of which it was published, it is surprising that no opposition party or NGO for that matter has yet declared intentions to challenge it in court.

by Piet Coetzer

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