Economic Watch

Is it time for a review of Black Economic Empowerment?

BEE about more than just shares
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Will what happened to Eskom, and the national crisis it triggered, finally see the introduction of a sunset clause on BEE and especially on employment equity legislation?

The Eskom crisis developed largely because of a massive loss of skills. Since 1994 the public utility has shed more than 10 000 members of staff, most of them experienced and skilled whites.

Eskom is fast becoming a monument as to how wrong the policies of Black Economic Empowerment and Employment Equity have gone, becoming tools of social engineering out of sync with the needs of the economy and the dictates of sound service delivery.

There is new hope that the debate about the need for sunset clauses on BEE legislation will be revived.

The man charged with turning around Eskom and other state enterprises like South African Airways and the Post Office, Deputy President Cyril Ramaphosa, on 18 January said in parliament: “We have, I must admit, lost quite a number of skilled people in Eskom, and the race is now on to attract as many more skilled people as possible within Eskom. And yes, to go on merit, not to go on skin colour.” (Our emphasis.)

Only ten days earlier on 8 March Eskom in a statement still declared: “Eskom views Employment Equity as a strategic imperative and is, within this context, striving to ensure that its workforce demographic profile reflects the Economic Active demographic profile of South Africa.

“Eskom must, in terms of the Vision 2020 on Employment Equity statement of intent, match the Economic Active Profile of South Africa by 31 March 2020.”

Indicating to what extent the utility, at least until that late stage, still followed a dogmatic, purely numbers-based approach, it also gave date-linked figures.

It stated that “… targets are set as follows: The Economic Active Population demographic profile minus the workforce (per occupational level, race & gender groups) as at the end of a particular financial year, divided by the years remaining between that particular date and the 31st of March 2020.”

Based on this information supplied by Eskom, the trade union Solidarity calculated that Eskom will have to decrease its white employees by up to 3 400.

In a comprehensive report titled "The rise and fall of Eskom," and comprehensively reported on elsewhere, the South African Institute of Race Relations writes that after Eskom was forbidden to build new power stations in 1998 “… the new directives were also vague and confusing, lacking clarity and consistency. Eskom fell into a void.”

About how the whole constellation of policies and legislation worked out, during the first phase of post-1994 South Africa  David Meades elsewhere writes that history will show the biggest mistake made “… was that so-called black economic empowerment turned out to be mainly only to the benefit of black shareholders in big corporations.”

Back in 2007, around the subject of BEE, the then president of the ANC Youth League and now Minister of Sport, Fikile Mbalula, in a statement wrote: “We must also sound alarm and disgust at those who amass wealth as beneficiaries of black economic empowerment at the expense of the people. They exploit their political connections to negotiate for themselves lucrative deals with unscrupulous companies desperate to be seen as advancing BEE, while their actions amount to nothing more than transparent window dressing.”

Sunset clause

Mbalula was rejecting calls at the time for the introduction of’ ‘sunset clauses’ to the BEE codes gazetted in 2006. 

As the first BEE deals started maturing and it became clear that the goal of ‘broad-based’ empowerment was not achieved, the debate about sunset clauses picked up steam again in early 2013. It, among other things, led to a vibrant discussion in parliament’s Portfolio Committee on Trade and Industry.

In April of that same year, however, the Department of Trade and Industry threw cold water over the idea, stating that “a sunset clause for broad-based black economic empowerment has not been considered at this stage because the country is far from putting black businesses on an equal footing with established businesses.”

Fact is, however, that the experience with Eskom has now proved that the way BEE has been implemented turned out to be not much more than the other side of the coin of apartheid’s “ethnic socialism” and social engineering.  And, as Meades writes, apartheid has already proved that such an approach is unsustainable.

Hopefully Mr Ramaphosa’s remarks last week and his at present extensive exposure to the captains of private enterprise will not only open the debate on this subject, but also lead to new approaches and initiatives to deal with the legacies of the past. If not, South Africa is heading for an economic brick wall.

by Piet Coetzer

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