Lobbyists can sometimes be their own worst enemies. The new BEE Codes suggest the politically connected elite may well have over-reached themselves. Instead of delivering the promised broadening of the Empowerment Base, what’s emerged is more slop for those with their snouts in the trough. This interview with attorney Safiyya Patel leads one to conclude it’s time we changed the abbreviation to NB-BEE – Narrowly Based Black Elite Enrichment. – AH
To view the video of the interview on CNBC Africa’s Power Lunch, click here.
ALEC HOGG: Companies will be granted a one-year transitional period to align with and prepare for the implementation of the revised broad-based black economic empowerment codes of good practice, which were gazetted on Friday. Safiyya Patel is a Partner at Webber Wentzel and she’s with us in the studio. Well Safiyya, we’ve already had the media telling us that these are not broad-based black economic empowerment, but rather narrow-based and getting worse. We had Michael Spicer from Business Leadership expressing a similar opinion a moment ago and Leon Louw from the Free Market Foundation saying the same kind of thing. Are they misreading it?
SAFIYYA PATEL: I don’t think that they’re misreading. Contrary to what (Trade & Industry Minister) Rob Davies has been saying, and to what President Zuma has been saying, the details certainly show that what has been incentivised is narrow-based economic empowerment, rather than broad-based black economic empowerment.
ALEC HOGG: Help us through that.
SAFIYYA PATEL: In the detail of the scorecard – the ownership scorecard in particular – the existing codes provide that 10% of black ownership should go to broad-based ownership schemes to optimise scores under the ownership scorecard. The new codes say that it must be 3%. Suddenly the incentive becomes much less to include broad-based schemes. The other thing, which I think is quite startling is that under the new codes, new black entrants are defined as people that have not concluded BEE transactions of more than R50m, which is quite a high amount. The existing codes, as it is, already has a high amount – R20m. Suddenly the net for new entrants increases vastly and the people who we would consider to be people that have already benefited sufficiently under the existing regime, may now still benefit under this new regime.
ALEC HOGG: This is extraordinary. If you were a man from Mars arriving on earth, and you were told that these are called broad-based black economic empowerment – down from 10% to 3%, and that the limit for people who can participate has risen from R20m to R50m – you would interpret this as crony capitalism.
SAFIYYA PATEL: Yes: putting it starkly – exactly. Crony capitalism: who is going to benefit? You and I both know who’s likely to benefit.
ALEC HOGG: Who is going to benefit?
SAFIYYA PATEL: Well, I don’t think that the broad-based community ownership schemes are likely to benefit, although those should be the ones that should benefit. I don’t think employer ownership schemes are the beneficiaries of this new scheme. I think it’s back to the usual suspects.
ALEC HOGG: But this is extraordinary. Why has civil society not taken to the streets?
SAFIYYA PATEL: How come? Look, I think civil society has been up in arms. The draft-revised codes said this. As far as I know, there were something like 600 submissions made to the DTI in relation to these very details, but it’s not picked up by the DTI for some or other reason. Now we find it in the final codes, so it’s not that civil society has been quiet about it; 600 submissions are a lot of submissions.
ALEC HOGG: There was an article in the Business Report this morning talking about charities also being negatively affected by these proposed new codes.
SAFIYYA PATEL: That relates more in relation to what charities can take up in terms of ownership in the new codes. In relation to charities and broad-based ownership schemes, the requirements have become a bit more stringent and administrative costs would increase for them as well. Some people may argue that corporate governance is better, but certainly, it would be higher compliance costs for them.
ALEC HOGG: Safiyya, we know that rules are made by those in power, and the lobbyists who would maybe influence them. If you have a look at this, though, it’s very difficult to understand where a politician, who has been appointed to do best for the broad community, is achieving it in this kind of legislation. Where am I missing the point? What am I missing here?
SAFIYYA PATEL: No, I don’t think you’re missing anything. I think that certain interests – I think your previous interviewee said just that – that certain interests had to come through in these new codes and that is exactly what’s happened. There were certain interests and lobby groups whose interests have come through quite clearly in these new codes.
ALEC HOGG: All right, now we have a court of law, we have a legal system in South Africa, which is a wonderful constitution. If someone were inclined to fight these codes, how would they do so?
SAFIYYA PATEL: I think there are potentially a number of statutes that could be utilised – potentially quite successfully – including the Promotion of Administrative Justice Act. Questions could very well be asked about whether the consultation that government went through, in promulgating these final codes, was in fact in terms of the Promotion of Administrative Justice Act and that’s just an example. There would be other technicalities in these codes as they’ve come out – I would suggest, that could potentially be taken up, but my view is that nobody is going to take this up.
ALEC HOGG: Why?
SAFIYYA PATEL: Nobody wants to take government on. I don’t think that anybody is tough enough – quite frankly – to take government on, on any issues like this and these types of technical points. Rather, what we’ll see is business saying, “Let’s rather just comply. It’s going to be more costs for us. It may mean more transaction costs. It means that we probably have to relook at transactions that have been done because we’re going to be negatively impacted by the codes, but we’d rather do that than take government on”.
ALEC HOGG: I’ve met many people in government. There are people with integrity in government. Not everybody is a crook. Not everybody is a crony capitalist. Surely, within the organisation/within the party – particularly with the election coming just around the corner – there will be some who will stand up and be counted on this? Is that our only hope?
SAFIYYA PATEL: I think, particularly because an election is coming up: that is the reason why we’re seeing the codes come out in the form that they’re coming out.
ALEC HOGG: Why?
SAFIYYA PATEL: My sense is that the ANC wants to appeal to a particular group for votes and it’s not necessarily big business.
