Sakeliga attacking ‘next-level’ BEE, advises more State-proofing no matter who wins Election’24

In this powerful interview, Sakeliga’s CEO Piet le Roux unpacks his organisation’s fightback against the ‘third wave’ of BEE typified in efforts to make it compulsory for SA’s 40 000 estate agencies. Despite Pretoria’s growing legislative encroachment, Le Roux is upbeat about South Africa’s future: ‘State-proofing’ is being rapidly adopted by businesses and is laying the foundation for growth in the collective power of businesses to counter a weakening and increasingly ineffective central government.  He told BizNews editor Alec Hogg that the next decade will be turbulent, but is confident the nation will emerge a lot stronger.

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Highlights from the interview

In the interview between Alec Hogg and Piet Le Roux, several key points emerge regarding South Africa’s political and economic landscape. Le Roux, representing Sakeliga, emphasizes a decentralized approach to governance and business, favouring non-state solutions for creating favourable business environments. He acknowledges the potential for political and social unrest over the next decade but sees opportunities for businesses to assert autonomy and navigate challenges through maximum achievable noncompliance with certain policies.

Le Roux highlights the importance of decentralization for successful societies, advocating for more local government involvement and discretion. He suggests that a weaker state, while messy, could lead to a more prosperous future by allowing businesses to seize opportunities and operate more freely. Sakeliga’s stance focuses on promoting ethical business practices and creating value in local economies, rather than aligning with specific political ideologies or power structures.

Overall, the interview underscores the complexities and uncertainties facing South Africa, with a call for businesses to take greater responsibility and adapt to changing dynamics in governance and economic management.

Extended transcript of the interview ___STEADY_PAYWALL___

00:00:09:15 – 00:00:46:11
Alec Hogg:
We gave a lot of play to David Ansara’s recent speech that he made at the Rand Club about state proofing, but even there, he gave credit to Sakeliga for the idea about state proofing. We haven’t spoken to Piet Le Roux, the chief executive of Sakeliga, for a while, so it’s about time that we got an update on what’s happening there and indeed what Sakeliga is telling its members to expect in this big election that’s coming up in less than a month.

00:00:46:13 – 00:01:10:00
Alec Hogg:
Well Piet, the fact that we haven’t spoken with you in a while is no fault of yours. You guys have been really busy. I see this latest story about estate agents. And you’re going into bat, presumably for members who are estate agents, who are now being told by government that they might lose their licenses if they don’t sell or give away, which is more practical.

00:01:10:02 – 00:01:13:23
Alec Hogg:
A big slug of the equity. You just explain what’s going on there.

00:01:14:01 – 00:01:41:11
Piet Le Roux:
Alec, we’re really at that point where the regulator, well, the state is attempting to set entry requirements on a racial basis in the economy. That’s what this is. So the Property Practitioners Regulatory Authority has announced last month that it will refuse to issue fidelity fund certificates to all property practitioners. Currently, these are mostly estate agents, but that includes developers, auctioneers, bond originators, management agents, and so on.

00:01:41:13 – 00:01:55:15
Piet Le Roux:
They refused to issue them a fidelity fund certificate, which would make it illegal for them to operate as property practitioners. So that’s making BEE an entry requirement for participation in the industry and in the economy.

00:01:55:17 – 00:01:57:11
Alec Hogg:
How many people are affected?

00:01:57:13 – 00:02:23:01
Piet Le Roux:
Currently, there are about 40,000 fidelity fund certificates issued to mostly estate agents and a little bit as well to employees of attorneys. Those are two of the categories of property practitioners that came into definition when the new Property Practitioners Act was brought into action two years ago. So there are ten more categories to which this will be expanded.

00:02:23:01 – 00:02:42:18
Piet Le Roux:
So 40,000 is the current number. The current enforcement drive is against businesses. And these businesses will be required to have at least 40 points on a BEE certificate or they will be refused their fidelity fund certificate. Now, I must add that this is what the PPRA intends to do, but we intend to stand in their way.

00:02:42:18 – 00:02:52:20
Piet Le Roux:
And I think business is not going to accept this. We really can’t because this is we can’t accept BEE as an entry requirement for participation in the economy.

00:02:52:22 – 00:03:22:05
Alec Hogg:
But there has been little move as well on the minimum amount or rather the maximum amount that a company has to turn out or can turn over before it loses its a right or level four BEE certificate. I think it’s been 10 million for a while now. Is that also not something to be looked at? Given that you are taking them on, you are taking on the lawmakers in this respect.

00:03:22:07 – 00:03:35:00
Alec Hogg:
Smaller businesses might be saying, but hang on a minute. You know, when it was introduced, 10 million rand might have been relevant, but given inflation, etcetera, that’s now also become a barrier.

00:03:35:02 – 00:03:56:03
Piet Le Roux:
Look on many levels, BEE does not make sense. But I think to take one step back, at Sakeliga we think of the current phase of BEE as we call it, a third wave BEE and it’s this thing. So let me run through the phases quickly. In the 90s, we had a voluntary phase of business across communities in South Africa.

00:03:56:08 – 00:04:18:13
Piet Le Roux:
It made a lot of sense. And for the first time after the restrictions of the 80s and of the National Party government, it became possible to voluntarily do business across racial and community boundaries in South Africa. It was a boom time for business. And if you look at the BEE reports of the late 90s, early 2000 there are billions of rands of deals, and those only the ones that were counted.

00:04:18:15 – 00:04:44:07
Piet Le Roux:
But of course, the economy really opened up in the 90s then, in 2000 and in 2003, respectively. The procurement first Procurement Act and the BEE act came into effect. And then after that, we had 15 to 20 years of second wave BEE, which was a statutory phase of BEE. So we had the voluntary phase of the 90s, which isn’t really BEE’s doing business on, you know, across communities.

00:04:44:09 – 00:05:14:23
Piet Le Roux:
Then we had the business, the BEE, the statutory BEE of the last 2 decades, and that BEE was driven by these acts and it made it compulsory to do BEE when you wanted to do business with the state. So it’s a vertical application of BEE. What we’ve now been seeing in the last five years, approximately, is what we call third wave BEE is where this relationship is turned on its side, and we doing any business at all become subject to BEE as an entry requirement.

00:05:14:23 – 00:05:36:05
Piet Le Roux:
We saw this with the amendment to the Competition Act in 2018. That’s now really these public interest clauses, you’ll see BEE requirements on any merger and acquisition and debt finance structure. It’s there for the ICASA regulations. It’s now with the property regulations. They’re in the financial sector and in all of these places. It’s not about doing business.

00:05:36:05 – 00:05:48:21
Piet Le Roux:
It’s about making BEE a professional and an entry requirement for doing any business at all. And that’s not acceptable. You can’t license participation in the economy based on BEE.

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00:05:48:23 – 00:06:27:03 Alec Hogg: But that has been licensed, if you like, for some time now. Because if you haven’t had a business that is smaller than 10 million rand turnover, you have to, to all intents and purposes, and unless you’re only going to be dealing with other small businesses. But if you work with any company of any size and you have turnover of more than 10 million rand because of the laws, you will have to bring in some kind of a, well, partner or some kind of initiative to get your license to align with what the government wants.

00:06:27:05 – 00:06:46:06 Piet Le Roux: Well, the nexus of the origin of that requirement is still in second wave BEE. That is where, because there’s a sort of a chain reaction through the economy where a big company wants to do business with the state and through its supply chain, it then requires its suppliers and so on to have some element of BEE.

00:06:46:06 – 00:07:14:07 Piet Le Roux: That’s where this originates, is originates within the state-to-business transaction network. What we’re now seeing is for the first time, being directly defined as an entry requirement for the economy. and these requirements differ based on various industries. You have the generic scorecards for the BEE act, but then you also have industry-specific scorecards. And with very few exceptions, up till now, it was still voluntary and it is still voluntary to do BEE.

00:07:14:09 – 00:07:40:10 Piet Le Roux: Of course, it gets enforced and required through this chain reaction. But there are many companies in South Africa who do not do BEE, and that’s perfectly fine. They, you know, and/or they don’t do BEE certificates. What we’re now seeing is, for the very first time, attempts to make it illegal to do business if you don’t have a minimum BEE score.

00:07:40:12 – 00:08:10:09 Piet Le Roux: And that is a distinct development, and it has to be opposed. It’s not easy to, And BEE is probably going to be with us for a while. The vertical relationship where you do business with the state. But I think it’s a crucial moment for us if we allow it to become the norm that regulators can refuse to issue you normal documents and licenses just based on BEE, then we’re in for a very, very different kind and very harmful kind of regulation.

00:08:10:11 – 00:08:37:23 Alec Hogg: It’s interesting. If it starts with fidelity fund certificates, it could extend, presumably into ZIpro into registering a company. If you don’t have the required BEE, you know, there’s a lot of cynics who say that Cyril Ramaphosa has been adopting a boiled frog syndrome. This when you talk about three waves or three phases of BEE it sounds a little bit like boiling the frog.

00:08:38:01 – 00:08:59:12 Piet Le Roux: Well, Mr. Ramaphosa has been intimately involved in all three phases. in the 90s, he benefits. He was part of several significant deals, of which I don’t know the details, but he seems to have done well from it. Then he reentered politics, and but even before he did, he was at the very origin of the Black Economic Empowerment Act.

00:08:59:14 – 00:09:23:03 Piet Le Roux: He was the chairman of the commission appointed by then President Thabo Mbeki in the late 1990s to produce a report with the recommendations that eventually, in 2003, led to the Black Economic Empowerment Act, that was the Black Economic Empowerment Commission. And so, Mr. Ramaphosa was the chairman, really, of the committee that designed and recommended the Black Economic Empowerment Act.

00:09:23:05 – 00:09:39:09 Piet Le Roux: And then, interestingly, once he became president, we saw really this third wave of BEE take off. So, I’m afraid that Mr.. Ramaphosa’s track record, with regard to BEE and the harmful effects of it on the economy is not very good.

00:09:39:11 – 00:10:13:10 Alec Hogg: Okay Piet, so we’ve put that to the one side. We’re now looking ahead at a binary election where there is a possibility that the socialist parties, if you like, ANC, MK, and the EFF, could get to a constitution-changing 66% majority. It’s not by any means a certainty, but it is a possibility. And from an organization like yours, what are you advising members to protect themselves against the risk of this happening?

00:10:13:12 – 00:10:33:19 Piet Le Roux: Well, we like the word state-proofing. David Ansara has used it. And, with our blessing, we’re very happy to see that we’re being used a lot. But it’s not that easy to, to, to state-proof. So as for businesses, we don’t have blank recommendations because businesses differ, you know, depending on the circumstances.

00:10:33:19 – 00:11:01:05 Piet Le Roux: The security company might do well if crime goes up and so on. So, let me not try and make one single recommendation for all businesses on how they should improve themselves. But I think there is something to be said for how business in general can approach not only this election but what will follow. Because this election, whichever way it goes, is not going to solve overnight the problems in South Africa.

00:11:01:06 – 00:11:22:22 Piet Le Roux: We have a bureaucracy, a civil, a stage, a public sector state employees, I would say millions, but but lots of people get a lot of money for doing not very valuable jobs. And you all sit in their very harmful ways and that’s not going to go away. You can’t you know, the City of Joburg has 70,000 or something employees.

00:11:23:00 – 00:11:47:22 Piet Le Roux: That’s probably a very high number for for how bad the city looks. So a lot of them actually need to be replaced, but that’s not easy to do. So a lot of the problems are baked into the state apparatus. So, with we we would like to recommend, and suggest to businesses that don’t expect short term solutions, prepare for an unstable political environment in South Africa.

00:11:47:22 – 00:12:16:02 Piet Le Roux: Whichever way the next election goes. And let’s use the next ten years of weak states and of state failure in different sections, in different places, to different degrees. Let’s use the next ten years to redefine the role of the state in the economy. We’ve let the state grow, incredibly big, incredibly powerful with relative relation to the economy.

00:12:16:02 – 00:12:40:19 Piet Le Roux: We’ve let the state grow to think that it can tell businesses that based on race, they can participate in the economy or not. In the next ten years, the state will keep making these pronouncements, but because it will be so weakened, there will be a lot of opportunity for business if we are organized to redefine the role and the borders of what the state can actually do.

00:12:40:19 – 00:13:02:04 Piet Le Roux: The extent to which it can interfere in the economy. It’s happened all over the world, in all states. It grows and it shrinks. Shrinks, depending on how well business is organized and the balance of forces and business in South Africa has a great opportunity in the next ten years to set the scene for a very prosperous future.

00:13:02:06 – 00:13:10:12 Piet Le Roux: We have to not only look at elections, we have to actually become strong enough to say no to very harmful, bureaucratic and political ideas.

00:13:10:14 – 00:13:12:06 Alec Hogg: Has it started happening? Saying no?

00:13:14:23 – 00:13:38:19 Piet Le Roux: Saying no, yes. If we look at the outpouring over the last few days, just on this property practitioner regulatory authority rules on BEE, I think that the level of willingness in the economy to accept new rules is very low. You know, Alec, five years ago, ten years ago, it was very hard to criticize BEE in public.

00:13:38:21 – 00:14:02:14 Piet Le Roux: Because everybody knew it was off. Everybody knew there was something rotten in the state of BEE. But it was hard to discuss because we, you know, everybody had colleagues and friends and fellow employees who were of different races and different communities. And now it becomes difficult to discuss. Today, very few people think BEE is a success.

00:14:02:16 – 00:14:26:22 Piet Le Roux: Very few people, you know, are not willing to criticize it. And this goes across communities. Dr. Sam Motsuenyane, who passed away yesterday, was a vocal critic of BEE. He was of elderly age, so it wasn’t so pronounced in his last years. But if you go look at things, he said just ten, 15 years ago, against BEE, I think today it’s much easier to be against BEE.

00:14:27:00 – 00:14:43:23 Piet Le Roux: And I think businesses are willing to say no. I think we are going to see over the next few years people just saying, well, I know there are risks in doing business without BEE and without permission from the government, but I’m going to be prevented from doing business anyway, so I’m willing to take the risk.

00:14:44:03 – 00:15:02:06 Piet Le Roux: It’s going to be messy, but business people are going to start saying no. And I think, you know, you don’t pronounce that you’re not compliant. We’re not at that phase. So, I think lots and lots more is happening under the radar than what we see in newspaper headlines.

00:15:02:08 – 00:15:28:20 Alec Hogg: But on the other hand, there is quite a lot of way around BEE if you are not entirely ethical. Are you going to suggest to your members that they think of doing it that way, i.e. they’re not going to stand up and say we are not compliant? So it’s not, “I’m gatvol and voetsek ANC,” but it is another way around it, perhaps, by not following normal ethical business principles.

00:15:28:22 – 00:15:50:09 Piet Le Roux: Well, the first point is that I think it’s ethical to not do BEE, and BEE is a harmful policy. And ethics demand that business do what’s good for itself and society. Those are if you could do both of those virtuous things, you’re doing the highest virtue, serve as the common good as well as your own good.

00:15:50:11 – 00:16:11:22 Piet Le Roux: So the first point is not doing BEE is the ethical thing to do. I’m not saying not doing business across communities. That’s great. That will happen. But not doing BEE, which is a very specific temporary government policy is the ethical thing to do. But now there’s a problem, some laws and some regulations demand or some regulators are attempting to demand of you that you do.

00:16:11:22 – 00:16:34:05 Piet Le Roux: BEE on a penalty, which would be an unethical penalty, but nevertheless a penalty of prosecution or fines and so on. It’s not only BEE it’s also this very bad Employment Equity Amendment Act and the regulations that have to do with that. So the second point to make is that the requirements to do BEE are unethical or unethical.

00:16:34:07 – 00:17:05:14 Piet Le Roux: What Sakeliga recommends to businesses is that they do maximum achievable noncompliance. And we’re saying, maximum achievable because it’s not always achievable not to do BEE sometimes the risks to your staff are just too great. So, when you weigh up all the responsibilities you have, the risk of losing a license might be enough that you do comply to some extent with BEE the important thing is to do what we call maximum achievable noncompliance.

00:17:05:16 – 00:17:31:23 Piet Le Roux: Create a value-adding business, do business across community lines with whomever you like, and make the world and the country a better place. BEE is not the way to do that. If you have to do some BEE that’s acceptable. But the ethical thing to do is to do as little as possible of this harmful government policy as you can, while making the world around you as good a place as you can.

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00:17:32:00 – 00:17:59:14 Alec Hogg: Okay. So BEE, we’ve got a very strong position there. What about general, De Vries’s warning that there could be a repeat of the KZN July 2021. Anarchy. And he’s a the former, deputy head of the army at the time of Constant Viljoen. So he’s a person who comes with substantial weight for him to be making these kind of pronouncements cannot be taken lightly.

00:17:59:14 – 00:18:04:08 Alec Hogg: How do you advise your members when they hear this kind of thing?

00:18:04:10 – 00:18:26:09 Piet Le Roux: Alec, the possibility of future unrest in South Africa is great. Not because it will be a new thing, but because we’ve seen it happen. And so it won’t even be unprecedented. And there are many reasons to think that as the economy gets tighter and money gets, you know, so there’s less to lose or people stand to lose more in politics.

00:18:26:09 – 00:18:47:06 Piet Le Roux: We will see increased risks of unrest. Whether it’s of this scale and of the concentration that we saw in the KZN riots, or it’s more dispersed, as we’ve been seeing for many years, you know, riots in different towns across the country sporadically, any, any day. There are several. Well, that remains to be seen.

00:18:47:06 – 00:19:12:21 Piet Le Roux: So it is something to be taken seriously. We have, I would venture two recommendations. The first would be to integrate your business into the local security structures. And that doesn’t mean only signing up to a security company. It means finding out who the other businesses with whom you need to coordinate in times of distress, not only to protect your business but to protect the local economy, the economy in which you operate.

00:19:12:23 – 00:19:37:13 Piet Le Roux: Because if a mob runs through, High Street, and ransacks businesses, that town can go to zero. So it’s important to not only, you know, in protecting your business, it’s also about protecting the local economy. So I think that’s the secret sauce for business future business chambers in the next ten years. It’s realizing that a business chamber is not a place to hand out business cards and do business with each other.

00:19:37:13 – 00:20:00:11 Piet Le Roux: It’s a place where you protect and advance your local economy. Take responsibility for it. So my first recommendation from Sakeliga’s side is get involved with the local chamber of Commerce or the Ratepayers Association or the Community Policing Forum. Find, find a way to strengthen those ties and then do your best when when things happen, there will need to be a coordinated response at a local level.

00:20:00:12 – 00:20:26:08 Piet Le Roux: It’s unlikely that the police or the army can, well, significant unrest like we’ve seen in the KZN. The second thing Sakeliga is doing is we’re well, we’re doing some interesting experiments. We’ll, we’ll make proper announcements at a later stage. What we’re looking at, introducing, private patrols on some of the highways, that will be funded publicly without a profit mandate, profit motive.

00:20:26:10 – 00:20:55:16 Piet Le Roux: We’ll we’ve we’ve been collecting the money. And at some point in the next few months, we will look to launch the first, pilot project where we will, we will we will deploy a private patrol on, 200km stretch of highway in South Africa with a mandate to protect life, property, and keep the road open. And that will be a public service that we intend to show how business can actually solve common security problems in the public interest.

00:20:55:16 – 00:20:58:14 Piet Le Roux: So those are two things I can recommend.

00:20:58:16 – 00:21:22:17 Alec Hogg: Interesting developments before we go. There is a lot of speculation now that the DA will lose its majority in the Western Cape. It’s a fairly small majority, 24 seats out of 42. If that were to happen, would this change your view, if any, on Cape Independence?

00:21:22:19 – 00:21:56:03 Piet Le Roux: Now, in general, firstly, Sakeliga is not too interested in the specific demarcation around South Africa or who’s in power or not. We think our mission is to create non-state solutions for favorable business environments. So, strategy certainly wouldn’t change depending on who’s in power in different places. But we do recognize that successful societies tend to be those that welcome decentralization; successful economies aren’t centrally controlled.

00:21:56:05 – 00:22:23:06 Piet Le Roux: And as such, I think there’s much more promise in a decentralized future in South Africa, not only at the provincial level, but even with much more involvement and discretion at the local government level for some of the cities and metros and towns across South Africa, rather than having everything run from, I mean, not literally as the Union Buildings.

00:22:23:08 – 00:22:33:11 Piet Le Roux: So you get my point that we are in favor of decentralization. That’s just been a winning recipe for successful societies, and that’s what I’d like to say about that.

00:22:33:13 – 00:22:58:08 Alec Hogg: And to close off with, how are you seeing South Africa evolve? We’ve got this binary election. There’s a lot of focus on it, not just from local investors, local businesses, but internationally as well. If you could take a ten-year view on the way that you’ve seen things going in the last ten years, what would be the flags that are most likely to be waved over that period?

00:22:58:10 – 00:23:06:08 Alec Hogg: As a futurist, what would the flags be that are most likely to be waved over that period?

00:23:06:10 – 00:23:43:02 Piet Le Roux: Alec, one thing that is sure to happen is that there will be significant political and social unrest over the next ten years. It’ll be unstable; it’s just baked into what we have right now. Now, what will make me very optimistic is if we see businesses organizing to say no and finding ways of doing maximum achievable noncompliance.

00:23:43:04 – 00:24:06:16 Piet Le Roux: Also, we will see, I don’t this is not even sort of, what I hope to see. I just think we will certainly see, less capability from the state. The state will keep speaking in very strong terms, but its ability to execute and control very specific elements of the economy and society will diminish.

00:24:06:18 – 00:24:34:20 Piet Le Roux: That’s a good thing because we will see businesses seize the messy opportunities that come with that. And it will also almost be a free market, off the books. The statutes will keep looking bad, but, as the government loses its ability to enforce those very bad laws, that will actually be a good thing.

00:24:34:20 – 00:25:00:00 Piet Le Roux: So I don’t think our solution in South Africa must be looking for a stronger state, and then we’re happy about that. I think there are scenarios in which we have a very prosperous future with a significantly weak state. And that’s messy, but, I think that’s the most exciting and promising opportunity for us over the next ten years.

00:25:00:02 – 00:25:09:05 Alec Hogg: Piet Le Roux telling us to take greater responsibility, especially if you’re in business. He is the CEO of Sakeliga. I’m Alec Hogg from BizNews.com.

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