Tim Cohen: Doubling down on transformation

Listen here.The fight over transformation policy in South Africa is intensifying as four of the biggest law firms legally challenge the new legal sector codes. Currency News Senior Editor Tim Cohen joins Irakli to discuss the deeper fault lines exposed by this clash, questioning whether the push for 50% black ownership and 25% black women ownership in five years is a realistic goal or a miscalculation. Cohen highlights the absurdity of a sector-wide transformation policy that exempts 95.07% of legal practices, leaving the burden on a tiny fraction of the industry. He further explains why the unique structure of equity partnerships - rooted in long-term professional development, client confidence, and risk - cannot be transformed overnight like a standard corporation. Cohen likens the government's approach to an extreme guru-prescribed diet, arguing that applying a failing policy with even more vigor will only lead to disastrous unintended consequences..Edited transcript of the interview.Irakli (00:01.563) South Africa's most powerful law firms are squaring off against the government over a new set of BEE legal sector codes. And the fight is exposing deep fault lines about whether transformation policy is working or simply being doubled down on. I have senior editor from Currency News, Tim Cohen, who draws a striking parallel to the 1960s and the hippie movement in his latest article that can be found on BizNews. Tim Cohen, welcome.Tim Cohen (00:30.04)Hi, Irakli. Thanks for having me.Irakli (00:33.459) So in your latest piece, you talk about how a follower of a 1960s guru fell fatally ill after following an extreme diet. What are the parallels here with BEE and what we're seeing currently in the courts?Tim Cohen (00:48.654) You know, it was sort of—I was just trying to find a kind of interesting hook. You know, it's not a perfect analogy, I have to say. But I was just trying to illustrate a situation in which people think that, you know, the problem is that a policy has not been implemented strongly enough. You know, when actually the problem is the policy in the first place, you know, and people who are invested in the policy believe that the way to solve the problem of the policy not working is to apply it even more, with even more vigor than it was before. And it just popped into my mind, this situation where somebody actually was involved in a macrobiotic diet and actually made themselves so sick they died. And every time they went back to their guru to say, "This diet of yours is not working," the guru would say, "Well, you've got to work harder on it." "You've got to impose it even more staunchly than you have in the first place." So it struck me that there was a sort of odd analogy with the situation in the legal BEE. You make up your own mind whether you think that was a good idea or not.Irakli (02:10.653) Well, no, but I mean, it holds the point that we previously lived in a world where black ownership at the top six law firms sits at roughly 25% and has broadly been meeting the current requirements. But now we're moving into a new code that demands 50% black ownership within five years, plus 25% by black women. What I find interesting in your article is how there is a disconnect between the top six law firms and those that are largely exempt from this law. Could you please elaborate on that?Tim Cohen (02:49.166) Yeah, when you look at the idea of extending BEE, I think a lot of people will think—a lot of South Africans will think—white South Africans are around 8% of the population, and they have 75% ownership of the larger law firms. So it stands to reason, if you are thinking along those lines, that we should extend black BEE into law firms even more. But when I was reading the papers brought by the four big law firms, it just struck me they have a much better case than you would imagine. And you have to look into the details of the case to recognize that. And what you've just raised now is one of those things. Essentially, as the proposals stand, there is a financial cutoff. So we're really only talking about around 8% of law firms in South Africa. So if the argument is that we need this BEE policy in order to transform the industry, and you're only applying that to the top 5%, then are you really talking about the industry? I mean, you're not actually transforming the industry if this is the case. So that was one of the points that the legal firms raised, which I thought was interesting; at least it is debatable, at least it should be higher up on the agenda. You know, people should be more conscious of that as a debating point than maybe they are.Irakli (04:42.227) And you do mention the point there: which sector is being transformed exactly if 95%, or as you mentioned, only 8%, are being affected by this law and the rest are not? And in your article, you also mentioned that the sharpest critique is really when we look at partnerships; it's more than just the shareholding—it involves capital, clients, judgment, risk, reputation, and also the slow accumulation...Tim Cohen (04:56.066) Yes.Irakli (05:12.109)...of trust. What is the risk, especially in the context of law firms and partnerships, in enacting this sort of requirement at a high level?Tim Cohen (05:25.858) Well, you know, I think all areas in South Africa are difficult to transform. But I think in legal firms, there are additional problems which the drafters of the new legislation—actually, it's not legislation, these are just regulations— really haven't taken into account. So basically, you have somewhere between 25% and 40%, generally speaking, of the large law firms owned by black South Africans. And BEE, as far as the law firms are concerned, has been around for, you know, we could call it 15 years. So they've been transforming at the rate of around 3% a year for the past 15 years, give or take. And I don't think that's a terrible speed in this context because when people go to court, they are concerned; they want the best legal representation they could possibly get. It's very individual. It has to do with your history and your company's history, or your individual history, people you know, people you trust. So there's that side of it. And then there's also the other side of it, which is the whole process of becoming partners in a law firm, which is a very long process. It's not like a company. You can't suddenly change the constitution of a law firm very fast. Because there's a hierarchy, they are very incremental firms; they try and develop their members or their partners over a long period of time. The law firms basically say that this is impossible; it's just impossible to do. Or it's not impossible, but if you did do it, then you would really have to start you know, putting people in positions that they're actually not ready for and that they don't have the credibility in the market for, and, you know, this could easily completely backfire. And it is worth noting that essentially what the regulations require is a rate of black empowerment twice as fast as has happened up to now. So I have some sympathy for their argument, even though I like the idea of transformation. I think we all do. We all like to see all of our institutions reflective of the country. But in this particular case, I think it's a very difficult legal question for the courts to answer. And my own opinion is that they've pushed the boundaries too far.Irakli (08:40.423) Thank you so much, Tim. This is BizNews. Please check out the article on our website. And thank you again for your time.Tim Cohen (08:47.064) Cool, thank you..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. 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Tim Cohen: Doubling down on transformation

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