Will Ramaphosa stop tilting at Trump? – Patrick McLaughlin
Key topics:
- The Black Transformation Fund Bill proposes a R100bn state-controlled fund.
- The bill strengthens BEE rules and penalties for non-compliance.
- Debate over BEE policies intensifies as South Africa faces international scrutiny.
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By Patrick McLaughlin*
US call for legislative reform no different to DA's call
The introduction of the Black Transformation Fund Bill at a time when South Africa is being explicitly asked by the United States of America to reduce the quantity of its black empowerment legislation could be just a question of bad timing by the governing party. More likely, it follows on from the previous provocative move by President Ramaphosa of affixing his signature to the Expropriation Bill at Davos, the first tilt that was made at the US windmill by the ANC executive.
But what is more worrying is that it also indicates that elements within the ANC have no intention of embracing the principles of the GNU. If such a Bill is finally tabled before Parliament, it is with the knowledge that the Democratic Alliance has already rejected the Bill as it currently stands. As we speak, a draft version of the Black Transformation Fund Bill has recently been circulated and is out for public comment.
Another fund…….
The Bill proposes a legislative process to establish and manage a R100bn state-controlled Transformation Fund with monies created from the Equity Equivalent Investment Programme (EEIP), i.e., monies generated by BEE in practice. The wording in the preamble of the Bill pointedly comments, in poor English, that such funds are to be used by the state "for greater transformational impact and for a broader reach than is the case if the multinationals attempted to implement transformation initiatives themselves."
In reality, the minister is saying that the private sector has, in the government's opinion, failed in the co-operative development of black business opportunities, and Minister Tau is taking over. This is, of course, a load of old codswallop, it being well known that the Department of Small Business Development has a dismal record of achievement in terms of a similar mandate from fifteen years ago, with the private sector never having been specifically selected to undertake such a task.
Ministerial appointments
Nevertheless, Minister Parks Tau proposes that the new transformation fund will be managed "jointly by the private and public sector" through a Special Purpose Vehicle (SPV) with a board made up of directors from both government and the private sector, to be capitalized at R20 billion per annum over a five-year period.
The new Black Transformation Fund Bill does not appear to introduce any new taxes for which a money Bill would be required to be passed through Parliament but rather strengthens existing BEE rules and introduces further penalties for non-compliance with existing black empowerment regulations, heightening the need for compliance.
The fact that BEE, in many of its aspects, has been found to be an impractical proposition and from an overall viewpoint is not working, does not change the fact that it remains law. Reuters comments on BEE in SA as follows: "The empowerment law enacted in 2003 created a scorecard system that encourages companies to hire and promote Black people by offering them tax breaks and access to government contracts.
Two decades later, unemployment is five times higher for Black people than for white people and income inequality is the worst in the world, according to the World Bank, and critics say the empowerment policy has not worked."
Public comment needed
Debate in Parliament on the issue of the retention of BEE policies will again take place when the Black Transformation Fund Bill is finally submitted to Parliament in a few months' time, with the DTIC having absorbed the public comment and considered what changes, if any, are to be made.
The retention of BEE would seem to be one of the mainstays underpinning ANC strategy, with this policy manifesting itself mainly in the labour, trade and industry, financial, mineral and petroleum resources, and small business development portfolios. All these have ANC ministers, all blindly following a policy that is dead in the water and certainly not worth continued grey listing.
Toby Chance of the DA points to the chequered career of the ANC when it comes to the management of public funds and the size of the black elite taking advantage of government tenders, now enhanced by such legislation as the revised pointing systems under procurement legislation, a badly worded Expropriation Act, and now the Black Transformation Fund.
How far wrong is the US Department of Justice, as an outsider, in calling for the reversal by SA of such laws, since this is exactly what the Democratic Alliance is calling for?
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*Patrick McLaughlin: Editor, parlyreportsa