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Here’s how BEE must change to meet Ramaphosa’s vision for South Africa

JOHANNESBURG — Debate around the right way to implement Black Economic Empowerment rules has swirled around for years. But does the country need to sharpen its focus around BEE, especially amid winds of political change? It’s a question that Paul Janisch raises in this piece. – Gareth van Zyl

By Paul Janisch*

Paul Janisch

It’s been over a week since Cyril’s SONA and our initial euphoria has been tempered by Gigaba’s reality biting budget speech. It’s now patently clear that Zuma’s gallant attempt at destroying the economy was remarkably successful. That might be a little too lenient on the erstwhile statesmen. His lack of leadership has left the fiscus, the economy, the government and the country in complete turmoil. No amount of litigation and Zuma/Gupta dock-sitting is going to make this pain any more bearable. Cyril also has to live with the fact that the last nine years have created a massive trust deficit between the public and the government. Cyril’s words at the SONA were comforting and probably lulled us all into a temporary false sense of security. But reality bites hard and we are unlikely to take his word at face value. We want action. Zuma made all sorts of promises in his SONAs but it was only those that served the interests of his kleptocracy that were honoured. Think about procurement set-asides that Dudu Myeni illegally imposed at SAA.

In spite of my cynicism, I do recognise the importance of resuscitating the economy. We can’t run away from this. The imperative to create employment cannot be overstated. Social interventions like black economic empowerment (BEE) have to play a greater role in this process than they ever have before. But they cannot deliver on this imperative in their current guise. If you consider that Gigaba has raised taxes and reduced the disposable income of most corporates, and taxpayers, there is now less money for extravagant BEE programmes. Davies’ Marxist-inspired altruistic BEE codes are in severe danger of collapsing in on themselves.

It’s been three and a half years since Davies gazetted his latest set of BEE codes. In that time, he has also overseen the gazetting of numerous industry-specific charters, culminating in the financial sector code in December 2017. This must have felt like a coup to him because he got it done in three years, three times faster than the previous one took to gazette. Over the last three years, I have seen a number of companies simply falling off the BEE radar. Of the 100-odd qualifying small enterprises (QSEs – turnover between R10m and R50m) that I have assisted in the past decade, only one has attempted to be rated under the new codes.  The balance have either opted for non-compliance or simply restructured their shareholding to appear to be 51% black-owned. The sole compliance company has gone to great expense and has come out in a far worse position than the effort was worth.

Read also: The growth Gigaba wants requires a shift from BEE – Anthea Jeffery

A number of larger companies (turnover in excess of R50m) have simply requested their verification agency to give them a non-compliant BEE certificate. Not your average non-compliance certificate, one with five zeros on it. The reasoning behind this is simple, under Davies deluded regime if you have 54.99 points or zero you are still non-compliant. Why go to the extraordinary effort and expense to get to 54.99 points when the result is exactly the same as zero. I can only assume that the market is accepting these BEE certificates because I’ve heard of very little pushback.

These companies have fallen off the BEE map and with it their enterprise and supplier development as well as socio economic contributions. They are still skilling up their staff because being in business requires it and they are still attempting to meet their employment equity commitments. There is no incentive to go back onto the BEE map because they have chosen to exercise their constitutional right to retain 100% ownership of their businesses – something that would be regarded as racist…

Read also: Dear President Ramaphosa, success of ‘build SA’ will rise or fall on character

Because of this simple omission they will make no contribution to emerging black businesses or charities. I’m sure Davies and his cabal of Marxist and militant employees are hatching all sorts of plans to punish these companies even further because of this. But this will be to no avail. They are lost to the system and it will be nigh on impossible to get them back.

What we need now are friendlier policies that encourage compliance, not policies that presume that all corporates are inherently racist and anti-transformation. These policies need to encourage and reward transformation, unlike the current system that only punishes. Most importantly it needs to embrace every company that is able to contribute, Davies’ head-in-the-clouds system exempts companies who are more than 51% black owned and turnover less than R50m from even bothering to contribute to the empowerment process.

The old is out and the new is in. More magic available at jerm.co.za.

What if Cyril took a different approach. What if he appointed a minister of trade and industry who saw black economic empowerment in its correct context; a context which recognises BEE’s contribution to nation building and restoring the economy. He wouldn’t have to do too much here. He cannot change the BEE codes wholesale because it will show that ANC policies are not workable. The business community would be hard pressed to swallow another change in the ANC’s transformation policy. All Cyril would need to do is remove the priority elements requirement. These are the elements, like ownership, which must be complied with. A failure to do so results in the company dropping a level. He should also reduce the points levels to those of the earlier versions of the BEE codes. It would also help if SANAS were told to drop their ridiculous levels of compliance checking and start giving companies the benefit of the doubt. But this might be too tall an ask for now. This gesture would be a small step in rebuilding the trust that the Zuma years have categorically destroyed and would bring those companies that have fallen off the radar back into the fold.

Business wants this country to succeed and is willing to play a significant role in this process, but it also needs to be shown that its efforts are making that contribution and that it is being acknowledged. Awarding BEE points for efforts that achieve these goals will make a major difference in the lives of those contributing to employment and growth.

  • Paul Janisch is a BEE compliance expert who is buoyed by the appointment of Cyril Ramaphosa but also realises that policies that were created under the Zuma regime cannot deliver on the promises that Ramphosa has and will make in the future. He can be contacted at [email protected]
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