Mandatory enforcement of BEE in community schemes must be rejected – Institute of Race Relations’ Mlondi Mdluli

South Africa’s Minister of Human Settlements, Mmamoloko Kubayi, sparks debate with her proposal to impose race-based economic transformation on community schemes, raising concerns about its impact on homeowners and the middle class. The Institute of Race Relations seeks clarity and challenges the move, vowing to fight against this controversial policy shift.

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Enforcement of BEE in community schemes must be rejected

By Mlondi Mdluli*

A month ago, Minister of Human Settlements, Mmamoloko Kubayi, delivered an address at the Community Schemes Ombud Service (CSOS) Indaba in which she said that community schemes (which include sectional title complexes, homeowners’ associations, retirement housing schemes, share block companies and housing cooperatives) should be subject to mandatory ‘economic transformation’.

The words ‘economic transformation’ may look good in the eyes – and will most definitely sound good in the ears – of many, but it is crystal clear what the minister is implying. She is effectively suggesting that community schemes must be subjected to unjust race laws such as Black Economic Empowerment (BEE), which have dismally failed since they were implemented. It is surprising that the government wants to enforce yet more race law, even as it struggles to name any meaningful successes of the race-based law it has introduced so far.

Declining service delivery, unemployment, low economic growth and inequality persist. Instead of addressing these pressing issues, the government sees fit to unfairly target community schemes. The Institute of Race Relations (IRR) does not take the government’s plan to impose race laws on community schemes lightly. 

Community schemes represent the home investments of innumerable South African households. For most, this will be the largest outlay they will ever make; for many, costs associated with housing are the single largest monthly expense.

This is a significant matter for the country’s hard-pressed middle class. Not only has the country seen a marked escalation in the cost of living, but state failure has forced those who can afford it into a regime of effective double taxation, as they buy privately what the public administration is not providing. This is part of the reason for the growth of community schemes in the first place.

Making empowerment criteria mandatory would be another effective tax, the equivalent of demanding that households commit an additional portion of their after-tax incomes to supporting a government policy.

BEE is not a mandatory obligation for either the public or the private sector. It is surprising that Minister Kubayi proposes imposing it on ordinary households.

Read more: Andrew Kenny – BEE is destroying the economy and hurting the poor

Clarity

The IRR has reached out to Minister Kubayi to request clarity on a few things. First, the minister has not indicated whether she, the Department of Human Settlements, and the government have engaged with stakeholders in the community schemes sector. It would be interesting to understand the main concerns and challenges these stakeholders have expressed regarding the imposition of race-based policies like BEE. Second, we have requested Minister Kubayi to provide us with her department’s analysis of the implications and consequences of race-based policies like BEE on overall unemployment, black unemployment, and youth unemployment over the last twenty years since its inception. Third, we have requested the Minister to provide us with insight into the socio-economic impact assessment and analysis that informed her announced plan to extend BEE to the community schemes sector. Such an assessment is crucial to understanding the rationale and expected outcomes of this policy direction.

Fourth, given the documented challenges and shortcomings of BEE, particularly its impact on unemployment, we have sought an explanation as to how its record justifies the intention to further implement race-based policies in the community schemes sector.

Furthermore, we have sought clarity on the legal foundation underpinning her decision to extend race-based policies like BEE to the community schemes sector. We have requested the Minister to provide us with the legal analysis that led her to believe she has a mandate or authority to implement such policies so assertively in this sector. It is imperative to note that in existing law, BEE is not a mandatory obligation. Given this context, her assumption of such expansive powers raises significant concerns.

The introduction of preferencing policies will significantly affect many stakeholders in the community schemes industry. Many organisations that are involved in the community schemes sector are yet to indicate whether they agree with Minister Kubayi’s view.

Read more: Is BEE holding back South Africa’s growth?

Stakeholders

Over the past few weeks, the IRR has sent a series of letters to stakeholders in the community services sector to enquire whether they agree with Minister Kubayi. Blow is a full list of the organisations that the Campaigns team of the IRR has reached out to:

  • Simbithi Eco Estate
  •  Community Associations Institute of South Africa
  •  National Association of Managing Agents
  •  Association of Residential Communities
  •  Plumage Property Group (Steyn City)
  •  Val de Vie Estate
  •  Waterfall Management Company (Waterfall Estate)
  •  South African Landscapers Institute
  •  Atlantic Beach Golf Estate
  •  Silver Lakes Golf Estate
  •  Pezula Golf Estate
  •  The River Club

South Africans must brace themselves for an extremely difficult time.

However, the Institute of Race Relations will fight this head-on, as it has fought other race law over many years. Race-based policies were successfully defeated in the ending of apartheid, and they will be defeated again now. 

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*Mlondi Mdluli is an economist, and Campaign Manager at the Institute of Race Relations.

This article was first published by Daily Friend and is republished with permission

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