The clarification of new Black Economic Empowerment (BEE) codes has been met with a mixed response from the business sector in South Africa.
The main amendment of the codes – announced by the Department of Trade and Industry (DTI) - will see broad-based empowerment and employee ownership schemes counting less than individual share ownership on company scorecards.
A possible end to 'fronting'
Keith Levenstein, CEO of BEE advisory company EconoBEE says that the change in regulation is necessary because many of the country’s business industry has had a problematic approach to the codes of good practice.
It is not because they don’t want broader participation in the economy, nor because they don’t want employees to participate in employee ownership schemes. It is purely because, regretfully, many of those broad-based schemes and employee ownership schemes turned out to be a complete sham. Some of them worked fantastically, but many of them, were simply aimed at making sure that a company gets BEE points without an employee or broad-based scheme ever getting an form of ownership or recognition.
Passive and active ownership
Last Friday, DTI Minister Rob Davies said that he will appoint a technical task team which will explore the appropriate balance between active (direct) and passive (broad-based schemes) ownership. The technical task team will report its recommendations to the Minister within 30 days.
Levenstein says that the role of the BEE verification industry, on checking the broad-based schemes before awarding compliance points, needs to be reassessed. He says that the DTI ought to ensure that the verification bodies thoroughly investigate whether black beneficiaries receive the full rights of holding company shares.
Truly transforming South African business
Sandile Zungu, the Vice President of the Black Business Council says that broad-based schemes have been taking shortcuts at the expense of enabling those who want to build wealth and contribute towards the global economy.
When we talk about the codes of good practice, we have to remember the spirit of transformation. BEE was not to inculcate the ticking of box mentality in corporate SA. It is about the spirit and sense of sharing. Economic power must be shared and jointly managed by black and white people. The attitude of hating black industrialist is something that we must frown upon.
He says that local businesses have been insufficiently hiding behind employee share-ownership programme (Esop) schemes as their best efforts to transformation. Zungu says that the business sector needs to identify black individuals and groups to hold their management accountable to giving stakes in their company to other black individuals.
Listen to the full conversation, with CapeTalk's Africa Melane standing in, on Breakfast with Kieno Kammies: