Defend Truth

Opinionista

Towards B-BBEE that advances all, not some

mm

Mmusi Maimane is leader of Build One SA.

A system of narrow targets aimed at enriching those who are already connected will do nothing to bring about real structural change in our economy. Race remains a proxy for disadvantage, but if we are ever going to transcend this as a nation, then BEE needs to be truly broad-based, incentivised and focused on job creation.

The decision by government to amend the B-BBEE Codes of Good Practice early in May ignited a furore in the business community that led to a prompt reversal by the Department of Trade and Industry (DTI).

At the heart of the uproar was the unexpected announcement by Trade and Industry Minister, Rob Davies, that the B-BBEEE scorecard would be amended to decrease the number of points that can be earned through broad-based and employee ownership schemes.

Under the previous dispensation it was possible for companies to get full marks for the black ownership section through broad-based schemes, but this would now be limited to three points out of a possible 25. This would result in companies being disincentivised to engage in broad-based empowerment and instead empower a small group of individuals.

One of the most important aspects of economic policy is certainty. Companies and investors make decisions based on a set of assumptions and the success of those decisions often depends on how correct those initial assumptions were.

In the case of the B-BBEE Codes of Good Practice, countless firms made the decision to increase their BEE level through broad-based ownership schemes, as this would simultaneously allow for a broad group of individuals, often employees, to share in the wealth of the company.

After all, if the purpose of broad-based black economic empowerment is to build a more inclusive economy, then broad-based ownership schemes were certainly a step in the right direction.

If the DTI had proceeded with the amendment to the Codes in the initial clarification, this would have penalised companies that undertook a process of ownership transformation based on a now defunct set of assumptions. All of these companies would have seen a decline in their BEE level and, over the long term, resulted in firms deciding against broad-based empowerment schemes.

While the subsequent reversal by the DTI has mitigated some of the damage this clarification would have caused by, first, limiting its impact to B-BBEE deals concluded after 1 May 2015, and later apologising, the intention of the original proposal itself was troubling.

By amending the ownership section of BEE scorecards to discount these schemes in favour of narrow empowerment, the government was sending a clear message that the real intention of BEE is not broad-based at all. This is underscored by the statement by the DTI earlier this year that R1 billion would be made available to support the creation of 100 black industrialists over the next three years.

The Democratic Alliance (DA) believes firmly in the need for redress, acknowledging that South Africans will only be truly free when they are able to pursue a life they value regardless of the circumstances of their birth. Freedom without the opportunity to build a prosperous future is meaningless.

But a system of narrow targets aimed at enriching those who are already connected will do nothing to bring about real structural change in our economy. Race remains a proxy for disadvantage, but if we are ever going to transcend this as a nation, then BEE needs to be truly broad-based, incentivised and focused on job creation. As long as 1 in 3 South Africans are without work, we will not see a decline in inequality through limited BEE.

Our long-term goal as a nation must be to transcend racially-skewed poverty and access to opportunities by building an inclusive economy where reward is linked to effort. South Africans share our belief that success should be determined by hard work and ambition, and not by one’s level of political connectedness.

This belief is central to the DA’s new Values Charter, underpinned by the core principles of Freedom, Fairness and Opportunity.

The principle of Fairness is key to our stance on empowerment. Given the immense challenge of redressing Apartheid’s legacy, it cannot be fair for government to re-empower connected individuals at the expense of substantive empowerment for a broader base of South Africans. Changes to the scorecard that would discourage broad-based ownership schemes would only serve to exacerbate this.

In contrast to this, the DA believes in an empowerment system of positive incentives to diversify ownership and employment, aided by a rising tide of economic growth and job creation that would increase the opportunities available to all South Africans.

The DA would accomplish this through economic policy that focused on infrastructure development, the eradication of skills shortages through increased access to high quality education, and the promotion of entrepreneurship through targeted programs aimed at assisting start-ups and small businesses. The Empowerment Scorecard and Good Practice Codes should be amended to incentivise job creation, support for small business, investment in skills development, and the promotion of diversity.

Empowering a million small businesses would go a great deal further to address unemployment than the empowerment of 100 black industrialists.

Herein lies the clear blue water between the DA and the ANC – we believe the only solution to widespread poverty and inequality is job creation. The current system of B-BBEE does little more than seek to manipulate outcomes while doing nothing to address the underlying cause. DM

Gallery

Please peer review 3 community comments before your comment can be posted

Every seed of hope will one day sprout.

South African citizens throughout the country are standing up for our human rights. Stay informed, connected and inspired by our weekly FREE Maverick Citizen newsletter.