Thebe Mabanga
The government is set to introduce a new strategy for black economic empowerment next month, which will extend the principle of empowerment charters to new industries and may lead to the disappearance or merger of state financing agencies like Khula.
However, the government will not act on a call by the Black Empowerment Commission (BEC) to introduce a softened form of prescribed assets, in terms of which a portion of retirement fund and state pension fund assets would be “diverted” to “productive investment in areas of national priority over a five- to seven-year period”.
The government is silent on the matter, believing more discussion is needed.
The most controversial aspects of empowerment have been the small pool of beneficiaries of deals, a lack of access to finance by potential entrants and “fronting”, whereby white companies use black front-men to land government contracts.
Andy Brown, of the black economic empowerment unit in the Department of Trade and Industry, said the new state strategy was in essence a response to last year’s BEC report. It was presented to the recent Cabinet lekgotla and may form a small but crucial part of President Thabo Mbeki’s state of the nation address today.
The government’s new “Strategy for Black Economic Empowerment” endorses the BEC’s proposal of an advisory council in the presidency to champion the empowerment cause and monitor policy implementation.
A key component of the policy will be sector and industry empowerment, by broadening empowerment charters to a wider range of sectors and industries. Charters lay down targets for black ownership and control. At present only the liquid fuels industry has a charter in place, setting itself a target of 25% black ownership and control by 2010.
The plan is also set to include a fresh approach to coordinating and streamlining development finance institutions such as the Industrial Development Corporation, the National Empowerment Fund, Khula Enterprise Finance Facility and the Public Investment Commission. This was a major theme of the BEC’s report.
Streamlining will involve compiling due diligence reports and evaluating the capacity of financing institutions with a view to possible consolidation where there is duplication or a failure to do the job.
This could lead to the demise of institutions like Khula, a guarantor of loans to small, medium and micro-enterprises, which is widely seen as a failure.
Government procurement policies, attacked by the BEC as inadequate in building empowerment, are also reviewed in the strategy.
For the moment, the Preferential Procurement Policy Framework Act will remain in place despite criticism from black business. However, the government will increase its ability to execute policy by training staff and encouraging practices like prompt payment to small suppliers.
Most importantly, the strategy calls for an increased pool of ownership and control, to spread profits and returns on investments to a larger group of people by encouraging cooperative ownership and collective investments.
This will be kick-started by the tabling of a cooperatives Bill in Parliament early this year and establishing a cooperatives business unit in the trade and industry department. The aim is to move cooperatives beyond the agricultural sector into other parts of the mainstream.
It has already been decided to link to Telkom’s pending listing with a retail scheme that will offer black investors Telkom shares at a discount. This is along the lines of Johnnic’s Ikageng share scheme and M-Net’s Phuthuma deal.