The government’s Black Economic Empowerment (BEE) strategy came under fire at Parliament on Tuesday, with both business and labour expressing serious concerns.
South Africa’s largest labour federation, the Congress of South African Trade Unions (Cosatu), warned members of Parliament the strategy document, as currently worded, could effectively enrich a black elite.
”Promotion of a narrow approach to BEE creates a conflict of interest between those who want to use the state to profit themselves and their allies, and the majority of poor communities who are desperate for affordable services and job creation,” Cosatu research co-ordinator Elroy Paulus said.
He was speaking before Parliament’s trade and industry portfolio committee, which is holding hearings on draft legislation to usher in the empowerment strategy.
The Broad Based Black Economic Empowerment Bill, among other things, proposes the establishment of a BEE Advisory Council.
Paulus said instead of addressing the historic marginalisation of the majority, the strategy merely attempted to justify the sale of state assets, in the name of BEE.
”The divesting of these assets into the hands of a relatively small number of private individuals, no matter who they are, undermines this historic mandate.
”This is one of the most glaring shortcomings of the BEE perspective espoused in the strategy document, which almost entirely ignores the need to strengthen social capital.”
There was a disproportionate emphasis on big business in the document, while the definition of BEE was too vague, he said.
The one-sided focus on procurement, and the promotion of small companies was also problematic.
Paulus said the emphasis on ownership and control would lead to increased representivity within existing market structures.
”Given the concentration of ownership in South Africa, this approach will effectively only enrich a small black elite,” he said.
The SA Chamber of Business (Sacob) warned the BEE proposals could harm small businesses, and potential investment opportunities.
Abri Meiring, the chairpersonof Sacob’s parliamentary committee, said in a submission to the committee that the business body fully understood the need to bring the previously disadvantaged into the mainstream economy.
”However, we must express some reservations, particularly in regard to the adoption of legislation that has the potential to undermine the continued viability of small business enterprises.
”We are also concerned about compliance conditions imposed on prospective investors, and we must warn against the possibility of undermining efforts to foster national cohesion and identity.”
The empowerment strategy could add to the already overwhelming compliance costs for many small entrepreneurs.
By threatening the termination of contracts should certain BEE targets not be met, the brunt of compliance would be handed down to existing small companies.
”The survival strategy for such businesses must now be assessed in terms of their ability to comply or to close down,” he said.
The size of operations in small companies would not interest any large black empowerment consortium.
”A small company would then be forced to seek out an unknown and unproved small black business as a possible partner,” Sacob said.
The state’s BEE strategy encourages partnerships between the public and private sector through charters and targets. It will target elements of human resource development; employment equity; enterprise development and preferential procurement, as well as investment; ownership and control of enterprises; and, economic assets. – Sapa