The South African Chamber of Business (Sacob) on Wednesday warned Parliament about the politicisation of business through the proposed Broad Based Black Economic Empowerment (BEE) legislation.
In a submission during public hearings on the Bill before the National Assembly Trade and Industry committee, Sacob parliamentary committee chairperson advocate Abri Meiring argued that the establishment of an advisory council was of concern.
“Sacob acknowledges that it is impossible to do business without being attuned to politics. This realisation goes for business in both the developed and developing world.”
“Seemingly the scale of that interplay is far greater in the developing world, such that in some cases it is difficult to determine just where business ends and politics begins.”
However, he argued that Sacob would not wish for that interplay to become overly emphasised in South Africa for it could be extremely damaging.
“It is with that in mind that concern must be voiced over the prospect of an establishment of an advisory council whose function will be to advise government on the implementation of BEE without sufficient clarity on its composition, role and mandate,” Sacob argued.
In terms of the Bill the council is chaired by the South African president and such other members as may be determined by the council’s constitution.
Sacob was also concerned about government’s empowerment strategy as it affected small business.
In considering the compliance requirements that have to be secured to be empowered, Sacob noted that the trade and industry department’s guide for preferencing and targeting support — such as for government contracts — a black enterprise is defined as one in which 50,1% of the business is black-owned; and a black empowered enterprise is defined as one that is at least 25,1% black-owned.
Small business is unlikely to attract large black empowerment consortiums as partners, he noted and thus small business must “perforce seek out an unknown and unproven small black business as a possible partner”.
“For any small business operation seeking to meet an ownership compliance requirement, the quality of a partner and its ability to provide a financial stake are important,” he said.
“The chances of a black partner being able to sink equity into the operation are remote … such a constraint requires the adoption of a suitable instrument that will enable a black partner to be brought into the operation. If a reputable firm is engaged to devise an appropriate strategy, the cost can be prohibitive.”
“If the new arrangement success both parties are winners but if it fails the fall-out will probably be borne by the non-black partner… finding a means by which a proportion of the business risk can be shifted on to the black partner’s shoulders is difficult.” – I-Net Bridge