The draft information communications technology (ICT) empowerment charter needs substantial changes to prevent significant additional costs to foreign investments in South Africa, the Democratic Alliance said on Wednesday.
Industry stakeholders are set to meet on Friday to finalise black economic empowerment goals in the ICT sector.
DA trade and industry spokesperson Enyinna Nkem-Abonta said the stakeholders involved in Friday’s indaba on the charter should adopt equity alternatives for foreign firms.
The requirements and prescriptions of the third draft of the charter, although sensible from a South African perspective, could simply be seen as a tax on investment in the country.
Nkem-Abonta said a consortium of foreign multinationals had proposed a set of equity alternatives to measure the transformation of foreign firms in September last year.
They proposed that investments given to communities, assistance given to entrepreneurs, and the retention of dividends should be recognised as equity alternatives.
They stressed the fact that these interventions would achieve the main objectives of black empowerment and could be accurately measured.
The DA believed these suggestions were sensible and helpful and should be heeded.
Many local offices of multinational firms have little control over ownership decisions and some international IT companies do not permit equity participation at all.
”It would be counterproductive to chase such investors from our shores and continue the decrease in foreign direct investment that already declined by 20% last year,” he said.
The charter working group has also overlooked another very important constraint in the charter — the lack of black investors to take up the 25% of ownership that has to be transferred in the next five years.
”It has been calculated that the transfer of 25% of the listed technology groups alone will cost around R3,7-billion, with 25% of Microsoft SA worth R500-million alone.
”Business Map director Reg Rumney has pointed out that, because foreign-owned companies will be averse to selling their shares at less than market prices, ‘there is not the money for these kinds of transactions’.
”We urge the charter working group to rethink the clause that prevents the substitution of underperformance in one category with performance in another.
”This will take pressure off the black capital market that is already cash-constrained,” Nkem-Abonta said. — Sapa