Polo Radebe, the chief director of the BEE unit in the department of trade and industry, said that the greatest challenge the unit faced was regulating the labyrinth of empowerment legislation, which included eight Acts and 15 industry charters.
On February 9, the broad-based BEE codes of good practice passed into law. Their purpose was to provide both government and industry with a standard framework for BEE, which had become unmanageable because of the dissimilarities between the empowerment charters: some industries had stricter standards, which put them at a disadvantage when competing for business in sectors that had more lenient standards. (See sidebar for list of legislation).
Monitoring compliance to these new codes would be a “great challenge,” Radebe said, because the responsibility lay across government departments, which were notoriously bad at communicating with each other.
“The success of what we are doing lies partly in ensuring that all government departments are singing from the same song sheet,” she said this week.
Finance Minister Trevor Manuel’s comment in an interview with the London-based Financial Times that BEE should be reviewed had to be seen in this context, she said.
“When I read that in the Financial Times, my first reaction was that he didn’t say that, so I decided to get the full transcript. When you look at that I believe that he gave context to what he said,” said Rabede. “The problem he highlighted is in the implementation, it’s not a problem in the content of the policy. It’s the practice of BEE that we need to rectify.”
This is an old adage, but there was a heightened consciousness in government that BEE had become unwieldy. “There was a danger of us losing the plot along the way,” said Radebe.
The week after the codes were enacted, the trade and industry department held a two-day workshop with all the national departments to explain the codes to them. Since then the department has held similar workshops with all the provincial governments and will shortly begin a similar process with the private sector. “We wanted to plant the seed,” said Radebe. “We have now requested each department and provincial government to come back to us with their practical implementation plans.”
The codes stipulate between five and 10-year targets and include 25% ownership and voting rights; 50,1% management control; between 40% to 70% employment equity; 3% of a company’s payroll to skills development; 50% of total procurement from black-owned companies; and 2% of net profit after tax to enterprise development.
Asked if she felt BEE should include a sunset clause at the end of the 10-year deadline stipulated by the codes, Radebe said, “You cannot put a sunset clause on transformation,” but her hope was that the current momentum would make BEE “self-propelling” so that the economy reached a point in the future when “legislation was no longer necessary.
“That’s when the market starts taking care of itself, when equity becomes part of our psyche,” she said. “At that point I would like to remove the ‘B’ from BEE so that people stop talking about black people and see empowerment as an integral economic driver.”
Over the past few years BEE has come under increasing criticism for rewarding politically connected individuals rather than entrepreneurial acumen. Cosatu and the South African Communist Party have, for example, lambasted the policy for creating an elitist class of billionaires at the expense of the poorest, and ANC leaders have warned of the murky nexus that BEE has created between political parties, the state and the private sector.
An ANC task team including Manuel, businessman Saki Macozoma, ANC Deputy Secretary-General Sankie Mthembi-Mahanyele and Director-General in the Presidency Frank Chikane were recently tasked by the ANC with reviewing BEE within the context of ANC members and officials enriching themselves.
“We hear a lot about these beauty parades — of BEE consortia being judged by potential private-sector partners according to their political connections,” said Radebe. “But if we assume that the 67% votes that went to the ANC are a reflection of their support throughout the economy, then it suggests that 67% of the population are in one way or another connected to the ANC. So when you make the argument that politicians, or those with political connections are the ones benefiting, then you are almost suggesting that BEE should be confined to 30% of the population. So for me the discussion always baffles me.”
She said it was equally difficult to regulate the so-called “elitism” associated with BEE. During the drafting of the codes they had an informal debate about this, she said.
“But how do you determine how rich is rich enough,” she said. “Even if we were ready to go the route of regulation, would these guys give us access to their balance sheets? Much of their wealth is still on paper too. We would start entering murky territory.”
Much of corporate South Africa is still bewildered by the elaborate requirements of BEE but Radebe, a razor-sharp strategist, has got her head around the issues. For three years, the time it took to draft the codes, her team of 13 people “lost sense of time”, she said. It wasn’t unusual for Radebe to be in the office at 6am and leave well into the night.
“Now a bit of sanity has been restored. I’ve become friends with my daughter again!” she quipped. “For me, the beauty of the process is that people are no longer asking why we need BEE. They are asking how we can best implement it.”