The Trade-Off That Could Rescue South Africa

Skim-reading just the bolded text may save you time

Imagine there’s been a disaster and people are hurt. The Red Cross and other medical relief personnel are on the scene. They begin the triage process to work out which patients should be prioritised.

Imagine, also, if the medical personnel gave a select group of people spa treatments: facials, manicures, pedicures, massages — the works, while ignoring those with the worst injuries.

 

 

The Problem With BEE

This parable is about abuses of Broad-Based Black Economic Empowerment, which could really be called Bribe-Based Black Elite Enrichment. Colonialism and apartheid were not natural disasters, but they were acts of war on humanity.

B-BBEE was intended to be the medical relief intervention. As a country, we skipped the triaging process and offered spa treatments to a politically-connected few while real victims bled and starved to death.

The worst part, in our observation as a BEE and transformation consultancy, is that this corruption happened under the guise of “radical economic transformation.”  It was radical economic transformation, all right, but not the kind South Africans have been looking for.

As a result of letting the law get abused to feed contesting loot factions, we’re now paying the price in state capture scandals, gratuitous cabinet reshuffles and severe economic instability. This has culminated in our being downgraded to junk status.

 

 

This is War

We anticipate that the integrity of the legislation we work with will be called into question so that it may be swept aside for “radical” measures that will sink us deeper into junk status. So, it’s important that we get vocal about how an Act as powerful as BEE has, inadvertently, been used for ends other than the spirit of BEE that the letter points towards.

How Does Triple-B Double-E Get Abused to Exploit the Private Sector and the Taxpayer?

The Ownership element of the B-BBEE scorecard speaks of what’s called a “new entrant.” The Department of Trade and Industry (DTI) increased the threshold of the value of equity previously held to qualify as a “new entrant” from R20 million to R50 million. This means that if you’re BEE-definition black and you’ve never had R50m value worth of assets to your name, you qualify as a “new entrant” and companies get bonus points for empowering you (under the ownership element) until your net worth value exceeds R49 999 999.99.

How many black people do you personally know whose net worth is that high? Why does our triaging process allocate so many resources to spoiling black people whose net worth far exceeds even the average white South African’s?

Are we really solving the inequality brought about by apartheid, or are we creating a new inequality at cost to the taxpayer? Can investors, creditors and other stakeholders really trust what we say in good faith, when our government is guilty of such double-speak? Do you see how the Department of Trade and Industry has played a role in undermining our position before rating agencies?

If we were serious about saving disaster survivors, the “New Entrant” Threshold would be lowered to match the lived reality of real South Africans. The resistance thus far encountered in this regard indicates forces with vested interests in spa treatments.

Inequality is not an accident of history; it’s a deliberate achievement. Black multi-millionaires should not count as needing the same empowerment as penniless black entrepreneurs. BEE should serve to up-skill and empower penniless black entrepreneurs, not pamper black multi-millionaires.

At BEE Novation, have nothing against black super-enrichment. We help businesses become stronger so their surrounding communities benefit. We do have a problem with unbridled enrichment happening through a legislative tool that was conceived to relieve poverty.

If we were serious about using B-BBEE to end the legacy of apartheid once and for all, we would lower the threshold for being a “new entrant,” and we would increase the number of points an empowering company can earn for using a new entrant. This would give smaller businesses a stronger chance to participate in the economy, and “graduate” accomplished black-owned businesses out of the BEE pipeline sooner.

 

 

Jump-Start the Economy

This small step would go a surprisingly long way in revving up the economy because it would “drain the swamp” of big black-owned businesses that get opportunities time and time again through BEE, which was supposed to give all black-owned businesses a leg-up so they could carry on and open the opportunity up for other small businesses to likewise grow.

We don’t view BEE consultancy as a job. If we did, we wouldn’t be speaking up against corruption done in the name of BEE. It’s because we take pride in the Act that we fight for it to fairly benefit all who come into contact with it — and yes, this includes our clients — that we are prepared to risk all respectability to fight for what’s best for the country they do business in.

*The commentary offered here is not business or legal advice; it is a perspective that is to be compared with others. BEE Novation will not accept liability for any loss, injury or harm of whatsoever nature and howsoever arising that result from interacting with said commentary. The material here is available for use at no cost but we ask that you credit BEE Novation and the author as its source. No politicians were harmed in the making of this thought-leadership piece.

 

 

10th April 2017

In Defence Of B-BBEE

Skim-reading just the bolded text may save you time Imagine there’s been a disaster and people are hurt. The Red Cross and other medical relief personnel are on the scene. They begin the triage process […]