Keith Levenstein, CEO of EconoBEE, a BEE advisory firm, has been appointed to the dti task team to examine and report on broad-based BEE schemes.

The task team was established as a consequence of the controversy around ownership notices issued by the minister in May 2015.

Levenstein said there has been concern about Employee Share Option Participation Schemes (ESOPS) and Broad-Based schemes for some time now. “I have been outspoken about some bad schemes and, even though I am often critical of the dti, I like to think I am objective. The minister obviously felt I could add value and I I’ve accepted his invitation,” he said.

Levenstein said there is nothing essentially wrong with broad-based schemes per se. “However some have been designed in a way that displays no real ownership. What many people forgot is that a broad-based scheme is firstly an ownership scheme and secondly a broad-based scheme. In some cases companies set up broad-based schemes with no ownership, but they were awarded points. This was wrong.”

“With no actual ownership accruing to the beneficiaries, the scheme has more of the characteristics of a socio-economic development initiative than ownership. Imagine spending a small amount of money on a genuinely good cause, but calling it ownership. This is what is happening.”

Levenstein said that some of the good BEE ownership schemes include MTN’s Zahkele scheme that also has the characteristics a broad-based scheme. “The shareholders bought their shares, took the risk and benefited hugely. Nedbank, long ago, announced its employee ownership scheme, also to the benefit of all.”

“B-BBEE remains broad-based: The five elements cover aspects of the business, society and the economy. Even within ownership, the codes encourage a broad-based approach. The driver is how points are awarded. Additional points are awarded for black women, not only men. The points encourage involvement of younger entrepreneurs (under 35 years old) and new entrants to the field of investments. A standard ownership deal does not earn as many points as one that properly involves employees, or the broad-based community. It is not called Broad-Based Black Economic Empowerment for nothing.”

“We’ve been concerned about some of these schemes for a long time – since 2007. It should not have taken so long to start investigating it. Some companies have been awarded ownership recognition points for the past 7 years on a dodgy scheme, when it should have been denied upfront.”

Levenstein said it is not the codes that are wrong. “To me the codes are clear. These strange practices are not supported by the codes. However, the lack of guidelines and lack policing of verifications by the regulators has enabled this to develop.”