Narrow Based BEE is the easy way out

I spoke to one of the mining companies and they proudly offered me their annual report. Being a BEE consultant I quickly browsed to the Broad Based Black Economic Empowerment section of their annual report.

It looked very well typed and they had made an effort to make sure that their BEE Status was inline with that of their competition. The problem is – the Mining Charter has been gazetted within an act and it is Narrow Based. This company had written a very good description of what they had done, but in Narrow Based terms.

Their narrow based terminology made no mention of true empowerment.They had also left out all of the great projects that they very proudly support – ranging from sponsoring schools to helping support the communities that are reliant on their mines.

They used a Narrow Based BEE Scorecard (in their case it is inline with the mining charter). They have only taken into account the ownership of the company. They need a black owned investment fund. Then they need to sell the shares. They gave a large discount on the shares which made the transfer go through without any problems. The banks are happy to lend the money because its practically paid for with the large discount. A simple sale of a small percentage of the shares would more than cover the debt owing to the banks. They also went for a small staff trust which now owns a small part of the company.

When I finished reading what they had done and that they had met all the required targets it struck me that they had barely done anything for Black Economic Empowerment. They gave their staff a small share of the company (this had to be split among 20 000 people). They gave a large discount to the new investors, but they had not increased the employment levels with their big discount. They spent no additional money in training their employees to make them more productive and give a better product to their customers. They didn’t increase the number of businesses operating in South Africa. They gave a large discount to an investment company that had a minimal risk to make millions out of the deal.

This company is happy they are now “BEE Compliant” according to the acts they need to follow. Their Narrow Based BEE deal has been concluded.

Many companies and government departments ask their suppliers for information that only involves Ownership and Management. Often the very same people advertise that they have done so much for BEE because they have a Black Partner. With companies asking for this information you can very easily “make your company look compliant” by appointing a black partner or manager. This does not mean very much at all for the poor person who has been appointed to run the company when he was and still is employed as a driver. This is called fronting.

Narrow Based BEE makes it very easy to pretend to reach targets and leaves plenty people wondering what is happening with BEE. Is BEE working? Is BEE not meant to help the entire population and help educate the previously uneducated, help develop businesses that have potential but need some assistance, reduce the number of unemployed rural people and make South Africa a safer and more economically active place to live.

The truth is yes BEE is supposed to make South Africa a better place, empower black people and yes if companies followed the Broad Based Black Economic Empowerment Codes of Good Practice we would achieve these objectives. The Department of Trade and Industries BEE Codes does take into account the skills training, enterprise development, charitable contributions and even buying from BEE Compliant companies who have good BEE Scores and it also does take into account the Ownership, Management and Employment of companies.

We can all make a tremendous difference to BEE or true empowerment, Broad Based Black Economic Empowerment by following the BBBEE Codes of Good Practice.

Gavin Levenstein

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