The BEE Council is formed

The BEE Council is formed

The B-BBEE Act, 53 of 2003 was officially signed by President Mbeki on 7th January 2004. Paragraph 4 of the act states “The Black Economic Empowerment Advisory Council is hereby established”.

In December 2009, President Zuma announced the establishment of the council and named its members – 6 years after the act established the council. The aim of the council is to advise government on BEE, review progress in achieving BEE etc… (paragraph 5 of the act).

The first meeting of the council was held last Thursday, chaired by deputy President Kgalema Motlanthe. Predictably he complained about the slow pace of BEE (transcript – http://docs.iol.co.za/Empowerment).

He stated “We also have to admit that the ‘broad-based’ part of BEE has seemed elusive. In the main the story of black economic empowerment in the last 15 years has been a story dominated by a few individuals benefiting a lot“. He also said later “We are also aware that there is a section of our society that is opposed to black economic empowerment” and “Moreover, we should ensure that as we criticize, we propose solutions to the problems we identify”.

 

One of the decisions that was taken at the BEE council was to investigate why BEE is slow and the BEE Council needs to report back in a short time period.

 

We know that most members of the BEE council are subscribers to our newsletter and sincerely hope that they read it, as these are criticisms and suggestions as to how to get broad based BEE on track:

 

We at EconoBEE fully support broad-based BEE, as defined in the act and the codes. We do not support so-called other methods that are not included in the act and are contradictory to the act and the codes.

 

The deputy president is of course both right and wrong about the slow pace of BEE. He should be condemning the slow pace of transformation. BEE has officially not even started in its entirety.

 

In previous articles we have pointed out that the alternative to BEE is BEE. Our criticisms and complaints revolve around implementation and the slow pace of implementation.

 

The problems with BEE:

It has taken 6 years to appoint a group of 19 people to the council, and the act lays down exactly how and who the president should appoint. BEE has not been implemented yet, so it is a bit unfair to blame the slow pace of BEE on the act. Government does not follow the B-BBEE act, neither does the mining industry. Half the industries that should follow B-BBEE have charters or sector codes that cannot even be verified because there are no agencies accredited to do the job.

Other industries are using the lack of a sector code as a reason to delay implementing BEE.

As the deputy president correctly says, there is substantial negative perception about BEE. Most people believe BEE is about giving your business to a black person. The small group of “BEE partners” who have in many cases enriched themselves at the expense of proper empowerment and transformation is used as proof of this perception.

 

Unfortunately Government rewards companies for taking the above actions. (Its PPPF Act is contradictory to the B-BBEE act, and government still follows the PPPF Act).

Government continues to make life as difficult as possible for the small group of companies that wish to implement true and proper BEE policies by making it mandatory to have those BEE activities verified at extra cost.

 

Some people have suggested to me that companies get tax breaks depending on their BEE status and this is an idea we are evaluating.

 

Government refuses to educate the public and businesses on true and proper BEE. This is especially to emphasize the positive aspects of BEE to the companies that government is hoping will implement BEE. 5 years ago when we suggested to the dti that they implement training sessions, they told us it is not their job and suggested we do the work instead. We took on that challenge and it has been both enjoyable and profitable for us, but it would have been better for government to implement their own policies.

 

This is a formal invitation to all the members of the BEE council or their constituencies  to attend one of our training courses or seminars, at no cost – subject to them being prepared to implement and follow the B-BBEE act in their important deliberations. This is a formal invitation to the BEE Council to call upon us, at no charge, for any telephone or email support they may need in doing their really important job.

 

Suggestions to the BEE Council:

Encourage South Africans to be positive towards BEE by:

– Implementing it properly

– Ensuring that true empowerment takes place, and enrichment is removed

– Follow the act and the codes. In our opinion the codes are the most brilliant set of guidelines and policies that have been gazetted of any law, white paper or government document.

– Make it easier to comply: The charters serve little purpose and the only ones that have been gazetted are so similar to the codes as to make no difference, other than complicate the issue.

– Make it cheaper to comply. The verification process is complex and the accreditation process for the verification process is more so.

– Remove SANAS as the accreditation body. It has only accredited 27 agencies since the verification manual was gazetted in July 2008.

– Make the codes and interpretations easier to understand and consistent. This should have been the job of the dti and SANAS, but differences in interpretation removes all standards, making it more difficult to comply, making the country more negative about BEE.

– We have repeatedly complained about the lack of interpretation of the codes, and leadership from the dti and SANAS to the extent that we wrote to the dti minister asking him to appoint an adjudicator/ombudsman/arbitrator to ensure consistency in verification, analysis and implementation.

 

If verification is really needed, let accountants/auditors do the work. Accountants know the businesses they work for or audit, and are governed by a strict code of conduct and professional development. A person can be employed by a verification agency today, with almost no skills or training and is asked to perform an on-site audit tomorrow. No wonder the verification agencies are not consistent.

On the other hand an accountant has a professional qualification, and there is recourse to a mistake. In addition, for example SAICA has an on-going professional development program for chartered accountants. One of these could be the BEE codes.

While fronting is a problem, more companies are fronting to get around the “give half my business away paradigm” which is not BEE anyway. It is less likely that a business will front if it is following four or seven elements. It is far easier to identify fronting by analyzing a scorecard.

– Lead from the front: If government is serious about increasing the pace of transformation, it should start implementing B-BBEE policies in all its departments. Remove the restrictive, non empowerment clauses in its own tenders and policies. We acknowledge that the PPPF Act is being reconciled with BEE principles. 7 years later is too slow.

Let each government department produce its own broad-based scorecard. Stop awarding tenders based solely on ownership.

– One of the biggest industries in South Africa is the mining industry. They do not follow B-BBEE. The mining act, and a confusingly named document called the “mining charter” which has nothing to do with BEE takes precedence. This document does not follow broad-based principles. The only way to get a mining license is to ensure that the industry is dominated by a few individuals benefiting a lot. Get the mining industry to follow the B-BBEE codes.

 

In our opinion the above is a good start for the BEE Council. We want to see the people who need help – the ones, who due to apartheid and what happened afterwards, brought into the economy. We want to see young children educated and given life skills and move out of the vicious circle of living in squatter camps. We want to see a culture of growing the economy, which must level the playing fields after the disaster of apartheid. We know that this will take years. Even youngsters who were born after the great days of 1990 are still very disadvantaged because their parents were and remain so. I’m not saying every poor person automatically deserves special treatment – only ones that did suffer due to laws that were totally beyond their control. I’m also not saying that businessmen should not be allowed to make a profit. In a free market economy this is exactly what we want. In a way the tragedy is not that there are a few black businessmen making a lot of money – it is that there are not thousands more also benefiting.

 

We remain committed to the true ideals of transformation and empowerment. We can defend the reason for trying to level the playing fields, grow the country, make South Africa a better place for all. We cannot defend the type of enrichment we are often seeing and we are thrilled that the deputy president also recognizes this as a problem.

 

Please, BEE Council, listen to the people and do your important jobs properly.

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