Rethinking BEE: Towards sustainable empowerment - Phillip Dexter COPE MP

The current empowerment environment is unworkable and "broken". We need to fix it.

• Some of the difficulties include -
  It is impossible to police;
• Its application is arbitrary and ad hoc;
• There is still no uniform standard across government and the private sector;
• It is extremely complex and hence difficult and costly to implement;
• It is becoming highly contested and the private sector, although sometimes not opposed to transformation, is becoming fatigued and disinterested;
• The current environment promotes avoidance, deceit and even corruption.

And of greater concern:

• It is not achieving its underlying goals;
• It is being used as a cover for corrupt practices (it is a soft basis to divert a contract).

It is proposed that the BEE legislation needs to be totally overhauled. The rethinking we need to do must separate out promoting black business ownership from broad-based empowerment objectives and from entrepreneurship in general.

BEE should only deal with ownership issues and the transfer of ownership to black people. All the other legs of the "broad based" standard (such as skills development, employment equity etc) should not be regarded as BEE. They are stand-alone socio-economic issues that can be dealt with on a case by case basis through specific legislation (including industry specific legislation). They can also be policed more effectively in this manner. In most cases, they would be good practice in any country. Classifying them as BEE conflates these issues and makes the policy objectives unclear.

The ownership issue should be made as simple as possible. On a staggered implementation basis, a standard of 25.1% should be a hurdle for any procurement from government and the private sector and anything above 25.1% and specifically 50.1% ownership should achieve a weighted benefit in accessing a contract. The make-up of the BEE should be irrelevant. It is a function of negotiation between the companies and prospective shareholders.

For example, let black entrepreneurs persuade companies that they offer a better value proposition than an ESOP. In reality it is likely that larger companies will opt for broader ownership and smaller companies for individual and active ownership, which makes sense and creates opportunities for entrepreneurs.

The same approach can be used to achieve targets for ownership of businesses by women, people with disabilities and to promote youth in business. This strategy help to make distinct the objectives of promoting Black entrepreneurs as well as entrepreneurship in general across all races, genders and among the youth, from the broader socio-economic targets of promoting employment equity, and from achieving the overall objectives of lowering the income gap.

BEE is essential, but we cannot afford to be romantic or mechanical about it. Achieving increased Black ownership of businesses is necessary for development. Achieving broad-based empowerment is essential for dealing with inequality. Encouraging and supporting entrepreneurs is essential for the vibrancy of our economy. But these objectives are not one and the same thing. The current BEE policy has outlived its usefulness. We need to clarify our policy objectives and then develop strategies to achieve these.

Phillip Dexter is a COPE MP

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