So it’s been 10 years since the Broad Based Black Economic Empowerment Act was gazetted into an all encompassing law. Suffice to say, the outcomes of the legislation have roused many an opinion from every Man and his dog. Some of this opining has been well within reason and has contributed much to the ongoing debate about empowerment in South Africa. Yet much of it has been mired in political rhetoric, at times, with zero economic rationale.
Gone are the days, or are they?, when most people thought of BEE as the preserve of a few political elite who donned button-collar striped shirts with sharp-pointy shoes and drove in German sedans. The days when the mere mention of BEE would have you ostracised and likened to a wannabe bourgeoisie. Nowadays, even the layman understands that BEE is but a mere policy of Government aimed at redressing the economically entrenched imbalances of our shameful past.
So what has BEE achieved in 10 years? Have we made significant progress and taken bold strides towards that nirvana of economic emancipation for the majority of the previously disenfranchised? OR perhaps, have we perverted the very concept of empowerment and merely redistributed the economic cake to a few ‘connected’ individuals? Have our political forebears and custodians of policy sold out on the ideologies enshrined in the freedom charter, all in the name of BEE?
That BEE has conferred economic benefits to black people goes without saying. Billions of Rands have been accumulated by the savvy oligarchs, the politburo and a few lucky buggers! The first phase of BEE [ala 1994 – 2004] was characterised by an almost free for all seizure of opportunities. White owned companies literally “gave-away” equity to the black who’s-who that occupied the upper-echelons of the ruling party. It was a banquet of untold proportion that to this day remains the envy of all the uninvited onlookers.
Worryingly, apart from a handful of the new beneficiaries of South Africa’s very own gilded-age, BEE doesn’t seem to have even remotely changed the lives of many? Yes the middle class have doubled from roughly 2 million in the 1990s to roughly 4 million now. Yes there are more people with access to lever-flush toilets, running water, electricity, access to the internet and all these wonderful things that have scant correlation to BEE.
Indeed, the ascent of the South African middle class can be said to be a once-off (at-least for a while) phenomenon caused by economic development in general and not BEE in particular. Think about it; empowerment is a subset of development, without economic development there can be no economic empowerment. At best, there can be economic redistribution but certainly no national wealth creation. One of the reasons for this extraordinary growth is that economic growth, driven entirely by exogenous factors, averaged 5% from 2003 to 2007.
This could explain why the swell of the middle class peaked in 2007; since then, growth of the middle class has just about stagnated. We all know the economy has gone to the dogs since then. The BEE banquet has turned into famine with big deals virtually unheard of these days. Smaller deals abound but fail to attract the newly rich and difficult to finance for the wannabe rich. Nowadays being involved in BEE deals means; complex tax efficient structures of vendor financing with decades long return horizons and dividend based debt amortisation schemes. In English, lots of debt, that may never be paid off!
One may infer from the aforesaid that BEE has been one puddle of mud that got the nation talking, often at each other, but has not added value. Narrow-based unemployment remains at a decade’s high of 25%, many South Africans are still poor and conditions of employment have still not improved (take a peep at the number of productive days lost to strikes). The middle class are under the tax whip, the Government’s share of the economy is nearing 35% and the social welfare check is at an astounding R150 billion. That said, one shouldn’t blame BEE for this country’s woes, the point made is that BEE has not contributed much to the solution.
Even so, the DTI kicked off, in earnest, the third phase of BEE on 11 October 2013 when they published and Gazetted the infamous 2013 BB-BEE Codes of Good Practice. These new codes have reduced the compliance burden for small businesses, introduced new requirements to improve the efficacy of BEE and sort to minimise loopholes and easy pickings for big businesses. If you ignore the sometimes conflicting sections, errors, misguided assumptions and interpretative problems, the new codes are an improvement to the old ones.
Magnified into view, BEE doesn’t seem to be much more than a policy tool to give effect to Government’s other laws, such as the Employment Equity Act, Skills Development Act, PPPFA, and etcetera. The only new thing with BEE is the concept of black ownership and local content, but only marginally so. It may have been easier to take a leaf from Brazil, India China or even Zimbabwe (BICZ nations) by enacting an Indigenisation Law requiring companies to be at-least 50% black owned to trade in South Africa.
The Government’s objectives with BEE must be lauded, after-all, the goal of empowering more black people in an economy from which they were precluded from meaningfully participating, is a noble one. The question to be asked is whether BEE is the correct tool, no use in having cricket bats in a tennis match. If the preceding 10 years is anything to go by, then we are beating the same path to nowhere. All in the name of BEE!