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!