Johannesburg - South Africa introduced new ownership regulations to encourage large companies to support and invest in small, black-owned businesses instead of issuing them shares, according to Trade and Industry Minister Rob Davies.
The changes were aimed at improving black people’s “real involvement” in the economy, Davies said on Thursday.
The new rules would put more emphasis on pushing large companies to develop and support the growth of smaller manufacturers, he said.
“That is the model of industrialisation which has characterised Asia and which I think is very much the type of industrialisation which we want to see in South Africa, where big companies work with small companies as suppliers,” he said.
South Africa’s empowerment regulations are designed to boost participation in the economy by black people and other groups who were disadvantaged during apartheid.
Black empowerment programmes benefiting community and special-interest trusts and employees would carry less weight when setting a company’s compliance rating than previously, the Department of Trade and Industry said on Tuesday.
“If it means that somebody was scoring high in the old codes and they go down on the new codes, well, we’d expect that,” Davies said. “We want it to be a tool of encouraging people to change behaviour.”
The new rules threatened the empowerment of workers and communities, the National Union of Mineworkers said on Friday. The union said that it continued to seek 10 percent employee-share ownership across all sectors.
The changes will be an ”unwelcome surprise”, to South African companies, which have already taken steps to comply with the previous rules and compliance scoring methods, according to Bravura Consulting, which advises firms on empowerment laws.
“It appears as though companies will need to adopt very different strategies” for empowerment, the adviser said.
Industry-specific black empowerment codes must be aligned to the department scorecard, according to Tuesday’s notice. Mining firms were subject to a different set of black-empowerment regulations under the mining charter “at this stage”, Nick Holland, the chief executive of Gold Fields, said on Thursday.
“It’s disturbing if the goalposts keep changing,” he said. “The one thing we would prefer as a country is to have a unified set of rules that are stable and consistent because it’s much easier for anyone to make long-term business decisions.”
Standard Bank Group, Africa’s largest lender by assets, is considering the implications of the notice, particularly the parts dealing with the status of industry-specific codes and the measurement of ownership, according to Wendy Orr, the bank’s head of inclusion. – Bloomberg