President Jacob Zuma’s advisory council on black economic empowerment (BEE) is examining whether stricter criteria should be imposed on small and medium enterprises that are allowed to complete an easier version of the generic scorecard.
Sandile Zungu, the chairman of the BEE advisory council’s sub-committee on ownership and management control, said last week that its members were debating whether to remove the partial exemptions given to qualifying small enterprises – those earning revenues between R5 million and R35m – in the 2007 BEE Codes of Good Practice.
“We as a council are looking at those issues that stymie the growth of the small and medium enterprise sector. For example, we are asking why they must choose only four criteria out of seven,” he said.
A qualifying small enterprise may select four out of the seven elements (ownership, management control, employment equity, skills development, preferential procurement, enterprise development and socioeconomic development) to develop its own scorecard. Even if it completes more than four categories, only the four best scores are used.
Businesses with revenues below R5m a year are not required to complete a scorecard.
Zungu said: “What does it do to the deepening of BEE when most of the qualifying small enterprises can say ‘Well, we’re not interested in ownership or management control’? Most enterprises in that category are not women-owned… or black-owned. And they still get the highest rating because they are exempt from that requirement.”
The council is examining whether to lower the revenue threshold and prescribe some criteria as a bare minimum.
Zungu said the council had been “hard at work” addressing concerns the president had alluded to at his annual Christmas party in Nkandla last week. Zuma called for a debate on the meaning of BEE, whose definition he believes has been narrowed.
Black Management Forum president Jimmy Manyi subsequently welcomed a review, saying ownership and management control were assumed to define BEE at the expense of the other five elements of the scorecard.
Manyi called for the proper allocation of score points to prevent the slide into a box-ticking exercise.
Regarding the council’s proposals on broadening BEE, Zungu said development finance institutions should give broad-based entities access to funding so they could acquire equity. - Business Report