Thabo Masombuka writes that whoever is called upon to interpret the real basis of the economic transformation policies, must look at what was intended more than what constrains it.
Johannesburg - The Department of Trade and Industry, (the DTI) has been very busy recently. The public sector custodians of the broad-based black economic empowerment (BBBEE) policy and legislative framework recently announced a number of cross-cutting measures and policy reviews aimed at enhancing the speedy implementation of economic transformation initiatives to improve the living conditions of black people.
Among other changes recently announced, by the Minister of Trade and Industry, has been the effective promulgation this month of the revision of the BBBEE Codes of Good Practice, which have in essence changed the requirements for scorecard compliance from seven to five elements of the codes and, more particularly, increased levels of compliance for black-owned enterprises as qualifying BBBEE level one and two contributors.
The most important change has been the enhanced recognition of certain categories of black people, notably black women, black youths and people with disabilities, black people in rural communities and those unemployed and living in poverty.
The latter emphasis was not present in the previous codes. However, the real extent to which these will be achieved as a result of the reviewed BBBEE policy framework is yet to be seen. Time will tell.
Propelled by a nationwide stakeholder outcry, these amendments were superseded by the announcement of the BBBEE Amendment Act 2014 which, among other things, imposes criminal sanctions for those found guilty of circumventing BBBEE and committing fronting. This will also cover lack of reporting by the designated companies, institutions and organs of state.
Hailed by many as an important development in the strengthening of economic empowerment, the enforcement of the Amendment of the BBBEE Act will depend on the yet to be established BBBEE commission – a statutory body set up to monitor and oversee the implementation of the BBBEE legislation.
Various sector councils and interest groups, notably the Black Business Council and the Black Management Forum, have been at the forefront in successfully lobbying for the enhanced beneficiation of black-owned businesses in terms of BBBEE and many other industrial initiatives. Alongside these has been the launch in March of the Black Industrialists Development Programme, which is positioned as a mechanism to facilitate the mobilisation of financial resources to support the creation of black industrialists over 10 pillars of the economy, including manufacturing, construction, financial services and information technology.
The Deputy Minister of Trade and Industry and others have in the meantime urged the country to position the programme as the ultimate measure to reverse racial disparity and confront the triple challenges of poverty, unemployment and inequality.
As these developments occupied the headlines, the Minister of Minerals and Resources announced the 10-year review of the Mining Charter compliance report, which showed some disappointing trends.
The Department of Mineral Resources (DMR), which is ultimately responsible for the compliance requirements by the mining industry, also announced they will approach the High Court for an interpretation and declaratory order on the intentions of the now-renowned “Once Empowered, Always Empowered” (OEAE) principle, which is a simplified reference to permanent empowerment status afforded to a white-owned company whose black shareholders have exited the BEE deal for various reasons.
The DMR’s understanding of the ownership element indicates that in the case of empowerment transactions concluded after 2004, where the BEE ownership levels have fallen as a result of assets being disposed, the OEAE principles should not be carried through the policy thrust for BBBEE going into the future.
Identifiable with the information and communications technology and financial services sectors, the OEAE principle effectively provides an incentive for a culture in which untransformed South African businesses can conclude a BEE deal with black partners only once and still retain ongoing empowerment (BEE compliance) status perpetually.
Dealt with in the revised codes of good practice under the element that regulates “the recognition of ownership status after the sale or loss of shares by black people”, the OEAE is covered by the provisions that allow companies who have concluded a BEE deal to have a “portion” of their ownership recognition status retained even after black participants and shareholders have exited the shareholding (or sold their shares) over a period of time.
This would usually be recognisable only on condition that the black participants/shareholders have held the shares for a minimum of three years; net (economic) value has been created in the hands of these black shareholders; consequent to the BEE deal having taken place, transformation must have taken place within the company that the black shareholders are exiting.
In no uncertain terms, these above rules assume that, where every BEE deal has been concluded, the black shareholders have not been passive shareholders but have actively driven value and influenced transformation in that company. This is something that has been a noticeable far cry from the many BEE deals and transactions that have taken place recently.
Although the move to approach the courts can be viewed as important for the creation of legal certainty, it is not necessary for substantive understanding and interpretation of the economic transformation policies in the South African political context.
Simply put, the courts, and whoever is called upon to interpret the real basis of the economic transformation policies, must look at what was intended more than what constrains it.
It is for these and many other reasons that the Once Empowered, Always Empowered principle cannot find any reasonable and justified basis for existence in our BBBEE jurisprudence and future economic transformation trajectory.
* Masombuka is an attorney and the CEO of the Construction Sector Charter Council. He writes in his personal capacity.
** The views expressed here are not necessarily those of Independent Media.
The Sunday Independent