Broad-Based Black Economic Empowerment (B-BBEE) policy should remain one of South Africa’s fundamental tools to redress the economic disparities of a highly unequal society in spite of the harsh criticism against it.
This is the sentiment of the B-BBEE Commissioner Tshediso Matona who, yesterday, delivered a strong defence of the intentions of the transformation policy.
Speaking at the Kagiso Capital seminar on the reality of the B-BBEE policy, Matona said B-BBEE had been a pivotal policy instrument in addressing historical inequalities and transformation of black ownership and participation in the economy, but discussion on its impact, progress and potential improvement was a polarising issue.
Matona said the country’s Constitution actually advocated that redress shall be through active interventions by the State, especially on procurement, in favour of previously disadvantaged people.
He said the overwhelming majority of people were yet to experience in any significant way the fruits of democracy in spite of BEE legislation being passed into law 20 years ago.
“That is the demon, I believe, we need to confront, that 20 years after the Act, 70% of the economy is owned and controlled by 7.9% of the population who are white, and the black people who make up over 90% of the population still do not participate in the economy in any significant and meaningful way,” Matona said.
“We thought that by now we would have reached this ideal of full equity(but) there is a sense in which we are stuck and we can't kind of move forward until we find some resolution to what I believe is elements of a stalemate on the policy, and if not stalemate perhaps even retreat.
“Of course, no one is suggesting that it's been perfect. The legislation is not perfect by any means, and to acknowledge this is not to have any dispute with the noble intentions of the legislation.
“So the law must be critiqued for sure, but it must be with a view to promoting improvements to it and promoting adherence to it, and to be extremely worried of attacks on the policy that seeks to bury it.
“South Africa is a very vibrant, active, noisy democracy, so everybody's views are allowed but I think that those views that spell degeneration and retreat to the past are harmful and I think should be combated.”
Financial analyst, Duma Gqubule said that he was not a proponent of B-BBEE and had “retired” from discussing it because there was “voodoo accounting system” in the B-BBEE Codes.
“There's a maze of conflicting statistics about black ownership that just confuses the hell out of the public. The Commission says it’s 30% and then some others say 20%, this is impossible because the total market cap of the JSE is R20 trillion,” he said.
“So you're telling me that black people own R6 trillion of the assets on the JSE if it's 30%, or R4 trillion if it's 20%. We know that that is impossible.”
Gqubule said Intellidex looked at actual ownership, not the actual scores, and found 1.9% of the JSE was owned by black people.
He said some companies such as retail giant Pick n Pay had never done a BEE deal yet it had 18 points in its B-BBEE scorecard, while banking giant Absa still has 12.8 points in its scorecard for a BEE deal completed in 2012.
“I won't get into the technical details of this manga-manga system of accounting. But ownership must be a compulsory separate law, separate one for management and so on, because these companies have learned how to game the system,” Gqubule said.
“We have to review the ownership element. We must measure actual ownership, not manga-manga ownership and must give companies three years to enter into transactions.”
Identity Fund Capital founder and chairperson Polo Leteka concurred with Gqubule about the ease to subvert B-BBEE Codes around ownership, management control, employment equity, skills development, preferential procurement, enterprise development and socio-economic development.
Leteka said the B-BBEE scorecards might be showing that the country was doing exceptionally to transform more sectors of the economy as companies were gaining Level 1, 2 and 3 statuses, only to find that they were actually not when you get into the rands and cents of it.
“We thought that by now, there'll be a flywheel effect where the stick is just self propelling and we are seeing transformation across the board. And unfortunately, that has not been fully the case across the board,” Leteka said.
“We haven't created the level of value. We have not transferred the level of wealth into the hands of black people. We haven't really transformed the economy as much as we thought by now we would have.”