The Johannesburg Stock Exchange. File picture: Siphiwe Sibeko

JOHANNESBURG - Benchmarks for measuring whether listed South African companies had adequate black ownership need to be reconsidered, according to a report prepared for the National Treasury and submitted to legislators discussing transformation in the economy.

Black economic empowerment (BEE) codes failed to fix inequalities, partly because of the focus on shareholdings rather than on black management of companies, according to the report, prepared for the Treasury by Lynne Thomas, an independent researcher and consultant. 

BEE deals tend to favour direct owners over indirect owners, who hold their stakes through vehicles like pension funds. “It is strongly recommended that BEE codes must recognise indirect black ownership, and ensure that future deals do not transfer shares from indirect black owners to direct black owners,” according to the report.

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Major financial companies had made progress towards achieving black ownership, but transformation was substantially lagging, in particular in management control and employment equity, it showed. Black ownership targets were set to redress economic inequalities stemming from white-minority rule under apartheid that ended in 1994, with companies required to meet targets in order to qualify for contracts.

President Jacob Zuma led criticism that the imbalances had not been adequately dealt with and he complained that ownership of listed companies by black South Africans remains too limited.

Treasury’s report was part of a presentation to Parliament’s Standing Committee on Finance in Cape Town this week. 

- BLOOMBERG