Time for BEE to hit target

2011-05-07 21:31

Discontent is growing that empowerment is still benefiting narrow sections of the country despite President Jacob Zuma having formed the Broad-Based Black Economic Advisory Council. Mpho Sibanyoni talks to advisory council member Sandile Zungu about its efforts to broaden empowerment.
 
How has the advisory council improved the empowerment landscape since its inception 16 months ago?
The council was put in place in November 2009 but we started to work in January last year. However, we have been playing catch-up because the amount of work we are supposed to do dates back to 2003, when BEE was enacted, and from 2007, when the BEE codes of good practice were also enacted.

The council has identified the weaknesses – for instance fronting – in the system that hinder progress.

Empowerment is a process, not an event, and we must calculate and measure how we work. Our plan is to commission a research study to see how the empowerment landscape is right now as this will help to make the empowerment debate an intellectual rather than emotional issue.

The council has agreed that BEE needs to improve and the scorecard should become a useful tool towards making government’s New Growth Path to create employment a success.

How has the council responded to criticism by President Jacob Zuma that the definition of BEE has been narrowed and benefits only a few individuals instead of the whole community?

The president was right, and I think he was concerned about rural communities and the unemployed. We have taken the president’s directive and we are responding to this by attaching greater weight to enterprise development.

This will put more emphasis on helping youth with bright ideas but no capital to start their own businesses.

We are trying to come up with a strategy that will impact positively on the lives of the youth, rural people and the unemployed.

Fronting has been evolving over the years, becoming more sophisticated. How does the council plan to deal with fronting once and for all?

First, we need to recognise that fronting, in terms of common law principles, is a crime.

We need to educate the public about the many forms of fronting. We should enhance their awareness and work with law enforcement agencies to eliminate fronting.

Both the BEE charters of the financial and mining sectors, which together own 50% of the JSE, have done little to advance empowerment because both charters have not been aligned to the BEE codes of good practice.

What role is the council playing to help align the charters of these sectors to the codes?

The process of aligning the charters to the codes is something that falls under the trade and industry, and mining departments and the national Treasury.

However, I must say that the interface between the sector charter councils and the BEE advisory council has been limited.

The advisory council is concerned that in some sectors the BEE targets are lower. We think that all sectors should have equal targets.

What stats does the council use to determine ownership of the JSC, given the many that have been floated around?
We are being directed by the Presidency’s baseline study that was commissioned in 2007. The study was very comprehensive because it looked at the public and private sectors, formal and informal sectors, and both the listed and unlisted companies.

Last year the JSE compiled a research on share ownership. But we don’t believe the JSE research report because it missed the point and it missed a lot of companies.

What is the council’s view on companies that lock-in their BEE partners for years and cannot sell their shares?
The structure of BEE transactions and choice of partners should be left to individual companies. The advisory council doesn’t want to be an overly- prescriptive organisation.

There should be a public debate on the lock-in period and companies should be clear on why they choose to lock-in BEE investors for three years instead of one, for instance.

However, it is concerning that black people feel discriminated by default as they are locked-in in a transaction for years and they are only allowed to sell when the share price of a company hits rock bottom.

Empowerment players should also ask themselves whether they want to trade for a long term or want to make a quick buck.

What issues does the BEE council aim to have tackled by next year this time?
We must have commissioned the baseline study and use it as an empowerment bible that will guide everyone.

We want to have also dealt firmly with the issue of fronting as it is a regressive counter-productive issue.


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