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How to fix BEE

15 February 2012, 22:56

BEE, or BBEEE or BBBEEE or preferably black empowerment is a concept intended to allow financial wealth to be redistributed amongst the previously disadvantaged, thereby theoretically liberating them from financial oppression.

The vehicle selected to achieve this objective was a points system structured to allow ownership of companies to reflect black board or management participation. Naturally companies and smaller enterprises did not enjoy the concept of sharing, and many devised elaborate schemes to share but not really to share.

You are on the board but no one cares and you are completely replaceable like today. As a result it did not take long for variations of the empowerment schema to be launched but with each launch new avoidance techniques were developed to circumvent the new variation.

Of course not everyone failed at achieving benefit from empowerment, in each version of BEE various intelligent black folk managed to develop a methodology for implementing their will upon various companies and assets. The problem though, is that BEE has completely missed the mark of broadly (Broadbased) empowering the masses, this has, as we are well aware, allowed much frustration to ferment. 

In addition to obvious frustration, we have seen the emergence of secondary problems stemming from a frustrated mass, xenophobia, increased financial crime, wage strikes and of course, politically, it allows opportunistic politicians the space to prey upon weakness and inject far right/left/personal agendas like nationalisation of the mines upon a hapless public.

WEALTH CREATION

When considering BEE and its objectives it’s important to note that every politician calls it wealth creation. How on earth is it wealth creation? If you take money from a person and give it to someone else what wealth have you created? All you’ve done is made one party very upset and made another party very happy and in this lies the problem with BEE. No extra wealth is being created there is no extra cash in the economy, no extra jobs and more importantly no improvement for anyone other than the recipient of wealth.

In itself, this is extremely dangerous because firstly you are damaging a wealth creator and secondly you are enriching and individual who may decide to redistribute it or as it currently turns out, pools it. Thus not only are you empowering masses you are merely allowing a few smart business people the opportunity to become filthy rich at the expense of previous wealth creators.

THE CURE

The entire concept of BEE and all of its variants should be completely scrapped, obviously not retrospectively but going forward. In its place a new scheme called GEE(Grown Economic Empowerment) should be established.

Grown Empowerment works like this:

1.       A company may only receive GEE points if it invests directly into new businesses established by young entrepreneurs. There is no maximum or minimum amount to the investment but the company needs to invest without any equity return in any way whatsoever.

2.       In addition a company that trains young entrepreneurs can get pre BEE points which don’t have any value until they assist that entrepreneur with launching their own business. If after five years the young entrepreneur is function well, with a good balance sheet and a healthy amount of staff the revenue service will reduce the company tax level of both the seeder company and the entrepreneur by 4%.

3.       A company may gain extra points and a tax reduction by investing directly into education facilities, housing, health or security. All of which need to be placed in an informal settlement or specific locations in tribal homelands.

a.       All sectors (education, housing etc) need to operated on a not for profit basis.

4.       Finally a company that invests into young entrepreneurs in the agricultural sector may only do so in areas that currently have no formal agriculture, in homelands or in areas thought to be unable to sustain agriculture.

To ensure compliance, SARS will issue a 3% increase in taxes for companies that do not have a GEE point after 4 years of implementation.

FINAL NOTES OF BEE

Chinese people (no offence) are not BEE. Just because we want to do much business with china and Standard Bank wants to sell large chunks of equity to china in no way makes them eligible for BEE. We need to keep our own money and invest it back into OUR economy thank you.

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