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The Morality of BEE

10 December 2012, 22:24

I am just an ordinary man who tries to figure out what the laws are based on, with very little knowledge of the law. I have yet to figure out the lawfulness, or moral justification, of something that I witnessed and was rampant in our country in the late 90's and the earlier part of the 21st century.

I was an accountant at an NGO, when one day along arrives a young black man, who introduces himself, and asks us whether we would like to participate in a BEE deal. We had no idea what he was talking about, so he "spilt the beans". He told us that by "participating" in the deal we would be "given" a 10% shareholding in a large company. Being rather sceptical we asked what the "catch" was. He explained that there was no "catch".

This is how it worked. A company that wanted to be BEE compliant (for fear of losing government contracts, and other business reasons) wanted to have a certain "black-owned" made an agreement with existing shareholders who dissolved part of their shareholding and offered these for sale to black people, and organisations.

The Public Investment Commission (PIC) would finance the deal, and as security, would take a pledge of the shares so subscribed. The PIC would pay for the shares, and their “loan” to the black investor would be repaid by the dividends resulting from the increased business that resulted as a result of the company being BEE compliant.

After 5 years, or whatever period of time the loan would have been repaid and the new shareholders would enjoy the benefit from dividends and a substantial capital investment.

He told us that he would also be participating because he had been "put" into the deal by someone very high up in the Development Bank of South Africa, who was also participating, in his own name.

This all seemed to be to me, at the time, as a kind of "smoke and mirrors" scam, but being a desperately short of cash NGO we agreed to have a look at it.

So I did a thorough due diligence on the company, its history, the industry involved, and the risks associated with it. I checked the documentation and the agreements, and recommended the deal to the trustees of the NGO. Apart from a total collapse of the world economy, this was a "no brainer".

We were all very excited, at the time, because we believed in our cause and were always desperate for funds. It later turned out that we could participate in many other BEE deals.

As time went on and we saw the loans to the PIC being repaid we were very excited. In a few years all our funding problems would be over. Hallelujah!

Well time has run on and the NGO has prospered prospered, but now a dilemma has arisen.


The question they are asking themselves is, "How, by signing a piece of paper, have we accumulated wealth that is beyond our ability to have accumulated without these BEE deals?"

The question foremost in my mind is, why did not that same piece of paper, be presented to the poor and impoverished? Those whom had been most disadvantaged by apartheid. After all, the NGO only signed a piece of paper, got the annual reports, and eventually owned 10% of the shares in a large company and are now benefiting from the dividends.. Where is the equanimity and justice in that?

When we did some investigation we found that just a few black South Africans had been the beneficiaries of BEE "deals". It seems that this process was rampant and if you were "connected" to the inner circle, you could, by signing a piece of paper, become a multi-millionaire overnight by signing a piece of paper.

It has begged the question whether the PIC would be prepared to disclose to the public who the beneficiaries of these BEE deals were? They do not have to disclose this in this law, but in ethics, and seeing that these "deals" were being done, in the interests of re-dressing the ills of apartheid.

These deals were "brokered", through intermediaries, and this alone is a national disgrace. These "brokers" made a huge amount of money, and naturally, they took the path of least resistance, and looked for institutions and connected individuals who were prepared to sign "the piece of paper".

They were not to blame but they were complicit in the scheme. The poor and the victims of apartheid were totally excluded from these deals. Why?

Our NGO was also, by default, also complicit in this. In retrospect, one can see the feeding frenzy that took place and is still taking place.

The sad thing for me is that it has created a culture of entitlement and corruption amongst certain sections of the black elite and that legitimately, hard-working black people who use their talents, skills and hard work to accumulate wealth, are going to be tarnished with the same brush as these politically connected nouveau rich, who obtained their wealth simply by signing a piece of paper.


Which raises the question, where is the morality of BEE, when the marginalised are not participants? Why create a black elite, whose only value-added is a signature on a piece of paper? This not only discredits the signatories, but also, to some extent, minimises the gifts, talents and abilities of genuine blacks who have raised their game beyond reliance on BEE.

Is BEE a ruse to benefit only a small group of South Africans or is it intended to benefit all? Does it truly benefit the poor and marginalised in our society? Was it ever intended to support and uplift the marginalised poor? Has its implementation proven it to be so?

There is no substantial proof that it does, so one has to question the morality of BEE. Show us the evidence. The recent results of the the census only shows that the BEE policies of the ANC have not benefited the poor in any substantial way, only the black connected elite.

Why were community trusts not set up so that black communities could benefit from these deals? One can only draw the conclusion that BEE was designed and implemented to only benefit a few, apart from the fact that it discriminated against a large section of the South African population that included the poor and marginalised.

Our country is now suffering the effects of this, where a culture of entitlement is pervasive and theft from the national treasury is rampant.

BEE should be scrapped and policies determined that bring real benefits and upliftment to the poor and marginalised.

Perhaps history will prove me wrong, but if recent history is anything to go by, this country may become a wasteland in the not too distant future, if there is not an equitable exchange of energy in our society. We are seeing evidence of this on a daily basis.

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