New measures to stop exploitation

2015-08-05 06:00
BUSINESS UNUSUAL: Kaizer Khoza, director: business regulation and attorney of the High Court of South Africa. 

Photos: Teboho Setena

BUSINESS UNUSUAL: Kaizer Khoza, director: business regulation and attorney of the High Court of South Africa. Photos: Teboho Setena

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EXPLOITATION of existing and emerging entrepreneurs in Broad-Based Black Economic Empowerment (BBBEE) through fronting deals by unscrupulous elements is set to be a thing of the past.

This follows stringent measures taken by government stakeholders to tighten the belt against unscrupulous business practice.

Three departments X the Departments of Trade and Industry, Economic, Small Business Development, Tourism and Environmental Affairs X are in the process of revising codes of good practice and amendments to the Broad-Based Black Economic Empowerment Act.

It is envisaged that the review process would enable entrepreneurs to prosper. The three departments held information workshops in the Free State last week (28 and 29 July) in Welkom and Bloemfontein, briefing entrepreneurs regarding the current amendments of the Broad-Based Black Economic Empowerment Act and the revised codes of good practice. The BBBEE makes provision for black, which is defined as African, coloured and Indian.

Kaizer Khoza, director: business regulation and attorney of the High Court of South Africa, said the number of loopholes that had been identified in the BBBEE, necessitated the revision of the system.

“There were a number of loopholes that were identified, as companies chose which elements they preferred and which they believe would achieve higher BBBEE status. Government has been concerned about the slow movement of the transformation of the economy over the past 21 years.

“The purpose of the BBBEE workshops was to update business forums and organisations about the BBBEE Amendment Act, 2014.

“The act also deals with fronting that was designed to defeat the aims and objectives of BBBEE. Fronting is now a criminal offence and punishable by law.

“Furthermore, it introduces a provision that the BBBEE Act will supersede all other legislation in this connection. Section 10 imposes a duty on government to procure from companies that are BBBEE compliant,” said Khoza. He said small business was exempt from providing verification certificates; an affidavit which is obtainable from the DTI website would suffice.

He said the workshops discussed the codes of good practice, which previously had seven weighting points: ownership 20; management control 10; employment equity 15; skills development 15; preferential procurement 20; enterprise development 15 and socio-economic development 5 = 100. “However, these were easily abused by companies that resisted transformation. The new elements have five (5): ownership, management control, skill development, enterprise and supplier development and socio-economic development. There are eight levels for companies.

Companies that are 51% black owned or more are automatically given a level 2 status and for a company to receive level 1, it must be 100% or above. The Amendment Act introduces a BBBEE Commission which will monitor compliance both in the private and public sector. All Public Companies are urged to report annually on BBBEE with the registrar at the JSE,” said Khoza. Stakeholders have welcomed the amendments and called for more radical transformation and implementation to raise the economy and ensure access to funding as well as markets.

Anna Ledimo, South African Women’s Entrepreneurs Network chairperson, highlighted the lack of implementation of policies as a reason for failure to achieve goals set. “South Africa has some of the best policies, but failure to implement and monitor has resulted in companies refusing to transform, rather taking shortcuts by having passive shareholders that are used to front their businesses. It has been increasingly difficult for small businesses to actively participate meaningfully in the core of the economy because they find themselves having to go back and outsource from the very same businesses that have no intention of developing or partnering with them and in turn use them to tick boxes for improved scorecards. Our economy needs more blacks in positions of decision-making and we hope that big business will embrace direct black ownership and control.”

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