Time to scrap empowerment charters

2015-03-17 06:00

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There is a prevalent and lazy view that suggests we can address post-apartheid social ills in the economy by creating sector-based empowerment charters or codes.

Those who believe in this approach err further by arguing that the alleged one-size-fits-all approach of the Broad-Based Black Economic Empowerment (BBBEE) Act’s generic Codes of Good Practice is inadequate and too blunt a tool to enable it to address various sector-specific nuances.

Nothing could be further from the truth. The existing charters helped shape people’s thinking about elements of the Codes of Good Practice and raised levels of awareness for stakeholders.

But they have overstayed their welcome.

These are some of the fundamental flaws in the sector charters/codes:?The sector transformation council is one of the sector charters’ key governance structures.

Competitors are forced to sit in one room and strategise about a number of business issues under the guise of discussing transformation.

An opportunity exists for sectors to plan to manipulate the law and outmanoeuvre government policies – a direct and blatant violation of our competition law.

The increased cost of doing business, as procurement officers must now design assessment templates to cater for companies from various sectors.

This is a cumbersome exercise because one must contend with different weightings and targets rather than using a common standard, as provided by the Codes of Good Practice..?Undermining innovation and increased rigidity – the sector charters regulate, standardise and place a straitjacket on sectoral initiatives.

This means that an innovative idea from a particular company can never see the light of day simply because not everyone in the sector may be in a position to do the same.

The irony here is that sector charters in fact introduce rigidity..?A lowering of standards because innovation can’t be adopted across the board, sectors are forced to the standards of the lowest common denominators.This is part of why the pace of transformation has – to date – been painfully slow.Sectors are continuing on a business-as-usual basis, albeit with codified transformation labels.

A cursory read of the amended Generic Codes of Good Practice, published in November 2013, restates some key principles enshrined in the original 2007 version.

These state that: “The fundamental principle for measuring BBBEE compliance is that substance takes precedence over legal form” and “In interpreting the Codes any reasonable interpretation consistent with the objectives of the BBBEE Act as amended and the BBBEE strategy must take precedence”.

The profoundness of these principles is that – contrary to popular belief – they provide the universality and flexibility that allows companies to play to their own strengths in their efforts to comply.

The other advantage is that companies can make their own representations, which embrace the key principles of the codes.

This flexibility is denied in the sector charters/codes regime.The introduction of the Codes of Good Practice in 2007 was meant to provide a harmonising instrument and one universal tool to measure empowerment.

The subsequent promotion of sector charters/codes defies logic.

A regular review of the codes is necessary to keep up with the dynamics of transformation.It is regrettable that the existence of the sector charters/codes provides a permanent structural hurdle when they are actually a safe haven for those companies avoiding real transformation.

Manyi is president of the Progressive Professionals’ Forum

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