The first Broad-based Black Economic Empowerment (B-BBEE) Summit kicked off yestreday, with government taking stock of the positives and challenges in the implementation of BEE since its implementation 10 years ago.
“BEE is an economic imperative,” Trade and Industry Minister Dr Rob Davies said, adding that government has looked at what had worked and what had not worked in terms of the BEE legislation.
“We found that there was significant fronting in the economy,” said Davies of the practice that has surfaced as a bug-bear in the implementation of BEE.
Through fronting, some companies had essentially not been entirely truthful in their dealings.
Davies said there were a lot of complex transactions where companies were not entirely truthful with their credentials in relation to being BEE compliant so as to derive benefits such as clinching tenders.
This was a form of fraud, Davies said.
The B-BBEE Act came into being in 2003. The Act was assented to with the aim of establishing a legislative framework for the promotion of BEE to end the exclusion of black people from the mainstream economy and de-racialise business ownership through focused policies of BEE.
The Act provided a legislative framework for the promotion of BEE, empowering the Minister of Trade and Industry to issue Codes of Good Practice and publish transformation charters. It also paved the way for the establishment of the B-BBEE Advisory Council.
Following the recession caused by the global financial crisis in 2009, which led to a considerable decline in companies’ contributions to BEE, a review of the BEE Act commenced in 2011 to tighten up the Act and address certain challenges, including malpractices such as fronting.
The Department of Trade and Industry (the dti), through its BEE Chief Directorate, undertook an immense exercise to implement the recommendations of the Advisory Council.
On 20 June 2013, long-awaited amendments to the BEE Act No. 53 of 2003 were passed by the National Assembly.
Davies said using common law to deal with fronting had proven to be cumbersome. The amendments make provision for a B-BBEE Commission, with the powers to oversee, supervise and promote adherence to the Act in the interest of the public.
Member of the Presidential Broad-based Black Economic Empowerment Advisory Council, Sandile Zungu, said the council wants to see those who practise fronting being put behind bars.
Davies expressed confidence that the bill will be passed by the National Council of Provinces (NCOP), which meets next week.
“I have no doubt that the [amendments] will come into law before the end of this administration,” he said.
Codes of good practice
It had relatively been easy to earn points in the Codes of Good Practice — the framework for the implementation of BEE policy and legislation in practice — without doing much, noted Davies.
Among the elements of the codes was supplier and enterprise development, which have been merged in the amendments.
“We need a symbiotic relationship with big and small suppliers,” Davies said.
The codes will be published for implementation on 11 October.
One of the issues addressed in the amendments was that of small businesses having to get verification certificates to show that they are black. This has been changed, with small business now only having to supply an affidavit instead.
Industrialising the economy
However, the challenge was industrialising the South African economy, Davies said.
In his address earlier in the day, President Jacob Zuma, who chairs the Presidential B-BBEE Council, lamented the growth rate of black industrialists.
“We are yet to see the growth of black industrialists, despite government’s aggressive focus on boosting the manufacturing sector,” said Zuma.
Davies said the big challenge was to respond to what Zuma said, which is to move forward to industrialise the economy.
“There are not enough black people in the manufacturing sector,” said Davies, adding that government would look at using the BEE framework to support the emergence of black industrialists.
“We are sending a clear message that BEE should really empower people.”
Zungu said a lot of work had been done, although the council was relatively young.
Monitoring and evaluation, he said, was also an important aspect.
“Significant progress has been made. The council continues to implement its mandate,” said Zungu.
The council’s mandate is to provide guidance and overall monitoring on the state of B-BBEE performance in the economy, with a view to making policy recommendations to address challenges in the implementation of the transformation policy.