Black Economic Empowerment in its current version has been criticised as a mechanism which does not necessarily grow wealth amongst its intended beneficiaries, but perpetuates the growing gap between the so-called historically disadvantaged individuals and groups that are classified as having been “privileged” during the apartheid era.
But the final BEE Codes, which are meant to address this problem, might even contribute to worsening the situation, Andile Khumalo, a business specialist who is the Chief Investment Officer of MSA Afrika Group, warns in his regular column in the Business Section of Sunday Times.
In a practice Khumalo calls “Book Entry BEE”, under the new BEE Codes, companies can now include, mandated investment in their calculation of BEE ownership.
“Mandated investments are made by or through any third party regulated by legislation on behalf of the owner of the funds. What this means is that companies can claim black ownership from medical funds, pension funds, collective investment schemes or ‘pooled funds if such funds have black beneficiaries or members,” he says.
For companies that have the Public Investment Corporation (PIC), which manages roughly R1.8 trillion of the Government Employers Pension Fund (GEPF), as shareholders can claim black ownership. This is because the vast majority of the members of GEPF are likely to be black.
What this means, explains Khumalo, is that any company that has PIC has a shareholder may claim a big chunk of the PIC’s shareholding as black shareholding and therefore claim valuable points for BEE ownership.
Khumalo’s reservations about the project is that it focuses on grading BBBEE than “redressing the inequalities of apartheid by giving black people economic opportunities previously not available to them”. Thus, he contends, mandated funds should not be considered as black ownership.
