29 November 2012

South Africa: Draft Revisions to Bee Codes Will Entrench Elite Enrichment

press release

The DA welcomes the Department of Trade and Industry's (DTI's) decision to withdraw problematic revisions to the Broad Based Black Economic Empowerment (BBBEE) Codes of Good Practice. These would have jeopardised funding to civil society organisations providing critical services and support to poor communities in South Africa.

But there is still much work to be done if the Codes are to be a genuine tool to correct the wrongs of apartheid and not just a means to enrich the politically-connected few.

In particular, the DA is concerned about the revisions made under the BBBEE Ownership element which is likely to encourage continued re-empowerment of the elite and narrow the pool of BEE beneficiaries.

In the Ownership element, businesses are incentivised to include new entrants to the economy in BBBEE transactions through bonus points awarded for the inclusion of "black new entrants" as shareholders.

Firstly, the revised Codes have reduced the target for the involvement of "black new entrants" in ownership transactions from 10% to 2% of shareholders. Rather than broadening the base of participation in empowerment transactions, this revision makes it even more likely for BEE to continue benefitting those who have already been empowered.

Secondly, the definition of "black new entrants" has been broadened to include any person who holds less that R50 million in shares. In the previous Codes this threshold was R20 million.

Again, this increases the likelihood that the people in genuine need of empowerment will lose out to those who are already empowered. This flies in the face of the intention of the Codes which is to involve more South Africans in the mainstream economy.

Thirdly, the Codes of Good Practice include no direct incentive or reward for job creation. In a country where 33.38% of the Labour Force are either unemployed or have simply given up on finding a job, we must make provision for job creation to be recognised as a contribution to empowerment.

When the BBBEE Codes come to Parliament next year, the DA will push for truly broad based BBBEE Codes that promote the inclusion of previously marginalised South Africans into the economy.

We hope that the precedent set by the DTI yesterday is a signal of their commitment to ensuring that the Codes serve their intended purpose.

Wilmot James, Shadow Minister of Trade and Industry

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