Government’s NGP is not detrimental to BBBEEE

Below is an article from our Affirmative Action Media Monitoring Project. These articles represent a wide variety of views. These views do not necessarily represent the views of AAPF but instead are intended to provide you with an overview of the current affirmative action debate.

March 17, 2011

Since the government approved the New Growth Path (NGP) last year, there have been growing perceptions and concerns that transformational goals – as espoused through affirmative action and broad-based black economic empowerment (BBBEE) – will no longer be in the government’s priorities.

Some commentators have even suggested that by implication, the emphasis on the NGP, made alongside calls for the “major overhaul and review of the BBBEE policy”, effectively means that firms do not have to be empowered as long as they commit to the NGP goals.

It has also been argued that the government would now dedicate its efforts and resources to the development of manufacturing and industrialisation of sectors at the expense of BBBEE, which has been seen as controversially benefiting the same circle of relatives and close associates of President Jacob Zuma and the ANC.

With the perceived influence of the Gupta family dominating BEE deal making lately, economic analysts have questioned the broad-based nature of some of the recent BEE deals concluded in the mining and property sector, such as the Waterfront property acquisition.

The NGP recognises that if the economy is to grow at the acceptable and faster pace, it must do so while creating sustainable and decent jobs that have the effect of drastically reducing the massive rate of unemployment. Knitted jointly with the Industrial Policy Action Plan (Ipap 2), as well as other policies and programmes aimed at rural development, the NGP is therefore a multi-sectoral approach that ensures that decent jobs can only be created if new industries in the agriculture, tourism, manufacturing, science and technology sectors are developed with an emphasis on industrialisation.

With the majority of unemployed population being young people between the ages of 18 to 34, it is only prudent that plans such as the creation of the fund for the youth wage subsidy, as announced by Finance Minister Pravin Gordhan, must be supported across all sectors of the country.

One of the most important emphases of the NGP is that “among other decisions, government must prioritise its own efforts and resources more rigorously to support employment creation and equity; business must take on the challenge of investing in new areas; and business and labour together must work with government to address inefficiencies and constraints across the economy and partner to create new decent work opportunities”.

Contrary to popular belief, these priorities are not necessarily exclusive of the ethos and objectives underlying the implementation of BBBEE.

As an integrated and inclusive economic growth policy that focuses on increasing the participation of the majority of black people, workers, rural women and the disabled in the mainstream of the economy, BBBEE recognises that the growth of the economy cannot occur in isolation of the empowerment of the majority of citizens in South Africa.

For this reason, BBBEE as a policy has always been underpinned by the principles of inclusive growth, good governance and sustainability. While negative perceptions about BBBEE continue to dominate headlines, it is regrettable that policy reconfigurations and changes aimed at enhancing the efficiency of the policy, happening behind close doors within government circles, are not recognised.

These negative perceptions paint the unfortunate picture that since democracy 16 years ago, no substantial progress has been recorded in improving the economic conditions of black people. Hence the calls for the radical overhaul of BBBEE policy.

These calls have been made despite the fact that the BBBEE Codes of Good Practice, the overarching framework through which BBBEE measurement occurs, were only gazetted in 2007, effectively implemented in 2008 as there was a transitional period linked to the gazette.

The truth be told, although strategic inroads have been made to improve the economic status of small enterprises – through various state and private procurement interventions – this has not happened at a faster pace.

There is recognition within the government that in its current form, the BBBEE Act does not deal with compliance in a decisive manner and as such must be changed. Instead of driving radical compliance across industries, the spirit within which the BBBEE Act was drafted encourages incentive-driven modes of compliance more than it makes compliance a condition of doing business in South Africa.

Popularly dubbed as the “soft legislation”, the nature of BBBEE makes it optional for companies to embrace it. This sadly creates space and opportunity for mischievous application of certain business practices, all in the name of BBBEE. This results in the policy being negatively affected and positive and successful empowerment stories being overwhelmed.

Against this background, the process to amend the act will commence at the beginning of next month.

During this period, and although the major thrust will remain, the Codes of Good Practice will also undergo detailed revision and improvement. The review is also intended to create a new, independent regulatory body for the verification industry to ensure that measurement of BBBEE remains credible and objective.

Many other changes in the companies’ regulatory regime, such as the introduction next month of the new Companies Act, have necessitated the changes in the BBBEE legislative framework.

The new provisions contemplated by the new Companies Act, such as the new requirement for a special resolution being changed from 75 percent to a mere 51 percent, will adversely affect the position of BBBEE shareholders in measured entities.

Other changes will now ensure that companies can now issue loans for the purchase of shares. This will have serious implications on the manner in which BEE transactions are structured in the future. On another front, the new companies’ regime will also promote interested parties and employees of companies to be able to apply for business rescue in certain circumstances that are permissible. This will go a long way in alleviating incidents of BBBEE fronting, as has been reported in many transactions.

With the cabinet having recently approved the alignment of the Preferential Procurement Policy Framework regulations with BBBEE, the path is now finally set for effective use of state procurement to ensure what the finance minister called during his Budget speech “the opportunity to build the country’s entrepreneurship” to the next level.

The alignment of these two policies, which will find expression through new regulations that will be announced at a date to be announced soon by the finance minister, will be considered.

Some positive changes will come out of the new regulations to be announced by the minister soon.

As the government seems to have done its part in aligning some of the difficult pieces of legislation to address the rather complex challenges of empowerment and redress, the private sector must come to the party in a manner that goes beyond mere recitation of its commitment to transformation.

Thabo Masombuka is a former senior empowerment manager at the Department of Trade and Industry and an empowerment strategist. He writes in his personal capacity.

Posted on http://www.iol.co.za

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