Concerns over codes

DEAR SIR — The Democratic Alliance (DA) will request an urgent meeting with Trade and Industry Minister Rob Davies to discuss the Codes of Good Practice for Broad-Based Black Economic Empowerment (B-BBEE) published on Friday (Codes kick off new phase of empowerment, October 14).

We support any initiative to create more opportunities for South Africans. B-BBEE is one of the most powerful instruments for doing so if it is genuinely broad-based. Our concerns are that the codes will not achieve sufficiently broad-based empowerment.

The codes confirm that the Department of Trade and Industry has not changed its mind on its decision to increase the threshold of the value of equity previously held to qualify as a “new entrant” from R20m to R50m.

Steps must be taken to ensure that B-BBEE does not become a tool for elite enrichment — we therefore argued for lowering the threshold in the definition of “new entrants” to R10m and increasing the points that can be earned by involving new entrants and workers in empowerment transactions.

The department clearly has not applied its mind to comments received on the draft codes published in October last year. Business and civil society raised serious principled and technical concerns around the 2012 draft codes. This is a severe and worrying example of a misuse of basic legislation which gives extensive powers to the minister to push through regulations without appropriate consultation.

There is a very real risk that the cost of compliance with the codes will have unintended consequences, including:

Businesses may choose to withdraw from the empowerment process; or

Disinvestment in the South African economy, costing thousands of jobs.

The DA remains opposed to the inclusion of minimum threshold requirements of 40% for ownership, skills development and enterprise and supplier development in the empowerment scorecard.

The codes continue to use racial subcategories in the targets for skills development and employment equity. This poses a particular challenge, because: first, it does not seem to take regional differences into account; and second it requires an even greater degree of racial categorisation (versus the 2007 codes in which “black” included African, coloured and Indian and relied on self-identification).

The codes, in their current form, will not create an inclusive economy.