Manuel cri­tiques BEE FAVOURS

For­mer fi­nance min­is­ter says BBBEE only favours a small elite, while the poor con­tinue to suf­fer

CityPress - - Business - JUSTIN BROWN justin.brown@city­press.co.za

The con­trac­tions re­lated to em­ploy­ment eq­uity law and broad-based black eco­nomic em­pow­er­ment (BBBEE) were high­lighted by the fact that the Gupta fam­ily, who came from In­dia, had never had any BBBEE qual­i­fi­ca­tion is­sues, Trevor Manuel, Roth­schild deputy chair­man, said this week. “There is some­thing se­ri­ously un­to­ward about this con­tra­dic­tion,” Manuel said at the an­nual con­fer­ence of the As­so­ci­a­tion of Black Se­cu­ri­ties and In­vest­ment Pro­fes­sion­als (Ab­sip) held in Jo­han­nes­burg.

On the other hand, he used the ex­am­ple of a se­nior ex­ec­u­tive in a lo­cal com­pany, who was born in Zim­babwe and ar­rived in South Africa in the 1990s but was only nat­u­ralised af­ter 1994.

“De­spite the fact that he is mar­ried to a South African and their chil­dren are dis­tinctly South African, he does not qual­ify as black for em­ploy­ment eq­uity pur­poses. It is im­por­tant to raise this sen­si­tive mat­ter,” Manuel said.

He said that it was ob­vi­ous that em­pow­er­ment was a crit­i­cal im­per­a­tive for South Africa to re­verse the in­jus­tices of the past.

“In spite of 13 years of leg­is­la­tion and reg­u­la­tion and eight years since the in­tro­duc­tion of the first BBBEE codes, and an even longer his­tory of dis­cus­sion of em­pow­er­ment char­ters and vast sums of money com­mit­ted to BBBEE, the ev­i­dence on per­for­mance sug­gests that the best en­deav­ours have pro­duced patchy out­comes, at best,” Manuel said.

“There is a huge la­cuna of in­tel­lec­tual lead­er­ship in trans­for­ma­tion, and I want to ap­peal to Ab­sip to con­sider how it can step into the breach,” Manuel said.

“Per­haps one of the most im­me­di­ate chal­lenges is to en­sure that we have an agreed sur­vey method, sur­vey fre­quency and an ap­proach to mea­sure­ment that is uni­form and bind­ing on all,” he said.

“There are at least four sur­vey re­ports avail­able and gen­er­ally in use – the Jack Ham­mer Ex­ec­u­tive Re­port; the Al­ter­na­tive Pros­per­ity Re­port; the NEF Own­er­ship Sur­vey; and the Em­pow­er­ment Trail­blaz­ers Sur­vey.

“I ex­pe­ri­ence pro­found dif­fi­culty in travers­ing across these and seek­ing com­mon method and agreed out­comes,” Manuel said.

“I of­ten pause while us­ing these re­ports to ques­tion whether the an­a­lysts are even us­ing the same raw data sets... Re­gret­tably, there­fore, all these re­ports are treated with a dose of cyn­i­cism and they are con­sid­ered un­re­li­able,” he said. Turn­ing to the own­er­ship el­e­ment of BBBEE, Manuel said that there was a trend among em­pow­er­ment share­hold­ers to feel en­riched for lit­tle ef­fort, which he re­ferred to as “money for jam”, and not wish­ing to jeop­ar­dise their new­found div­i­dend stream, they tend to be silent. A key down­side from the fact that em­pow­er­ment deals are done at a dis­count means that pen­sion­ers – the ma­jor­ity of whom are black South Africans – are poorer each time an em­pow­er­ment dis­count is passed. “Con­se­quently, there is an un­der­stand­able re­sis­tance to re­peat­ing the dis­count­ing af­ter a group of share­hold­ers has cashed out,” Manuel said. A key chal­lenge re­lated to em­pow­er­ment deals was fund­ing. The lim­i­ta­tions on the pool of avail­able BEE eq­uity cap­i­tal hin­ders the trans­fer of real eco­nomic value, he added. “The fund­ing struc­tures are al­most al­ways highly geared... Too fre­quently, the new BEE share­hold­ers end up with trans­ac­tions un­der wa­ter, and them­selves highly in­debted,” Manuel said. In the min­ing sec­tor, it was es­ti­mated that R400 bil­lion in BEE deals had been done with­out much to show for these trans­ac­tions, he added. Turn­ing to skills de­vel­op­ment, Manuel said that this area was show­ing slow progress. “Man­age­ment con­trol has de­creased since 2007, while sig­nif­i­cant progress is be­ing made at the level of nonex­ec­u­tive di­rec­tor,” he said. “The tal­ent avail­able to fi­nan­cial sec­tor cor­po­rates is in­cred­i­bly shal­low for a coun­try with a sec­tor as large as we have,” Manuel said. “So, we have a skills mis­match, black with all man­ner of tech­ni­cal fi­nan­cial skills abound in fund man­age­ment while cor­po­rates try and make do with a dearth of skills for all of the rest of man­age­ment,” he said. Turn­ing to the em­pow­er­ment en­ter­prise and sup­plier de­vel­op­ment pil­lar, Manuel said that sup­pli­ers needed “gen­uine sup­port”. “We must em­bark on gen­uine con­sul­ta­tions about how we de­velop the sec­tor for small, medium and mi­cro en­ter­prises. [By] merely re­flect­ing in the score­card with­out a gen­uine sup­port sys­tem sets the en­tire sys­tem up for fail­ure. We must recog­nise that this sys­tem im­poses enor­mous ad­di­tional costs that will have to be borne in the in­ter­ests of broad­en­ing and di­ver­si­fy­ing the base of our econ­omy,” Manuel said.

PHOTO: GALLO IMAGES

READ THE MAN­UAL For­mer fi­nance min­is­ter Trevor Manuel ad­dresses the au­di­ence dur­ing the an­nual con­fer­ence of the As­so­ci­a­tion of Black Se­cu­ri­ties and In­vest­ment Pro­fes­sion­als last week. The con­fer­ence, held un­der the theme Eco­nomic Trans­for­ma­tion for So­cial Change, was at­tended by high-pro­file politi­cians and in­flu­en­tial busi­ness­peo­ple

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