WHY BEE IS FAIL­ING

CityPress - - Business -

Eskom has many prob­lems, but this week it made an im­por­tant, al­beit clumsy, in­ter­ven­tion in the dis­course about the future of BEE and trans­for­ma­tion in South Africa. In ques­tion­ing the de­ci­sion by Exxaro, the coal miner, to re­view its em­pow­er­ment struc­ture, the power util­ity has ex­posed the sys­temic fail­ure of em­pow­er­ment and trans­for­ma­tion that has been go­ing on for years now, mostly ow­ing to poor mon­i­tor­ing by the gov­ern­ment.

Un­til last month, Exxaro was con­sid­ered an ex­em­plar­ily em­pow­ered min­ing com­pany: it had ex­ceeded the leg­is­lated 26% em­pow­er­ment share­hold­ing, and was both black owned and con­trolled. Then, late last year, the em­pow­er­ment scheme’s lock-in pe­riod ex­pired, and the com­pany, which sup­plies coal to Eskom, had to struc­ture a new em­pow­er­ment trans­ac­tion. Courts have yet to rule on whether white firms can en­joy em­pow­er­ment sta­tus even af­ter black share­hold­ers have long sold their shares in these en­ti­ties. In­stead of waiting for this de­ci­sion, Exxaro chose to redo the trans­ac­tion. But the new one, ap­proved last week by share­hold­ers, will see its em­pow­er­ment re­duce from above 50% to 30%. This means that Exxaro will be­come black owned, but not black con­trolled.

This has rat­tled Eskom whose em­pow­er­ment poli­cies re­quire its coal sup­pli­ers to have 50% em­pow­er­ment. Its Twit­ter-happy in­terim CEO, Mat­shela Koko, felt in­sulted by Exxaro’s ac­tions and has threat­ened not to recog­nise the new struc­ture. Exxaro says it can’t af­ford an­other 50%plus em­pow­er­ment scheme be­cause of un­cer­tainty around com­mod­ity prices. Plau­si­ble though this might sound, it’s not en­tirely fac­tual. But the pur­pose of this in­put isn’t to in­ter­ro­gate the com­mer­cial vi­a­bil­ity of a 50%-plus scheme. Rather, it’s to ex­plain how we got here. Put dif­fer­ently, why it is pos­si­ble for com­pa­nies like Exxaro to con­sider re­duc­ing em­pow­er­ment at all?

The an­swer is sim­ple: Em­pow­er­ment and trans­for­ma­tion are just no longer im­por­tant in this econ­omy. They’ve not been, at least, for the re­port and try­ing to reg­u­late banks on be­half of his friends. More than a decade af­ter en­act­ing the Broad-based Black Eco­nomic Em­pow­er­ment (BBBEE) Act, the depart­ment only set up the Black Eco­nomic Em­pow­er­ment Com­mis­sion – an agency that is sup­posed to en­force the act – only last year. Typ­i­cally, it has an act­ing head, which means that cor­po­rate thugs are con­tin­u­ing to bend the laws while it gets its act to­gether.

Third, over time, em­pow­er­ment and trans­for­ma­tion have lost their most vo­cal, com­mit­ted and ef­fec­tive high priests. Two ex­am­ples come to mind. As CEO of the Pub­lic In­vest­ment Cor­po­ra­tion (PIC), Brian Molefe used the PIC’s mus­cle to force listed en­ti­ties to em­brace trans­for­ma­tion and, as head of the EE Com­mis­sion and Black Man­age­ment Fo­rum (BMF), Mzwanele Manyi gave un­trans­formed com­pa­nies a hard time. These voices have since gone silent on this is­sue.

And lastly, there are se­ri­ous ca­pac­ity and re­source con­straints. Even with the best in­ten­tions in the world, it’s doubt­ful that the BMF has the ca­pac­ity and fi­nan­cial re­sources to track, mon­i­tor and act against anti-trans­for­ma­tion trans­ac­tions and com­pa­nies. The same ap­plies to the de­part­ments of labour, trade and in­dus­try and min­eral re­sources. Even though the BEE Com­mis­sion is fi­nally op­er­a­tional, we have yet to see whether it is well-re­sourced to track down and jail any of the many cor­po­rate of­fend­ers who are flout­ing the BBBEE Act. This ad­min­is­tra­tion’s track record on fund­ing such bod­ies is unin­spir­ing.

Can the de­pri­ori­ti­sa­tion of em­pow­er­ment and trans­for­ma­tion be stopped? Yes, it can – and ought to – be stopped. Prob­lem is, the cur­rent ad­min­is­tra­tion lacks both the po­lit­i­cal will and in­ter­est to do so. It is just not in­ter­ested in the man­age­ment of proper eco­nomic em­pow­er­ment and trans­for­ma­tion. This is why, for now, South Africans will have to set­tle for em­pow­er­ment ac­tivism, Eskom-style.

Dludlu is a for­mer ed­i­tor of the Sowe­tan

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