To BBBEE or not to BBBEE?
Over the past week, the effectiveness of broad-based BEE in facilitating true economic empowerment has been brought under scrutiny. It all started with the DA announcing it has decided to dump BEE as a policy because it’s not working. In the DA’s view, it is the ANC’s version of BEE that stands to be rejected rather than the idea of economic empowerment and inclusion. I’m not sure if there is any other version of BEE. The last time I checked it is the governing party that introduced the policy. In any event, to support this assertion, the DA’s head of policy, Gwen Ngwenya, referred to multiple evaluation indicators, mainly inequality and unemployment, as either having regressed or stagnated in the era of BEE. A regime that has failed to tackle such primary challenges is, in the view of the DA, not fit for purpose and therefore stands to be abandoned.
Smart people say that for democracy to work society needs credible and strong opposition parties. I would love to meet the DA bright spark who thought that getting one over on the ANC would involve a call to get rid of BEE. It doesn’t. If anything, perhaps it shows just how detached some are from the objectives of economic empowerment policy and the real impediments to its implementation.
Granted, the primary challenge with the BEE report card is the ever-widening gap between its generally accepted objectives and its outcomes. As the government’s primary instrument for facilitating economic inclusion for marginalised black people in a manner that creates opportunities and the possibility of escaping poverty, BEE has not fully delivered on its mandate. While it has created a number of real participants in the economy in terms of black senior executives in corporates, skilled black professionals and some black entrepreneurs in key sectors of the economy, the broad base is not there. This is clear from the worsening unemployment indicators and the fact that SA has the world’s highest inequality coefficient.
These challenges were never going to be solved by BEE alone, but it is worth interrogating what role BEE was meant to play in tackling them, and where it has failed, instead of throwing the baby out with the bathwater as the DA suggests. But it seems the DA is not the only one suddenly struggling with the concept.
SA still battles with identifying the most objective and robust evaluation tools for assessing the effectiveness of BEE. Key to the problem of evaluation are the various forms of arbitrage that exist in the system that can enable a company with no ownership levels to achieve the same rating as a visibly empowered company simply by focusing on parts of the scorecard that deliver no ownership to black people. Similarly, the idea of once empowered, always empowered creates scope for a company that executed a BEE deal 20 years ago, which has matured, to be granted the same recognition as a company that is currently involved in an empowerment deal.
Then there is the recent case involving the Airports Company SA (Acsa) and Swissport. In summary, Swissport, a Swiss baggage-handling company, has objected to a clause requiring the bidders for the baggage-handling licence to commit to 51% black ownership within a year of winning the bid. In Swissport’s view, this requirement is against its practice of retaining majority stakes in its operations and flies in the face of the constitution. Yes, the Swiss company believes that a state-owned entity in a government that has adopted BEE as a policy is against the constitution if it requires service providers to be blackowned.
Acsa’s view is that baggage-handling services have been earmarked for large-scale transformation. Acsa intentionally wants companies that are committed to substantive empowerment to be the ones providing such services. This naturally revives the old tensions between global companies that have scale and expertise, their much smaller local competitors, and the country’s commitment to transformation. Global companies setting up local subsidiaries are prone to doing the barest minimum to comply with empowerment targets, as many simply see us as a dot in their maps and not necessarily a key market. Local companies, on the other hand, may have the right commitment to transformation but lack the capacity to match the scale of the global competitor.
Once upon a time the government tried to marry these two divergent worlds under the principle of “skills transfer” by awarding the business to both companies and hoping that the forced marriage would bear love and prosperity. All that happened was that the local firm was kept around for compliance and the global firm did all the work and took the lion’s share of the profits.
This may be the reason why the likes of Acsa have run out of patience and now insist that key suppliers must be black-controlled before they can bid for key contracts. Business must learn that regulation will always chase compliance — in other words, if you don’t do it yourself we will force you to do it.
So the DA may do better focusing on the real reasons why corporate SA and even foreign companies have been so slow at transforming.
If you don’t do it yourself we will force you to do it