Lack of clarity renders BEE vulnerable
Twelve months ago, as the nation gradually realised that the fight against the pandemic was going to be a long haul, the government put together a series of economic relief packages supposed to amount to R500bn.
As we now know this was a foray into political optics rather than financial realities, mainly because its greatest single variable — the loan guarantee scheme — was not much more than a possible commitment.
As it winds down quietly, the scheme’s actual utilisation of just over R18bn or 9% of the figure aggressively promoted by President Cyril Ramaphosa for more than a year, represents the single greatest flop in SA’s response to the pandemic.
At the same time, the department of tourism, working with an industry whose existence was fundamentally threatened by nonpharmaceutical measures put in place locally and across the globe, initiated a R200m relief fund. The rules of the fund, particularly its reference to BEE criteria, were subjected to litigation championed by AfriForum.
At the heart of AfriForum’s argument was that prioritising BEE in allocating relief during a pandemic was primarily political rather than practical.
The high court ruled that the BEE criterion formed part of a range of considerations that were collectively justifiable. After that fund was exhausted the tourism minister managed to marshal enough resources to launch a bigger Tourism Equity Fund worth R1,2bn. The aim of the fund is to facilitate transformation of the tourism sector, which in the view of the minister was lagging before the pandemic and has worsened over the past year.
That fund is now the subject of another court case pitting — you guessed it — AfriForum and Solidarity against the minister.
The crux of the argument this time is that the fund is an illustration of unfair discrimination, because it seeks to exclude businesses that do not meet the 51% black ownership threshold.
If that rule is applied, the reach of the fund will be in line with the ministry’s desire to help black-owned businesses access funding opportunities that will enable them to scale up operations, particularly in the post-Covid recovery period. The recourse to litigation — questioning and challenging the
implementation of various initiatives aimed at achieving different socioeconomic goals — has become a common feature of governance in SA.
At the heart of it is tension relating to the question of whether discrimination can be fair. For a country with an explicit commitment to undoing the effects of decades of unfair discrimination, the rationale for focusing on initiatives aimed at levelling a playing field that suffers from intergenerational inequalities seems obvious. The problem we have is that regulations and directives aimed at facilitating transformation range from the meaningful to the contentious and the arbitrary.
The lack of clarity between intention and implementation creates an open window for organisations like AfriForum to continually challenge the initiatives. When this happens resources that could be used to assist affected businesses — whatever their ownership scores eventually look like — are redirected towards litigation. In the current case, for example, the argument is whether tourism minister Mmamoloko Kubayi-Ngubane or trade, industry & competition minister Ebrahim Patel has the right to set the rules the Tourism Equity Fund seeks to implement. This question may seem arbitrary, but it is apparently contentious enough to be a matter for litigation. The frustration for small businesses and other stakeholders that need to apply for the fund is that such questions are the type of things that should by now be established practices rather than new issues to be revisited with every new initiative.
Given the commonality of this question across the various economic sectors, it is puzzling that the answers seem to be grey wherever you go, which leaves the courts as interpreters of something that should frankly be patently clear to everyone affected, particularly those in charge of implementation.
● Sithole (@coruscakhaya) is an accountant, academic and activist.