Beginning of the end for BEE transformation in SA

BEE transformation is a divisive topic ahead of November’s all-important elections. No wonder then that two diametrically opposed viewpoints landed recently on how to solve the issue. They both share the same diagnosis that empowerment in South Africa is broken. However, each holds a wildly different prescription on how to fix it …

On one side: President Cyril Ramaphosa has backed Trade Minister Parks Tau’s R100-billion BEE transformation fund. Labour experts are calling it the biggest shake-up to the sector in a quarter century. The idea is that companies can now simply pay money to a central fund and earn empowerment points (instead of doing all the other stuff). Critically, President Ramaphosa frames it as transformation evolution 2.0, not a retreat from the existing system.

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BEE TRANSFORMATION VERSION 2.0

Meanwhile, Solidarity has released a report arguing South Africa could be ‘race-free by 2030.’ Its case rests on the same complaint everyone’s been making for years. BEE transformation is expensive and has produced only a tiny pool of politically connected winners. However, it hasn’t moved the unemployment needle in any meaningful way. As such, it wishes to see affirmative action given a hard sunset.

Moreover, it’s got numbers to back its assertion. It puts the BEE compliance drain on South African companies at R290 billion a year. And it reckons unemployment could fall from 32% to 17% with the removal of race-based legislation. In turn, its preferred replacements are employee stock ownership plans measured by genuine broad-based ownership rather than contrived racial scorecards.

BEGINNING OF THE END FOR BEE TRANSFORMATION

President Ramaphosa believes the R100-billion fund is not a retreat from BEE transformation, but rather an evolution. Image: File

Moreover, government’s own economists are quietly agreeing with Solidarity’s argument, in principle. Economists believe government doesn’t want to scrap BEE transformation entirely. Instead, it wants to give businesses an easier way to comply. Under the newly proposed system they’ll simply write a cheque to the fund, instead of the current rigmarole of finding black shareholders, then proving their worth through lengthy audits.

Meanwhile, data from XA Global Trade Advisors finds 37% of firms are non-compliant with BEE transformation anyway. And 67% have no BEE shareholders of any description. Solidarity quotes these figures as reasons why the government system should be abolished. Ramaphosa’s camp reads the same identical numbers as proof the framework needs to be “refined, reworked and strengthened.”

But what do you think about BEE transformation in South Africa? Is it necessary or should government do away with it altogether? Let us know your thoughts in the comments section below …

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