What the proposed BEE amendments could mean for corporate SA
MONEYWEB / 21 JUNE 2018 - 22:29 / NOMPU SIZIBA
Unfortunately, says BEE lawyer Amber von Steiger, the focus is only on ownership
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NOMPU SIZIBA: Draft amendments of the BEE codes published by the Department of Trade and Industry, the dti, earlier this year have come in for some criticism, with some arguing that the amendments could actually undermine transformation and the legislation that’s been created to promote it.
I’m joined on the line by Amber von Steiger, who is a BEE lawyer at Norton Rose Fulbright. Thanks very much for joining us, Amber. What are the most important proposed changes to the BEE codes?
AMBER VON STEIGER: There have actually been two pieces of draft legislation that have come out in fairly quick succession, the latest one being on Friday. There have been some really fantastic initiatives in the draft legislation. There have been initiatives that have focused on job creation, involving changes to the skills development score card, introducing the youth employment service.
There have, however, also been some changes regarding 51% black ownership, particularly in respect to automatically 11 being awarded to companies with 51% black ownership, and also read together with the second group of legislation that went there really has been a strong drive towards procurement from those companies. Unfortunately it’s focusing more on ownership than the other parts and elements of the BEE score card.
NOMPU SIZIBA: So now how are the proposed changes affecting transformation?
AMBER VON STEIGER: … When one looks at the BEE score card, when you look at all of the elements together, they really are transformative. There is socioeconomic, which deals with basic living needs, basic education. Skills development is obviously upskilling individuals. Enterprise development is focusing on building black businesses, bringing them into the supply chain; management control which means bringing black people through the various management levels into the board. Ownership, however, is a very limited definition and it’s quite specific for BEE purposes. It only looks at voting rights and the right to economic …, which is effectively a right to…in the hands of black people.
So where the concern regarding transformation is coming in, is that the focus is only on ownership, which is only for the right to vote and the right to receive dividends, but very limited.
NOMPU SIZIBA: So, based on this, this emphasis on the ownership thing, will that increase the risk of fronting?
AMBER VON STEIGER: Absolutely. There will be a risk in increase in fronting, and regulatory fronting – what I mean by that is the crime of fronting as in the BEE codes, meaning that people will put in ownership structures without having to implement any other BEE initiatives. And because that’s going just going to be in paper, it’ll be very easy for people to misrepresent what the real set of facts is. Unfortunately it may also retrieve at the … layman’s view what fronting is, and what I man by that is where a company has 51% black ownership or 100% black ownership, it would automatically have a really good BEE focus, without having gone through all those initiatives.
So when someone who walks into a company, with for example a level 2, which is a really fantastic BEE level, because it’s got that with only having shareholders that are black, and there is no transformative initiative that has gone through the rest of the elements, they can work with a company and not be a single black person that’s there. It’s not regulatory fronting, but there is a perception of a view from the legislation which unfortunately is something which the legislation allows. But from a layman’s perspective, it’s feeding into a bigger understanding the BEE fronting.
NOMPU SIZIBA: Based on what you say, how do you think government could have made such a huge oversight?
AMBER VON STEIGER: I think there has been a big drive to push through this legislation, but there is a huge drive from government to push transformative legislation, and the BEE legislation amendments aren’t the only ones that have come in over the last couple of months, which are really trying to focus on driving BEE. I think it may just perhaps be they didn’t quite…the full consequences of what they put in the legislation. They did include in the initial legislation, with skill development score cards being upgraded, the initiative regarding the youth employment. So there have been other initiatives. I think perhaps this focus on ownership may need to be changed slightly.
NOMPU SIZIBA: Alright, Amber, well talk to you further on this particular subject, but we’ve run out of time.
Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER