Linking SME survival to BEE criteria is ‘grotesque, self-defeating’ – IRR
BIZNEWS / 30 APRIL 2020 - 15.55 / BIZNEWS EDITOR
IRR media release:
The Institute of Race Relations (IRR) notes with dismay that racial criteria will be used to determine whether government relief will be extended to small businesses development, Ms Khumbudzo Ntshavheni.
During a joint meeting between the Portfolio & Select Committees on Small Business Development, she confirmed that the Black Economic Empowerment framework would in fact be a key determinant as to whether the relief would be extended to any particular firm.
The minister said: ‘It is a fundamental requirement for transforming the economy of this country, we cannot choose as and when we use it. BEE is a critical requirement, we need South Africans, all of us, to own and have a share in the economy of the country. So when applications come through, we evaluate them on their need but we consider demographic representation which does not only include race, it includes gender, it includes geographic location, it includes age, which is youth, it also includes people with disabilities. So those are fundamental to the transformation of this economy. As much as we build South Africa we must build a united and equal South Africa and that’s what I commit to. We are committed to building a free, fair and equal South Africa for all South Africans to have a shareholding in the economy of this country.’
In other words, ‘demographic’ signifiers – and given its particular position in policy, nothing more so than ‘race’ – will be used to guide the allocation of relief. This is despite previous comments that such racial criteria would not be used.
Says IRR Deputy Head of Policy Research Hermann Pretorius: ‘However the minister may choose to phrase it, this is the stuff of exclusion. This is not only for those firms denied assistance, as they do not tick the appropriate boxes; their employees and the local economies will suffer, too.’
The IRR also notes that BEE accreditation is not obligatory. Many small firms do not pursue this, as it can be a cumbersome and costly process offering few if any benefits.
Regrettably, we cannot claim to be surprised.
Notes Pretorius: ‘The ideological impulses behind this policy move are powerful, and it seems that even a seminally destructive event such as this pandemic is insufficient to shift government’s position.
‘The minister is following the example set by her colleague at the tourism ministry, who similarly intends to link relief to empowerment status. The country as a whole will pay a steep price for this.’
Despite the supposed priority that government affords the expansion of the small business economy, this has been a failure. Credible research by the Small Business Institute and SBP indicates that there are only around a quarter of a million formal sector micro, small and medium enterprises in the economy. This is far fewer than previous estimates; by the time the pandemic dissipates, there will be far fewer still.
‘To link their survival to adherence to BEE is not only grotesque,’ says Pretorius, ‘it is self-defeating for the country’s economic aspirations.’
Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER