THE SOUTH AFRICAN / 16 AUGUST 2020 - 13.30 / RIYAZ PATEL
Broad-Based Black Economic Empowerment Commission say state entities falling short in implementing BEE directives
A new report by the Broad-Based Black Economic Empowerment (B-BBEE) Commission shows an overall decline in black economic empowerment across almost all measured elements.
This dip is despite SA’s substantial legislative and regulatory framework intended to ensure the economic empowerment of South Africa’s previously disadvantaged groups.
However, “mere compliance ‘box- ticking’ with these requirements will not produce an inclusive, thriving economy with sustainable empowerment. The precursor to this is quality education and skills development,” says Candice Meyer, Daveraj Sauls, and Deon Visagie from law firm Webber Wentzel.
The B-BBEE Commission’s report, dated 10 June, provides a year-on-year comparison of available data, focusing on averages achieved in 2018 and 2019.
STATE ENTITIES FALLING SHORT
It showed that organs of state and public entities have fallen woefully “short” of the required standards in the B-BBEE Codes according and will be subjected to “greater scrutiny” in future.
The Commission has called on state organs and public entities to align requirements and processes for awarding contracts, licencing and incentives with the directives of the B-BBEE Act and that it must enforce adherence.
The report reveals that there was a slight uptick in the average levels of black ownership of enterprises from 25% to 29%.
However, on average, the other measured elements of B-BBEE, as in the Generic Codes of Good Practice and the various Sector Codes (B-BBEE Codes), either showed a decline or remained static from 2018 to 2019.
These are management control, skills development, enterprise and supplier development and socio-economic development.
Black management control declined from an average score of 45% in 2018 to 39% in 2019, indicating reduced control of local enterprises by black South Africans, despite the average increase in ownership by black people.
SKILLS DEVELOPMENT IS KEY
Skills development of black people remained static at an average score of 49%.
“Education and skills development are critical ingredients for the successful transformation of the South African economy from one in which most of the population is excluded from the formal economy, to one with an inclusive, thriving market,“ believes Meyer, Sauls and Visagie.
The skills development element of B-BBEE has been flagged in the B-BBEE Codes as a priority element, recognising that skills are essential for universal economic empowerment.
If an enterprise fails to meet the sub-minimum target for skills development, as set out in the B-BBEE Codes, its overall B-BBEE recognition level will reduce by one level, no matter how compliant it is in relation to the other measured elements of B-BBEE. As such, the B-BBEE Codes have a weighted compliance incentives for the skills development element.
Despite this, there is stagnation in skills development scores.
The B-BBEE Commission maintains that the targets for skills development are high, but says emphasis should not only be on the measurement of the quantity of skills development spend, but also the nature and quality of the training interventions.
It has called for greater scrutiny of training initiatives and the role of intermediary skills development service providers.
Coupled to the B-BBEE Codes is the Employment Equity Act (EE Act), which prohibits unfair discrimination and also seeks to ensure inclusive participation of all South Africans in the formal economy by establishing minimum requirements for staffing at various levels within an enterprise, in terms of race and gender, as well as skills development.
One of the main purposes of the EE Act is to implement affirmative action measures through the adoption and implementation of an employment equity plan by designated employers.
The Department of Employment and Labour recently published a notice indicating its intention to table the Employment Equity Amendment Bill, 2020 (Amendment Bill), which, if enacted in its current form, will empower the Minister to prescribe criteria that must be taken into account in identifying national economic sectors for purposes of the administration of the EE Act and set numerical targets for equitable representation of persons from Designated Groups in the sectors identified.
The Amendment Bill intends to reduce the regulatory burden on small employers. Designated Employers will exclude employers with fewer than 50 employees if they meet a prescribed turnover threshold.
Non-designated employers will no longer be required to notify the Director-General of their intention to voluntarily comply with Chapter III.
Meyer, Sauls and Visagie says given the reported average decline in levels of compliance with the requirements for BEE, the proposed amendments to the EE Act could, however, lead to more compliance “box ticking,” by filling positions rather than substantively empowering people through education and skills development.
Black economic empowerment cannot succeed without meaningful participation of Designated Groups in the economy, the Webber Wentzel team said, and as a precursor, the critical focus must be on providing quality education and skills development from early childhood into productive adult years.
“Lifelong learning should be encouraged – knowledge is power. Not only will this enable economic inclusion on a sustainable and equitable basis, but it will also drive South Africa’s ailing economy into a healthier future.”
Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER