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NEGATIVE CONNOTATIONS MEAN BBBEE NEEDS TO BE COMPLETELY OVERHAULED, ADVISER SUGGESTS

Darren Parker | 6 February 2023

A complete overhaul and rebranding of broad-based black economic empowerment (BBBEE) is needed to undo and overwrite the damage done to the system by unscrupulous opportunists who have used corruption and State capture to enrich themselves through the abuse of empowerment policies, Centre for Economic Development and Transformation director Duma Gqubule has said.

“We need to rebrand this thing. It might even involve a name change, because in the public, it has been discredited,” he said on February 6.

Speaking at a seminar on BBBEE in Johannesburg, hosted by investment firm Kagiso Capital, Gqubule said the measurement of black ownership currently had zero credibility, stating that there was no relationship between actual black ownership and what was on the black economic empowerment (BEE) certificates of many companies.

He said there were so many ways of representing the statistics, with so many creative ways to manipulate those statistics, that the result had been a “confusing maze of black ownership statistics”.

For example, financial institution Nedbank quoted its black ownership at 37.6% in March 2017. However, in its year-end financial report for the same year, the actual figure included was only 1.7%.

Moreover, reported BEE statistics differ dramatically between the JSE at 23% and the National Empowerment Fund at only 3%.

He attributed the “voodoo BEE accounting system” to a series of policy concessions made when the BBBEE Act was first promulgated.

Among these concessions he referred to was the flow-through principle, which allowed a 51% black-owned company to be counted once as 100% black-owned in an ownership chain.

Other concessions he mentioned included the exclusion of mandated investments and State ownership, the continuing consequences principle, third-party ownership and the exclusion of non-South African assets.

In an experiment, Gqubule said the application of these concessions using the “voodoo BEE accounting system” turned an actual 6% black ownership of a consortium into 26% black ownership on paper.

He also decried the “once empowered, always empowered” principle applied to large companies, such as banks and mining companies, who have no incentive to enter into replacement BBBEE transactions.

However, despite these issues undermining the success of BBBEE, Gqubule blamed the African National Congress- (ANC-) led government’s mismanagement of the South African economy for 27 years as the real reason that BBBEE is failing.

He said there needed to be drastic changes made to the government’s failed macroeconomic policies.

“The ANC government - you've been talking about structural reforms for a decade, but you cannot deliver growth, and you will not deliver growth. The only way is for the government to spend more on its people and its infrastructure to grow this economy,” he said.

Gqubule added that there would need to be a significant revamping of the BEE policy framework to stimulate a third wave of transactions.

Further, he called for a new BEE Commission to be instated.

‘Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER’.




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