There’s nothing like a pandemic to remind us of how distasteful black economic empowerment (BEE) as formulated by the African National Congress (ANC) really is.
This is particularly highlighted in the tourism industry, which will be decimated for a lot longer than most industries.
In an act of hard-heartedness probably born of economic illiteracy and blind belief in ANC policy, tourism minister Mmamoloko Kubayi-Ngubane announced that the Tourism B-BBEE Sector Code (promulgated in terms of the Broad-based Black Economic Empowerment Act 46 of 2013) will be applied to determine which companies receive the financial relief the department is offering.
A casual read through the Code’s 124 pages reveals a dystopian wet dream for social engineers. It is bureaucratic and complicated, and requires repeated re-reading to interpret. Definitions have to be referred to repeatedly to determine what an expression or acronym means.
This Code is an embarrassing admission of failure. A quarter of a century into democracy and the perceived need to advance blacks artificially has achieved little or nothing for the majority. The wealthy BEE beneficiaries of the past remain the BEE beneficiaries of the present.
Last year Sanlam, an iconic corporation founded in 1918 in the nascence of Afrikaner nationalism, entered into a BEE deal with Patrice Motsepe’s Ubuntu-Botho Group. This followed on an expired empowerment deal through Ubuntu-Botho’s 2004 purchase of 10% of Sanlam. That deal expired in 2014, delivering R14bn in value to Motsepe’s consortium.
Sanlam will ‘lend’ R4.3bn to Ubuntu-Botho and a number of other empowerment entities, which they will use to buy 4.9% of the life insurer at a 10% discount to its share price. This will lift Sanlam’s direct black ownership from 14% to about 19%. Then Sanlam will lend R2bn to Ubuntu-Botho, which it will use to buy stakes in other Sanlam companies and businesses that can ‘create value for Sanlam’.
Programme has failed
Twenty six years into democracy, Motsepe is worth R33 billion rand and is the sixth richest man in South Africa, yet he’s is still considered a BEE beneficiary. The programme has failed.
In the view of the IRR, complicated legal and racial contortions are no match for poverty relief, decent education, employment opportunities and healthcare. These are the things that society really needs for success.
Yet Kubayi-Ngubane has decided that in light of the devastating impact of the lockdown on the tourism sector, the department will provide a once-off grant of R50 000 to assist SMMEs in the tourism value chain to ensure their sustainability.
However, in her opinion piece in Business Day, Kubayi-Ngubane doesn’t include as those worthy of being sustained any enterprises that fall short of the department’s BEE requirements.
‘Necessarily and correctly, the department has decided to administer the relief fund in accordance with the Tourism Broad-Based BEE (B-BBEE) Code of Good Practice approved by the trade and industry minister in 2015. This in line with the objectives of economic transformation, and the vision to ensure SA has a sustainable and inclusive tourism development.
‘Over and above the moral imperative of transforming the economy, the department of tourism is compelled to apply sector codes as stated in section 10 of the B-BBEE Act: “[E]very organ of state … must apply any relevant code of good practice issued in terms of this act in … determining criteria for the awarding of incentives, grants and investment schemes in support of B-BBEE”.’
In the time of our worst economic crisis, B-BBEE as crafted by the ANC government is still holy writ even though its effectiveness has been widely condemned for years. Our research shows that over 80% of blacks have never experienced the benefit of BEE or affirmative action.
Unprecedented crisis
According to Kubayi-Ngubane, it is ‘moral’ to save black-owned businesses rather than the employees, mostly black, irrespective of the racial make-up of the owner. Arguably the Tourism Code is for the ‘empowerment and transformation of the sector’, not for bailing the sector out in an unprecedented crisis.
Kubai-Ngubane then sought to attack the IRR: ‘Perhaps the most revealing opposition to the administration of the fund came from the Institute of Race Relations (IRR). In a letter to the editor (Kubayi-Ngubane sends a worrying message, April 8), Terence Corrigan (Project Manager) wrote: “Race-based empowerment policy has long been a burden on business, for both domestic and foreign firms, while having performed questionably at opening up opportunities for new entrepreneurs and having unquestionably failed to spur desperately needed economic growth. When the health emergency recedes, SA will need to go for growth with single-minded determination. It will need every ounce of entrepreneurial energy it can muster. The very stability of the country will be at stake if it does not.
‘The content of this letter lays bare the core beliefs of those who oppose the application of B-BBEE policy. They believe BEE is antithetical to growth and the determination to kindle growth is the antithesis of entrepreneurship and entrepreneurial energy, and is not a factor for the stability of the country.”
The Minister is right about one thing; Corrigan’s letter does lay bare the IRR’s core beliefs, which do include opposing B-BBEE. B-BBEE is a cumbersome, bureaucratically intrusive system that has never benefited as many people as it should have. It continues to benefit increasingly wealthy and connected blacks. It is racist social engineering which discriminates against whites by reason of skin pigment only.
There may be a number of reasons companies do not achieve B-BBEE status. They may not wish to sell ownership in family businesses or to people they don’t know or to people they don’t believe can benefit the business. Companies are likely to embark on ‘fronting’ to get access to business they want or need. The implicit coercion of B-BBEE is likely to make companies compliant in theory but not practice.
For the crime of fronting, the B-BBEE Commission can refer the matter to the National Prosecuting Authority for investigation. This is an obscene waste of limited resources on non-crimes whilst real crimes, which make South Africa one of the most crime-ridden countries in the world, are not solved and are not prosecuted.
Kubayi-Ngubane continues: ‘Simply put, these sections of society still hold the view that the participation of black people in the economy, especially as owners of the means of production, is a negation of entrepreneurship and growth… is but an expression of opposition to the emergence of black business in the economy.
‘Our government and those who are committed to creating a stable, non-racial and democratic SA believe that our government should intervene, through policies such as B-BBEE, to create an inclusive business sector that adds to the growth of the economy.’
Economic Empowerment for the Disadvantaged
Kubayi-Ngubane’s statement is libellous in every respect. It is exactly because the IRR has always wanted to see blacks as owners of business, black entrepreneurship and growth that we oppose B-BBEE and propose Economic Empowerment for the Disadvantaged (EED).
EED promotes investment, growth and jobs, so generating a rising tide that will help to lift all boats. EED seeks to liberate South Africans from poor-quality public schooling, healthcare, and housing by giving them tax-funded vouchers in these key spheres.
We just don’t believe it is healthy or productive to disadvantage 4% of the population to the supposed benefit of 80%. And the ANC’s interventionist, racist policy hasn’t worked. Far too many blacks are under-educated, untrained and denied opportunities to climb the employment ladder.
It is trite that foreign investors, who face a mountain of impediments to invest here, regard B-BBEE as the worst impediment of all. The ANC cannot comprehend that foreign companies won’t invest here if they have to dilute their ownership.
A foreign company noted recently in the media that South Africa represents 3% of its turnover and 30% of its compliance. Does the minister understand what this means? Eventually international companies will withdraw from South Africa to their benefit and to our detriment.
Display of humanity
In our current circumstances, Madam Minister, humanity demands of us all to display our humanity, ubuntu. This means helping as many businesses as possible to save their employees’ jobs – black and white.
In his second speech to the nation about the lockdown on 9 April, President Ramaphosa detailed the assistance that could be given to businesses from a number of government quarters.
Ramaphosa made no mention of the exceptions thrown up by his minister and B-BBEE. He didn’t refute her, but he did ask us to sacrifice as never before and to show ‘our ability to come together in a crisis’.
Either Ramaphosa was missing in action or he approved of Kubayi-Ngubane’s state-sanctioned racism. Neither speaks well of his leadership.
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