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BBBEE progress made and amended Act promises to fast-track change

Trade and Industry Minister Dr Rob Davies
President Jacob Zuma

President Jacob Zuma and Trade and Industry Minister Dr Rob Davies discuss the impact of the BEE Act and the amendments Bill. Recorded. 03.10.13. Camerawork: Nicholas Boyd. Video Editing: Shane Williams.

Trade and Industry Minister Dr Rob Davies

Photo by Duane Daws

President Jacob Zuma

3rd October 2013

By: Natasha Odendaal

Creamer Media Senior Deputy Editor

  

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While much progress has been made in rolling out the broad-based black economic-empowerment (BBBEE) legislation first implemented ten years ago, many areas of growth had not materialised and the new amendments were expected to close those gaps.

Speaking at the start of the inaugural two-day BBBEE Summit, in Midrand, on Thursday, President Jacob Zuma said the amended policy, which was expected to be promulgated in mid-2014, aimed to fast-track and better guide South Africa in its transformation ambitions, while plotting the better alignment of the regulations with equal-opportunity growth in South Africa.

The first BBBEE Summit aimed to assess the progress made in implementing the BBBEE Act of 2003 and provide a platform to discuss the incoming amendments.

However, the newly tweaked Codes of Good Practice, first promulgated in 2007, were expected to be published on October 11. The Codes would also outline that companies would have a year to make the required transition to the amended Act.

The summit was expected to allow for reflection on what had been achieved and what still needed to be achieved, as well as to determine what actions had worked towards building an inclusive economy where the black majority participated fully as owners, managers and shareholders.

The nation had, over the past 20 years, expanded its economy by 83%, boosted national income per capita by 40% in real terms – from R27 500 to R38 500 – and had increased the disposable income, per capita, of households by 43%.

Total employment also increased by more than 3.5-million, Zuma added.

On the back of this, he pointed out that there had been an "impressive growth" of the black middle class, as household consumption and income increased.

The black middle class had grown from 1.7-million in 2004, to 4.2-million in 2012, while
 the appointment of black people and women in senior management positions in the private sector had increased from less than 10% in the 1990s to over 40% currently.

Further, the National Treasury recorded that BEE transactions had reached a value of over R600-billion since 1995.

But, with the high number of JSE-listed companies involved in these deals, government remained concerned that black participation in the economy continued to mostly involve share ownership schemes.

Black ownership of South African assets on the JSE had continued to register poor growth - 6.8% by 2010 - Zuma pointed out, adding that economic transformation was not meant to benefit only a few individuals through big business deals.

The nation’s history of exclusion and marginalisation of the majority had hampered South Africa’s efforts to narrow the high levels of income inequality between the races, he explained, noting that the average yearly household income of blacks reached R60 613, while that of white households registered at R365 164.

Government would continue to be guided by the creation of decent employment for all South Africans, the elimination of poverty and narrowing the “extreme” inequalities in society as the latest amendments were implemented.

Zuma envisioned equitable and mutually beneficial regional development in South Africa, and the resultant fostering of progressive integration in the Southern African region.

The mass creation of black industrialists emerged as a critical aim in transforming South Africa into an industrialised and production-focused economy to shift its growth path.

Trade and Industry Minister Dr Rob Davies stated that the development of black industrialists was key to repositioning the economy from being a producer and exporter of primary products and an importer of finished products, to becoming an industrial producer and diversified exporter.

“The day we see factories all over the country owned by black entrepreneurs taking advantage of our Industrial Policy Action Plan, we will be moving towards achieving our BBBEE goals,” Zuma said.

FRONTING A BARRIER
However, fronting remained a barrier to the development of industrialists, as it impeded skills transfer and the experience at higher management levels needed to successfully launch industrial enterprises.

The newly adopted BBBEE Amendment Bill had criminalised the practice of fronting and would hold companies and directors to task.

“Fronting is unforgiveable as it distorts our empowerment picture, giving an impression of progress where there is none. It is for this reason that we will work hard to prevent and eradicate this practice,” Zuma explained.

The amendments would work to mute fronting activities and had set out several new procedures and guidelines to mitigate this issue, while encouraging the emergence of black industrialists.

Further, as the backbone of any growing economy was dependent on small, medium-sized and micro enterprises (SMMEs), the amendments would place more emphasis on developing small businesses.

“We encourage the growth of more SMMEs owned by black people, women, youth and persons with disabilities in our six New Growth Path job drivers – mining, agriculture, the green economy, tourism, manufacturing and infrastructure development,” Zuma said.

Further, the costly verification process that is currently needed to prove the extent of small enterprises' black ownership before they are entitled to secure new business from, or partner with, larger BBBEE-compliant organisations will be scrapped.

The incoming amendments were aimed at easing the burden on small businesses, Davies noted.

This meant that smaller players would no longer have to fork out the R30 000 to R40 000 verification fee to prove the degree to which they were black-owned enterprises.

All 100% black-owned companies would automatically be recognised as a level 1 BEE company, while those that are 50% black-owned would be automatically recognised as a level 2 BEE company.

Larger companies would no longer be allowed to demand verification codes of smaller enterprises and would be required to accept affidavits outlining the smaller companies' BEE position.

Companies found to be misrepresenting themselves would be held to task by the yet-to-be-established BEE Commission under the umbrella of fraud.

The Presidential BEE Advisory Council's Sandile Zungu said the commission would be responsible for eliminating fronting, overseeing the structure of the Act, setting growth targets and investigating BEE claims and issues.

“We are moving a step ahead to promote transformation and the passing of the BBBEE Amendment Bill by the National Assembly on June 20 represented a huge step forward,” Zuma said.

The BBBEE Act had been reviewed in an effort to align it with other key pieces of legislation, including the Industrial Policy Action Plan, the National Development Plan and the New Growth Path, which were all geared to supporting job creation, localisation, skills development and growth.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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