In a rare criticism of transformation legislation, Deputy President Kgalema Motlanthe has conceded deficiencies in broad-based black economic empowerment (BBBEE), saying on Wednesday that shortcomings in the implementation of this legislation had emerged.

Speaking at the Mail & Guardian’s 20 Years of Economic Transformation Summit, in Sandton, he asserted that, among others, emphasis on ownership and senior management had unintended consequences, resulting in fronting, speculation and abuse of the tender system.

BBBEE regulations, Motlanthe said, had also failed to adequately incentivise job creation and provide support for small enterprises and local procurement.

“To ensure a more broad-based approach, government contends that there should be a stronger focus on the broad-based elements of the BBBEE regulations, [including] support for small enterprises and cooperatives and procurement from local producers,” he commented.

With a view to addressing some of these concerns, Motlanthe said that government had recently undertaken a “substantial” revision of the BBBEE Codes of Good Practice, which were introduced following the conception of the BBBEE Act of 2003.

“[The revisions] will make a commitment to implement BBBEE consistently in all sectors, while an aspect of these efforts [will involve] continuously monitoring and evaluating the impact of BBBEE compliance,” he noted.

The Deputy President added that the most important recent innovation was an increase in incentives for larger companies to support emerging and smaller enterprises, stating that this support may be in the commercial interests of larger companies wishing to increase the competitiveness of smaller enterprises in their supply chains.

“Total early-stage entrepreneurial activity is particularly low, at about half of that of other developing countries. Going forward, there will need to [be] continued focus on improving mentoring and other support programmes, as we reduce regulatory burdens for small businesses,” he held.

According to Motlanthe, the 2009 Global Entrepreneurship Monitor Report ranked South Africa fifteenth out of 37 countries for start-up activity and twenty-ninth in new firm activity, placing it in the lowest quartile of all the countries involved in the study in two key measures, namely opportunity entrepreneurship and new firm activity.

He added that the economy had not diversified sufficiently and that manufacturing, in particular, had grown “slowly”.

The fastest growing industries had been telecommunications and the financial sector, while in contrast, manufacturing had fallen from contributing 20% of South Africa’s gross domestic product to 10% in the past 18 years.

“To ensure sustained growth going forward, we will need to reverse this trend,” Motlanthe maintained.

However, he averred that it “was not enough” to simply strive for growth if it was not in the context of an equitable economy, saying that, while poverty had declined since the first democratic elections of 1994, inequality had not.

“As far as we know, inequality increased during the commodity boom of 2000 and subsided with mineral rents. In 2011, the gini coefficient was still around 0.65, which is extraordinarily high by global standards. The richest 10% of households still get over half of our national income,” Motlanthe said.

“We should not underestimate the impact of inequality on our society. Social stratification, which cuts across the colour line today, sharpens the sense of economic injustice among some sections of the South African population.”