Africa-Press – South-Africa. The government is set to make changes to Black Economic Empowerment (BEE) legislation after a two-phase review in the coming years to understand the outcomes of the policy framework.
This comes after BEE has come under increasing criticism from business leaders, lobby groups, and parties within the Government of National Unity (GNU).
Many, including the DA, have called for BEE to be replaced with means-based redistribution policies to improve the effectiveness of legislation aimed at tackling inequality.
Some within the ANC, including the Minister of Trade, Industry and Competition, Parks Tau, have said that BEE has become tainted by cronyism and corruption.
Tau and former president Kgalema Mothlante have said the policy framework needs to be altered to remove loopholes that have been exploited by some individuals to benefit at the expense of a broader cross-section of society.
Answering questions in Parliament, Tau explained how the review of the policy framework will be conducted and hinted at what changes could be made to BEE.
“The review will be implemented in two phases. The first phase will be a short-term review focusing on refinement and an analysis of subordinate legislation, which should be completed by the end of this financial year,” Tau said.
“Parallel to that, we have been in the process of consultation to finalise the Transformation Fund, and the implementation of the fund is part of the review process.”
Tau explained that the implementation of the Transformation Fund seeks to aggregate different funding instruments to enhance efficiency and maximise value.
“The second phase is a long-term review which involves an analysis of the Broad-Based Black Economic Empowerment (B-BBEE) Act for substantive amendments,” Tau said.
“The review of the Act aligns with South Africa’s growth and inclusion strategy, outlined by the government. The path to economic growth, inclusion and transformation is underpinned by B-BBEE through preferential procurement policies.”
Tau said the government’s approach to BEE helps to create jobs in marginalised communities, strengthens local supply chains, and ensures that benefits are widely shared.
“Therefore, reviewing the Act in the context of socio-economic shifts ensures that South Africa’s legal framework supports broader transformation,” Tau said.
BEE under fire
Minister of Trade, Industry and Competition Parks Tau
BEE has come under increasing pressure in South Africa, with critics ranging from within the ANC to business leaders and other political parties.
Much of the criticism is directed at making changes to how the government’s current BEE framework is implemented, with the focus being on limiting cronyism and corruption.
Tau’s previous critique and that of other ANC members fall into this category, with the party remaining dedicated to BEE and its implementation.
This is notable in that the ANC has historically refused to acknowledge criticism of BEE and famously snubbed opposition parties’ attempts to debate the issue.
Deputy President Paul Mashatile told Parliament that there is no need to scrap the legislation, as the DA has proposed, but said it should be corrected.
“To the extent that there may be weaknesses, let’s correct that. Let’s make amendments, that is why there is this review. There is no need to ditch the legislation,” Mashatile said.
The DA’s Baxolile Nodada said in a statement that the party is determined to replace BEE in South Africa, and the admission of the policy being reviewed is a step in the right direction.
“The DA will not allow this entrenched poverty to go on, enforced by failing BEE that makes insiders rich and leaves everyone else behind,” the statement read.
“The DA is determined to replace BEE with real economic inclusion for all, that is beyond the reproach of political meddling.”
Investec CEO Fani Titi sharply criticised how BEE is currently being implemented, with it being characterised by corruption and benefits flowing to a handful of well-connected individuals rather than a broader cross-section of society.
In particular, Titi said that BEE has been misapplied and the opportunities for economic participation that it provides have been increasingly linked to political party membership.
“I can understand the frustration that there is,” Titi said. “You’ve had employment-equity legislation for 30 years, yet it hasn’t achieved the desired effect.”
The head of the Solidarity Research Institute, Connie Mulder, said that BEE has failed to achieve its desired effect in South Africa.
Mulder said that current transformation policies have effectively resulted in tax money turning into Maseratis for well-connected individuals, with little benefit for poor South Africans.
“We have got a problem with unemployment, a problem with unemployment, and a problem with meaningful inequality in South Africa,” Mulder told BizNews.
“We need to address that as a country. Our perspective has never been to not do anything about this, but it has been about doing something else because this will not work.”
Mulder explained that BEE has failed to address any of these challenges, with South Africa’s myriad of crises only worsening over the past two decades.
“Unfortunately, we have been proven right here. The needle has not moved on black unemployment. It has gotten worse. South Africans have only gotten poorer, and inequality has broadened,” Mulder said.
“This means that these policies have not achieved what they should have. Rather, they have achieved the exact opposite. What they have done is create a small, well-connected elite that is benefiting.”
The Solidarity Research Institute estimates that BEE costs South Africa around 3% of GDP a year in lost economic activity, which equates to R226 billion.
“We need to drop the emotion and honestly evaluate this policy. It has a massive cost to the economy. What are we getting for it? Are we getting what we want? And the answer, unequivocally, is no,” Mulder said.
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