LETTER: BEE requires a more nuanced approach

A recent report by the Free Market Foundation calculated the cost of BEE at between 2% and 4% of GDP. That seems in the ballpark: a sledgehammer interference in the operation of business comes with a cost.

Yet BEE itself, as it has been applied in the private business sector, has been and is still necessary. The major reason our economy is tanking is not private sector empowerment, but that state sector empowerment was introduced too quickly after 1994. 

The resulting loss of skills has caused grave damage to rail transport, ports, the Post Office and the defence force, not to mention the metros. What we should therefore do is dial back empowerment in the state sector, while ameliorating its costs in the private sector.

Let’s keep the present BEE rating systems, but replace the existing (and the mooted new, more draconian) penalties with a nuanced system of tax incentives and disincentives. This would play far better in a market economy such as ours.

We could, for instance, provide that company tax rates (and rates of fixed-asset depreciation) vary with the degree of BEE compliance. The best complying companies could be taxed at, say, 20%, and the worst at 40%. The best compliers could also get, say, a 30% excess in annual depreciation, with an equivalent reduction for the worst.

Tax consequences such as the above would incentivise BEE compliance without causing systemic economic distortions.

Willem Cronje
Cape Town

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