Inside the battle over tourism’s Covid relief funding
Small business looks set to be collateral damage as the state and AfriForum head to court again over BEE exclusions
The department of tourism, minority advocacy group AfriForum and trade union Solidarity look set for another monumental tussle over the state’s BEE rules and the department’s R200m Covid-19 relief fund.
In the meantime, small enterprises — BEE compliant or not — that have applied for relief have to wait for any financial help as the three parties slug it out.
Last week, high court judge Jody Kollapen handed down judgment affirming the department’s right to use BEE as a criterion in awarding relief.
But AfriForum isn’t taking it lying down.
"We don’t believe that in a society that advocates for human rights, where people in all communities are suffering, including business owners and employees, you can impose empowerment credentials on those that receive relief," says CEO Kallie Kriel.
After the decision, AfriForum and Solidarity launched an application to approach the Constitutional Court directly, just as the department gears up to forge ahead with processing applications and disbursing funds.
The court at the time of publication had not yet decided whether it would hear the matter.
"There is no doubt in anyone’s mind that the fund is an emergency relief for businesses affected by the Covid-19 pandemic. With that in mind, we do not see anything that AfriForum and Solidarity can bring to court that will adversely affect this noble intention. As a result of the delay, the department will only be able to make first payments to qualifying SMMEs next week," says department of tourism spokesperson Blessing Manale.
The issue exploded last month when small business development minister Khumbudzo Ntshavheni did an about-turn at a presentation in parliament in April, and stated that BEE would be used as a criterion by the government in determining relief. This appeared to be contrary to her earlier statements.
Department of tourism minister Mmamoloko Kubayi-Ngubane then confirmed that BEE would be used as a criterion after the launch of the R200m tourism relief fund.
The fund is designed to help small, micro and medium-sized enterprises in the tourism sector weather the economic fallout of the Covid-19 pandemic by providing a once-off grant to a maximum of R50,000.
As a sign of the acuteness of the pain being felt in the sector, Manale confirmed that as at May 5, the department had received 11,000 applications, 5,400 of which were complete.
The applications represent "a fair geographic spread and the diversity of tourism product owners requiring relief", says Manale.
Based on just the completed applications received, and assuming a maximum grant at the upper limit, the relief fund is already comfortably exhausted.
Is the hysteria justified?
Kollapen examined the scoring system in her judgment, which determines a score out of 100.
The first 25 points relate to formal and regulatory matters such as company registration, tax registration and Unemployment Insurance Fund contributions, which determine whether the entity concerned has been compliant with basic company regulations.
The second and largest category scores entities based on "functionality" and allocates a weighting of 55 points out of the available 100. This does not include race but rather matters such as business profile, annual financial statements, bank statements and other proof supporting how the pandemic has affected the business.
It appears to be far more discretionary than the conditions provided in the first segment.
Finally, BEE criteria are applied for a maximum of 20 points.
According to Kollapen’s interpretation of the scoring, "the differential between a wholly white-owned versus a wholly black-owned business in terms of points on the scoring criteria could be anything from eight points at the maximum to two points at the minimum".
While not insignificant, the question whether race should be included at all is at the heart of AfriForum and Solidarity’s attempt to have the decision overturned in the highest court of the land.
Kollapen’s view was that the relief fund was an extension of existing regulations and "was taken in support of and as part of broader government policy, both in relation to providing support for those impacted upon by Covid[-19] as well as the government’s overall empowerment objectives."
Says Kriel: "We disagree with the judgment. Our view is that section 9(2) of the constitution allows for discrimination to correct past injustices, but ... it’s unconstitutional that the rights of minorities are subordinate in these types of situations."
Manale says the department will go ahead as planned in disbursing the funds after the high court ruled in its favour, and that protracted litigation should not negatively affect all the potential beneficiaries.
"Our focus at this point is on getting the money to the deserving and qualifying applicants. We are, however, ready to defend our policies, because we believe they are fair and just and aimed [at] creating [a] more socially and economically just society."