ON MY MIND: Standoff puts future of BEE at stake
The standoff over the ‘once empowered, always empowered’ principle puts the future of black economic empowerment at stake
Fifteen years after mining industry stakeholders reached agreement on a historic charter for the transformation of the sector, a bitter dispute has erupted between companies and government over interpretation of the charter’s ownership requirements.
The stakes have never been higher. Mines and banks are lobbying hard for the "once-empowered always empowered" principle to prevail in their sectors. If they have their way, this could set a dangerous precedent for other sectors of the economy. It could bring to a premature end more than two decades of BEE transactions long before SA has achieved meaningful transformation. The future of empowerment itself is at stake.
If the trade & industry department (DTI) cannot get two critical sectors of the economy to be aligned with the amended BEE codes of good practice, the credibility of the new empowerment rules will be questioned.
Transactions have come to a halt since the start of the global financial crisis
On the other side is the ANC — or a powerful faction within it — that has argued for radical economic transformation. But over the past two decades, government has made a habit of backing down before big business. It implemented Gear, a conservative macroeconomic policy, in 1996. It allowed SA companies to list abroad during the late 1990s; there is now near consensus in the ANC that the decision was a mistake. And in 2012, national treasury sided with the financial sector and pushed through a financial sector BEE code despite opposition from Cosatu and the Financial Sector Campaign Coalition. That year the ANC also sided with the private sector and rejected nationalisation.
Since March 2016, DTI minister Rob Davies has been sitting on a new draft financial sector code, which is an attempted alignment with the amended codes of 2013. The code provides the financial sector with another "get out of jail free" card that allows it not to comply with the amended codes’ more stringent requirements.
If the code is gazetted, it will put an end to BEE transactions in the sector. Now that a powerful lobby group within the ANC has identified treasury as an obstacle to radical economic transformation, it remains to be seen whether the new code will be gazetted.
In the run-up to the ANC’s elective conference in December, can the party afford to back down to "white monopoly capital" in the mining and finance sectors and still claim to be in pursuit of its radical economic transformation agenda?
BEE transactions worth more than R600bn have been signed since 1994. Research by the Centre for Economic Development & Transformation reveals direct black ownership of about R250bn in the top 40 JSE listed companies by December 2014. Most of the BEE net value was created in mining and finance. But transactions have come to a halt since the start of the global financial crisis.
The uncertainty about government policy on the "once-empowered, always empowered" principle is a major contributor towards the liquidity freeze in BEE financing.
If government were to resolve the issue, a new wave of transactions could start.
There is a compromise position: the "continuing consequences" principle (the "CCP") in the codes allows companies to keep up to 40% of ownership credits after the exit of black shareholders under certain conditions. In practice, the CCP gives companies time to conclude a new BEE transaction after the exit of black shareholders.
Since the DTI and the mineral resources department have shown that they cannot resolve this issue, it’s time for President Jacob Zuma to appoint his deputy, Cyril Ramaphosa, the former BEE commission chairman, to head a panel to develop a solution. It would take far less time to resolve than the issue of the minimum wage.
* Gqubule is founder of the Centre for Economic Development & Transformation in Johannesburg