How broad-based is BEE?
August 25, 2004
The Department of Trade and Industry says its black economic empowerment (BEE) programme is working - and it's on track to achieving a target of 25% BEE ownership in South African companies by 2014.
In 2003, R42.2-billion (US$6.5-billion) worth of BEE deals were made, but criticism stemmed from the fact that the beneficiaries of these deals belonged largely to the politically well-connected elite.
But the department says there's another side to the coin. Its deputy director-general, Lionel October, is adamant that the government's incentives are resulting in broad-based BEE and not the enrichment of an elite few.
October says over 90% of the beneficiaries of cheap loans, incentives and contract opportunities are black, small, medium and micro enterprises (SMMEs).
Recently the capital-raising potential for black-owned SMMEs was boosted through a joint agreement between black business body Nafcoc and the Johannesburg Stock Exchange (JSE). The agreement, which was signed in May, will see black SMMEs actively encouraged to list on the JSE's small business index, AltX.
October says that empowerment has been much broader than it has been made out to be. South Africa is a market economy and it is inevitable that a few talented black business people would build large corporations. But broad-based BEE, he said, had to be expedited. "We are watching the situation very carefully," he said.
Iqbal Sharma, departmental chief director, said that there is a need to question the practice of historically white conglomerates choosing the same major black companies over and over again as BEE partners, rather than smaller, upcoming ones. But he said it is not the policy environment that has been created that should be questioned.
While empowerment charters for the information technology, transport, construction, agriculture, and wine sectors are expected to be completed by the end of 2004, charters for the oil, gas and mining sectors have already been concluded. Many sectors have drawn up BEE charters without prompting and many are continuing with this trend.
The number of BEE companies in South Africa has grown from about two to more than 100 in the past 10 years. Today, for example, nearly 50% of companies in the construction industry are black enterprises.
October said that charters for most of South Africa's economic sectors should be completed by the end of 2005.
Source: Adapted from Proudly South African.
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