The broad-based BEE commissioner is abusing her power and only minister Ebrahim Patel can stop her.
Zodwa Ntuli, who was appointed when the commission was set up in 2019, has made a point of questioning the status of broad-based empowerment schemes, arguing that these are not genuine black owners. On an abstract, intellectual level, she makes a coherent argument.
Investment holding companies, which are owned by trusts established to support specific black beneficiaries, are not the same as companies that are owned by individuals. The individuals can decide to buy and sell their stakes in the investee companies and always know the value of their investment. The dividends the individuals receive are the same as the dividends paid out by the investee companies to other shareholders and accrue to them directly.
This is not true for the children of mineworkers, for instance, who benefit from bursaries raised from the profits of the Mineworkers Investment Company.
The creation of a black owning class is a very important aspect of economic and political transformation. It is not viable or desirable, in our view, that ownership of assets should be skewed in favour of a single racial group, brought about by institutionalised discrimination.
But creating black capitalists is not the only objective of BEE policies, hence the broad-based qualification that has developed along the way. While broad-based refers to control, leadership transformation, skills and the contribution to creating new black enterprises, it also refers to ownership.
The only prospect that most people, who have been excluded from the economy, have to access investments that can generate wealth is collectively, through the pooling of their resources. That’s not necessarily even a purely SA phenomenon. It’s how, for example, workers in the US can own a bit of Tesla or the treasury market.
This is what gave rise to the earliest broad-based collective schemes, which after 1990 sought to leverage the newfound desire of corporate SA to diversify ownership to invest in wealth-generating companies for the good of the poor and working class.
It is also not the case that the discussion about BEE is an abstract, intellectual one. As every business owner knows, BEE has been codified to the nth degree. BEE has been shaped by many, many hours of deliberation by legislators, to hone and understand the proposals by government officials. An entire industry has sprung up to interpret and translate the codes and scorecards that have flowed from BEE legislation. It is a precisely codified subject.
The B-BBEE Act of 2003, amended in 2013, deals with definitions and the requirement of broad-based ownership schemes at length, including both trusts and employee-based ownership schemes.
It explicitly includes broad-based schemes as a form of black ownership and details what proportion of ownership points these can claim; and states what is req必利勁
uired from the scheme to be a qualifying one, which includes, for instance, that individual beneficiaries must be identifiable. It also sets a limit on the fees the trust can make out of the entire exercise.
The act does not insist, as the commissioner has done, that beneficiaries must behave as shareholders, because it is simply not possible.
It is not to say there aren’t sham empowerment schemes that lack identifiable beneficiaries, do not distribute dividends fairly and equitably and have been set up purely to make the BEE score sheet look better. These should not qualify as empowerment vehicles.
Broad-based schemes, some of which have been pioneers of BEE, have been knocking on Patel’s door for two years to urge him to clarify their status. While the law is clear and the commission has not referred any case to a law enforcement agency for investigation, the threat that it might has been enough to put a damper on their ability to do deals and secure black ownership status.
It is time to clear up the uncertainty.
- This editorial comment piece was published by Business Day newspaper on Thursday 26 November 2020. You can read the original piece here.