Strategy for Black Economic Empowerment: briefing

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Trade and Industry

12 March 2002
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Meeting report

TRADE AND INDUSTRY PORTFOLIO COMMITTEE
13 March 2002
STRATEGY FOR BLACK ECONOMIC EMPOWERMENT: BRIEFING
 


Chairperson: Dr R Davies (ANC)

Documents handed out:
Department's Briefing notes on Strategy for Black Economic Empowerment (see Appendix)

Black Economic Empowerment (BEE) Commission website:

www.beecom.org.za

SUMMARY
The meeting centred on a briefing by members of the Department of Trade and Industry on the strategy for Black Economic Empowerment, developed by the Black Economic Empowerment Commission (BEECom). Also present were representatives from the Black Business Council, who gave their views on the strategy. The strategy rests on a broad definition of empowerment, and aims at broadening meaningful participation in the economy by black people. It rests on four pillars:
- the creation of an enhanced environment for BEE,
- the establishment of a black empowerment council,
- the mobilisation of resources and opportunities to facilitate BEE and
- the development of partnership programmes with the private sector.
While the general mood was positive, certain concerns were raised, in particular the need to address BEE to all levels of business. Several of the committee members felt that there had not been enough attention directed towards the empowerment of people at a micro-level, in survivalist businesses, for example.

MINUTES
The chairperson, Dr Davies (ANC) welcomed the two representatives from the department, the Deputy Director General, Mr Sibise and Ms Brown, and the representatives from the Black Business Council, Dr Gajjar and Mr Lalu. He said that, due to Dr Gajjar's time constraints, he would make some comments first, before the department made its presentation.

Dr Gajjar noted that he would present some general views on the document and the process behind it, and Mr Lalu would give detailed comment after the presentation. He added that his comments would focus on the need for the process, as well as the context.

He started by saying that the process had begun following a conference in 1997, in which the consensus emerged that there was a need for black people to direct a new process of BEE, which until then had been driven by the private sector. It was felt at the time that the private sector did not have a clear notion of true empowerment. A commission was set up in May 1998 which worked for two to three years, and drafted the BEECom report, which was tabled first with the council (BBC), and then presented to government in April 2001. It was subsequently discussed by a government working group.

Dr Gajjar said that BEE was part and parcel of transformation in South Africa, although he pointed out that it was only one part of that process. He quoted from an article in a newspaper which presented extracts from a speech given at an IT conference. The speech made reference to the State's "unsound fascination" with the advancement of the previously disadvantaged, citing this as the main reason behind the departure of talented people and their children from the country. Dr Gajjar said that such sentiments underscored the need for a clear statement on BEE from the government, which he felt should take the lead in creating the environment for BEE. He felt there was little to lose and a lot to gain from an interventionist strategy, because markets tended to reinforce the existing distribution of income and assets, which was unacceptable.

He continued, saying that government had accepted, in October of 2001, that there was a need to address some of the fundamental issues. He felt the review of existing legislation, as suggested by the strategy, was appropriate. He was excited by the notion of a BEE Council. The BBC felt that a good goal was not just to create an enabling environment, but that there was a need to change the attitude of those in business, and it was very difficult to persuade such people without addressing the bottom line. He suggested that this should be the point of entry. Dr Gajjar concluded by saying that, as the council began to interface with government, they encouraged a constant review of the legislation, adding that it was the feeling of the council that there was the need for stand-alone legislation on BEE. The Employment Equity Act showed the effectiveness of such legislation. He added that unless business was compelled to act, and all economic strata of South African society became part of the process, the council believed it would be difficult to steer a persuasive route alone. Despite the possibility of punitive measures, these became unmanageable without legislation.

Ms Brown dealt with the bulk of the briefing. She presented the basic recommendations of the government strategy document on BEE. She said it had been a government-wide process, with a committee being formed, which had taken submissions from government departments. She went on to say that BEE was an argument for improved competitiveness and economic growth, and addressed issues such as ownership strategies, access to land and skills development.

Ms Brown said that government had to date not provided enough guidance on how to define BEE. For this reason, in terms of the first of the four pillars of BEE - creating an enhanced environment, a Cabinet-approved policy statement would be drafted within the next two months. An enhanced environment required legislation, and for this reason, existing legislation was being reviewed such as company law. For example, she felt that in time it would be necessary for companies to report on more non-financial issues than at present, such as outsourcing, procurement and ownership matters.

The second pillar was the formation of a BEE council. This was to be done by June/July. Its focus would be on the monitoring and evaluation of issues such as ownership, control, skills and income levels. For example, if it was found that in ten years, control had not been moved, BEE would not have succeeded. The council would report on these issues to the government. The council would also accredit companies who have performed empowerment audits. She added that there were a number of such programmes.

In terms of the mobilisation of resources and opportunities, Ms Brown said that one of the foci in the public sector would be on procurement reform. It was felt that this had so far been unsuccessful, despite the considerable amount of talk in the last seven years. One idea was to strive for early payment on government contracts for black-owned companies, as a way of improving their cash flow.

Another area was the examination of entrepreneurship advice networks, which so far had been only slightly successful. This was felt to be a huge but essential project to develop capacity at a local level, and would take time to deliver.

Another critical areas was access to financial services and capital, in which there was a division made between the public and the private sector responses. In relation to the private sector, the issue of disclosure legislation for the financial sector was being examined, for example seeking to include whom banks were lending to. There was also a need to look at alternative financing institutions such as community-based saving schemes, and co-operative banks. Another issue was the examination of the setting up of an empowerment charter for the financial sector, which may include the setting of targets for the financial sector.

The public sector response focussed on the improvement of the development finance institutions, which until now had supported certain segments of the market well but not others. It was pointed out that there was a need to support all sectors of the market, as well as all sizes of business. The Risk Capital Facility had also been launched, which was a joint initiative aimed at providing venture capital for SMEs. The other issue was the establishment of an Integrated Financing Institution focussed on empowerment and small businesses.

The fourth pillar of the strategy was the development of Public-Private Sector partnerships (PPPs). these aimed at targeted investments and the design of charters for key industries identified by the government. The feeling was that there was a need to follow the model of the transformation of the liquid fuels sector, which had incorporated among other things the use of learnerships and the development of skills. It was felt that BEE could be leveraged through the use of incentive schemes which were tailored to growth, but which at the same time enhanced empowerment.

Mr Sibise also made a few comments. He said that there was a need for government-wide application, so that the strategy would bind all departments, with the DTI taking the lead in the economic cluster. He drew attention to the definition, and how it could be effected. He said that the aim was to make BEE a reality across the board, including creating economic opportunities for the black rural communities. He added that the definition would have to be tested. For example it had been noted that there was a gap in venture capital firms in the area of competitive production and exports. This had led to the launch of the Risk Capital Facility, which focused on SMEs. The aim was to ensure that the average equity injected into a business was around R2, 5 million. But for every R2, 5 million injection, it was hoped that a smaller business requesting R500 000 would also be serviced. This aimed at creating jobs in a productive setting.

Mr Sibise also pointed to another gap, in the area of micro-financing. He said that Khula and Ntsika had broad mandates, which stretched their resources and capacity, but that they had performed well. The government response had been to look at the creation of an institution which focussed on the micro-level.

Returning to the issue of the definition, he said it reflected the need for the strategy to keep in touch with all aspects of BEE. In relation to the issue of targets, he said that the question could be asked why targets had not been set in the areas of skills development and ownership etc. He said that the reason for this was that targets, in order to be credible, had to be based on accurate data, which didn't exist at the moment. As part of the process, clear targets would be set, once this information was available. He said that some firms had already looked at setting up empowerment targets etc.

On the issue of co-ordination between government and the private sector, Mr Sibise said that the council would have both public and private sector entities represented, to present an overview of the programme, and keep in touch with the private sector. The information that was gained through disclosure and the changing of the law would lay the basis for a dynamic method of responding, and enable the government to see who was doing what. He added that this view was shared by a number of government sources.

Mr Lalu, in his comments, apologised that there were not more BBC representatives, but said that several of its members were in Zimbabwe. His area of attention was financial services. He said that there was a need to address the role of labour, saying that labour mobilised capital and directed where it should be spent, and consequently its role was critical and needed to be examined. In terms of the policy statement, this was welcomed as a move to clear up uncertainty and confusion. He did however point out a concern over what measures such a statement would actually allow, particularly with regard to private sector compliance. In relation to the issue of SMME funding, he said that the strategy called for targeted funding to areas of national priority. He said that industry-specific funding was welcomed, but asked what were defined as areas of national priority.

Questions
Mr Mofetwe asked the first question. He wanted to know how, given that the aim was to
decrease inequality, how this was going to be measured.

Mr Sibise said that there were measures, the most commonly used being the Gini co-efficient. He said that it had to be a central concern of government, saying that many developing economies had been able to accelerate growth by reducing inequalities.

Mr Mofetwe then asked how "ownership in black hands", as contained in the strategy, was defined. Did this refer to the intelligentsia, the petit bourgeoisie, all people who are black etc.?

In response to this issue, Mr Sibise joked that it was simply a matter of biology. He said that legal people were involved in, for example, defining what constituted a firm, but the debate was not yet concluded. The easiest way to define it would simply be to say it was fifty plus one, but in reality, allowances had to be made for the varying rates of change. He said that ownership could be passive, and therefore there was a need to examine skills and black human resources as well. He said that this was one of the central issues.

Mr Mofetwe also said that he was glad that there was a desire to explore alternative savings schemes, which had existed for a long time. He asked if the commission was promoting links with formal institutions. He cited an example whereby a stokvel invested its money with an institution, which then gave them a preferential interest rate, but still reaped the majority of the profits from the investment themselves. He said that such a situation would not be acceptable to people.

Mr Sibise said that they were not suggesting only one scheme, but that there were a variety of initiatives. The question was how to best mobilise and direct black savings, to assist the process of economic activities in local communities and wherever savings were mobilised.

Mr Mofetwe's final question was on the question of access to tenders. He said that at present, only the knowledgeable were able to access these, while the vast majority were not aware of these and remained outside mainstream economic activities.

Mr Sibise said that the question of knowledge and access was key. He suggested that the response had been varied, with Ntsika piloting a number of small-scale tender assistance schemes, which needed to be expanded. He did point out that these initiatives were constrained by resources and capacity.

Ms Gomomo (ANC) asked whether there were programmes that were earmarked for micro enterprises. She said that there were 2,1 million people in Soweto, and yet there was no advice centre, and only a few banks. She felt there was no involvement from Khula at the micro-level, which was where the survivalist businesses with the most need actually were.

Mr Sibise pointed out that he had not been suggesting that attention should not be given to micro-financing. He said that the most appropriate way was to separate micro's from medium enterprises, because they needed tailor-made initiatives. For example, he suggested that to try and enhance government assistance to micro's, there was a need for a different institution to Khula and Ntsika. He added that initially, it had been thought that banking infrastructure would help, but this had turned out to not be the case.

In terms of the review of procurement and tendering, Ms Gomomo said that if the intention were only to focus on early payment, and to ignore ways of involving micro enterprises, they would not be able to enter into this area.

Mr Sibise pointed out that early payment was just one example, adding that this had been identified as one of the major problems for small enterprises who get government tenders, and for this reason was a point of concern. Other examples included better availability of information for small enterprises. The issue of sustainability also needed to be addressed. Winning one government tender was not enough to create a sustainable business.

Ms Gomomo concluded her questions by asking if there was a database in Soweto of industries, programmes needed, and banking capacity etc.

On this issue, Mr Sibise said that at present, the data available was inadequate, and there was a need to know, for example, where were the small businesses, and what was their focus. Ntsika had sought to establish such a database, including information on their location, and the problems they faced.

Mr Davies said that there had been a gender transformation meeting the previous day, and there was a concern that BEE was silent on the issue of gender equality. He asked for comments on this issue.

Mr Sibise repled that there was a need to consciously and consistently place the issue of gender at the forefront of BEE. The traditional response had been to put in place programmes that targeted women's enterprises. It was possible that there was a need to report on these issues in the same way that reporting on skills was mandated.

Mr Davies also said that he supported the broad definition, but in light of the day's news, he asked whether big corporations were involved. He said that the issue of big corporations de-listing raised questions, and asked whether empowerment at these higher levels might generate a more positive view of South Africa internationally, where black managers could become known to foreign investors etc.

Mr Sibise said that the broad definition said that there was a need to cover everything. For example BEE firms had said that they had problems obtaining risk capital which would allow them to access firms. This was thus part of the response, with the NEF to take the lead role in increasing ownership. In working with these firms, it was expected that they would set clear BEE targets, at all levels. The issue also extended to restructuring. He used the example of Iscor's restructuring, which had a large BEE focus.

Mr Rasmeni (ANC) said that he wanted to reiterate the point that there was a need to accelerate the rate of change and BEE. He said that the ANC Lekgotla had suggested that government make better use of community based public works, government financing institutions and infrastructure tailored towards the poorest of the poor. He also said that attention should be given to parastatals and development financing institutions with a view to generating clear criteria. He went on to say that he was happy to hear that an enabling environment would be created within six months, but asked what were the short-term strategies geared to wards positive spin-offs to the people on the ground. Mr Rasmeni also asked, given that there were fragmented pockets of empowerment, whether these strategies were being harnessed to ensure that they related to broader national strategies, to avoid window-dressing, and provide meaningful empowerment.

Mr Sibise said that there was a need to increase the rate of transformation. There were two issues that the policy statement was aiming to address. These were the lack of coherence in BEE, and the creation of short-term initiatives, using the IDC and parts of the Department of Trade and Industry. He also said that there were attempts to encourage the private sector through the use of various levers at the State's disposal such as in the area of procurement.

Mr Lalu said that the Gini co-efficient was an excellent measure, and suggested that the BBC would like to see short to medium term targets set for this co-efficient. In relation to the issue of stokvels etc., he said that there were few savings initiatives which were accessible in for example, rural areas where the need was the greatest. He said that therefore, the idea of incorporating existing banks was not necessarily a good idea. He also added that the spectacular failure of a large bank recently highlighted the need for an enhanced regulatory environment to protect the depositor. This was countered by the need for community banks, and it was suggested that the two did not go well together. He suggested that this issue needed to be examined. One example was that of Malaysia, where there were unit trusts that were open to small contributions, making them accessible to domestic workers and the like.

Mr Lalu said that, in BEE, there were going to be people who would benefit directly due to their skills and capital, and it was naïve to assume the possibility of a broad-based initiative. He suggested that it was better to assume that the benefits would cascade down. He also raised the point that it had equity legislation had shown how some corporations refused to comply with the spirit of the law. He added that government should play a significant role as the largest procurer of goods and services, and the provider of licences.

Ms Hajaij (ANC) said that the document was exciting but that there were problems. She said that there had been targets set for ten years time, but that there surely must be industries that could be transformed sooner.

On the issue of targets, Mr Sibise said that targets were to be set according to the various sectors, taking into account the dynamic context of each. He added that the example in the presentation was not prescriptive, but rather suggested what one sector, the liquid fuels sector, was doing.

Ms Hajaij also raised the question of how best to transform conglomerates and multi-nationals. With the example of Iscor, she pointed out that there had been no effort to ensure that transformation was also examined in terms of the distribution of steel

Mr Sibise said that all areas of the chain would need to be considered when addressing BEE, and this included distribution

Relating to the issue of an empowerment charter, Ms Hajaij pointed out that time and again, there had been attempts to persuade the banking sector, yet some continued to refuse Khula guarantees. She asked what teeth an empowerment charter would have, to make it effective.

The Deputy Director-General said that the exercise had to be effective, and thus where the State had levers at its disposal to influence private economic activities, it must use them he added that this extended to for example where the government banked, and where, for example, civil servants shopped.

A committee member asked if there was not a danger that there would be duplication of existing SMME programmes. He also pointed out that there was no need to reinvent the wheel, suggesting that Afrikaner strategies from the 30's might offer some answers and ideas.

To this, Mr Sibise replied that various ways were examined, for example Malaysia's experience had been considered. He said that there was a need to remain cognisant of the fact that changes had occurred. In the past, Afrikaner employees were given bank accounts with certain firms, and insurance with others and this was very prescriptive. He suggested that things were different today. He also pointed out that the Afrikaner experience had been at a considerable cost to the majority, and excluding the minority would not work in the same way. He said that the issue also extended to how much empowerment black firms addressed in their own procurement policies etc. He suggested that the issues related to where everyone shopped, and banked as well.

Ms Ntuli drew attention to one of the four core measurement areas, which was skills. She asked how Ntsika or other non-financial training institutions were to be strengthened to train people with real skills. She said that currently they provided the basics only, and that without skills, all the rest was futile. She asked whether skills training programmes were in place, with reference to underdeveloped areas in particular.

Ms Ntuli also asked how people could be educated to unlock their creativity and the skills needed to be successful entrepreneurs. She pointed out that the commission referred to the economic cluster, but made no mention of the education sector. She suggested that there was a need to address the skills needed for business from childhood.

Mr Sibise said that they should not expect Ntsika to be all things to everybody, but that skills were important. There was thus a need for a broad-based initiative. He pointed out that the issue of skills also meant the involvement of the Department of Labour, as well as Education and Trade and Industry.

Adv Madasa said that the idea of entrusting the empowerment of the masses to black capitalists was problematic. He said that while there might be benefits for extended families and that such people would act as role models, the question was how would the masses benefit.

Mr Sibise said that, on this issue he had no comment, other than to point out that, as government, the growth of black business was an important issue. He did however say that at the end of the day, the bottom line was important, and there was a need to be competitive both locally and internationally. There was also a need to address the empowerment of other sectors.

In relation to financial capital, Adv. Madasa said that this was linked to PPPs. He asked if it was desirable to arrest the flight of capital from the country, and if so how best could it be done.

Mr Sibise responded, saying that the experience of other countries suggested that there were numerous things that needed to be done to attract investment and keep it in the country. He suggested that legislation might work in the short term, but that it was unlikely to be the ultimate answer, adding that the solution lay in micro-level development and stability. BEE initiatives were not felt likely to address capital flight, but rather to establish attractive investment potentials.

Prof. Ripinga (ANC) said that his major concern was the issue of the sustainability of the strategy. He asked if the strategy was comprehensive, exhaustive and informed by international and local experience. Prof. Ripinga also said that he welcomed the creation of the council, but that such a body was likely to be advisory, making recommendations but not taking decisions. He pointed out that such a body would not have the power to directly intervene.

Mr Sibise said that sustainability was a critical issue, and a gradual decrease in government involvement and an increase in the creativity of individuals would facilitate it. In terms of the issue of whether or not the strategy was exhaustive enough, he suggested that it hadn't dealt with everything, but had at least identified a path, which could be followed.

Mr Lalu commented that the BBC was proud of the dialogue it had established with the government's economic cluster, adding that he felt this was the start of a process focussing on the plight of the majority.

Ms Ntuli asked when the process would begin to unfold, and when the paperwork would be finished.

Mr Sibise responded that the programme suggested a framework, and that certain things had been done already, such as the launch of IDC initiatives such as programmes in the rural areas into tourism as well as agriculture. He added that there was a time frame for the policy statement as well as various other elements, to ensure that things were being done.

Dr Davies asked that the committee be furnished with copies of the policy statement on its completion. He also suggested that the committee would welcome the opportunity to meet with members of the advisory council once it had been established and they had settled in. He invited the BBC to make a submission at the public hearings on industrial policy which were due to take place shortly. He concluded by thanking the department and the Black Business Council for their participation.

The meeting was adjourned.

Appendix:
Portfolio committee briefing notes
A Strategy for Black Economic Empowerment
13th March 2002

1. Background

1.1 The Black Economic Empowerment Commission (BEECom) under the auspices of the Black Business Council (BBC) submitted its report 'An Integrated National BEE Strategy" to the Government on the 11th of April 2001. The Government undertook to examine the BEECom report and consider the findings and recommendations.

1.2 The DG Cluster on Employment and Investment was mandated to coordinate a response to the BEECom. It appointed an interdepartmental working group, which facilitated submissions from various Government departments.

1.3 The DG Cluster then agreed that it should draft a Strategy for BEE, which would in effect be a response to the BEECom report. The Strategy Document was presented to the Cabinet Lekgotla in January. The Strategy will be finalised in March 2002.

2.The problem

2.1 Government believes that South African society remains characterised by vast racial inequalities in the distribution of and access to wealth, income, skills and employment. Consequently the economic potential and wealth creating contribution of black people to growth and development in the economy is restricted. With the majority of the population excluded from meaningful participation in productive economic activities, the ability to expand the material base of the economy is likewise limited.

2.2 To promote favourable conditions for private investment and economic growth, we must intervene in a targeted way to enhance a wider and deeper involvement by the majority of South Africans in meaningful economic activity. This will liberate enormous resources, energy and creativity, enhance dignity and benefit all sectors of society.

3. Overview of the BEE Strategy

3.1 The Strategy is based on four pillars:

The promotion of an enabling environment for BEE
· · The establishment of a Black Economic Empowerment Council
· Mobilisation of resources and opportunities through new programme innovations
· Partnerships & commitments from all stakeholders

3.2 An enabling environment

3.2.1 The government will finalise a policy statement on BEE for approval by cabinet in March. The statement will provide for guidelines, establish key parameters for defining BEE, indicate core programmes, define the role of the BEE Council and outline a monitoring and evaluation framework.

3.2.2 The government will investigate legislative amendments across all industries to promote improved regulations on BEE. The review will also cover relevant legislation such as the Companies Act.

3.3 The Black Economic Empowerment Council

3.3.1 Government favoured the institution of a Council to be responsible for the oversight and monitoring of the Strategy. The DG and Cabinet Clusters will be utilised in the coordinating, implementation and reporting on the Government programmes.

3.3.2 The Council will be formally established in April 2002. It would be chaired by the President and consist of a broad spectrum of stakeholders, nominated by Cabinet.

3.3.3 The Council will champion BEE and implement a reporting and monitoring framework for the public and private sectors which will enable us to evaluate BEE on an ongoing basis, set targets and make new interventions where necessary.

3.3.4 Progress will be closely monitored against four core measurement areas. The measurement areas are as follows:

· Ownership (both individual and collective),
· Control/Influence
· Skills/employment equity,
· Income (decreases in income inequality and increase in income levels of workers and black people).

3.3.5 The Council's role requires further consultation, however, government envisages the following mandate:

· The Council will promote an empowerment governance framework, which provides for the reporting and monitoring on BEE within firms of a certain size. The Council will accredit rating companies to perform empowerment audits. These audits would form the basis of a self-regulatory reporting mechanism for the private sector. Audited reports could be submitted to the Council and results published.

· The Council will award prizes for good performance in various empowerment categories

· The Council will have the authority to ensure compliance with the BEE Strategy from organs of state such as regulatory agencies, government departments and tender authorities.

· Finally, the Council will receive reports from organs of state with which it will compile an annual BEE report for the Government.

3.4 New programme innovations

Programmes will be renewed and developed to include new product innovations, with the objective of substantially enhancing access to resources and opportunities for BEE and SMME's.

3.4.1 In the area of Finance:

· The dti has begun a review of disclosure legislation for the financial sector. Institutions would be required to disclose information in terms of lending and investment patterns. Areas of disclosure would include: geographic Iocality\ outreach; number of applications from applicants whether owned or controlled by black people; identification according to race, gender, disability and loan amount.

· The dti will design an empowerment charter for the financial sector together with all stakeholders, including the Banking Council and the Association of Black Securities and Investment Professionals (ABSI P). The charter would outline targets for the sector and mechanisms to enable black participation.

· The National Empowerment Fund (NEF Corp) opens its doors for business in April 2002, its initial focus will be on venture capital, with the establishment of R200m NEF Ventures. The government will substantially review the activities of all the DFIs in terms of empowerment and small and medium enterprise support. Some consolidation of smaller institutions and funds may occur. The objective is to work towards the establishment of an Integrated Financing Institution with key components focussed on empowerment. The institution would combine venture capital activities, guarantees, revolving funds and grants.

3.4.1.1 Special attention is being paid to the area of micro-finance.

· Government is establishing a micro-finance institution to provide loans for productive purposes.

· The dti created two institutions Khula and Ntsika to implement wholesale funding and business support services respectively, for SMMEs. After five years of operations and considerable assessment government is of the view that the mandate given to Khula that is, to provide loans to institutions serving the SMME sector is too broad. The dti is now looking at establishing an apex organisation that will only focus on supporting micro finance institutions servicing micro enterprises. The Apex will perform two major functions: financial intermediation and development of sustainable micro credit institutions. An interim CEQ will shortly be appointed to further design the institution.

· In addition, the capacity of the Postbank will be boosted to enable it to deliver financial services to the poor. The dti will work with the Postbank in evaluating capacity and designing an appropriate model.

3.4.2 In the area of Procurement:

· The Preferential Procurement Policy Framework Act (PPPFA) and regulations will be reviewed to ensure they promote access to opportunities for black and small businesses. The institutional framework, for procurement will be enhanced through guidelines on BEE and SME support, training for procurement officials on these matters, the implementation of an early payment system for all government organs for black and SMEs companies and a system of contract sessions to enable companies to source funding.

3.4.3 In the area of broad and collective ownership:

A cooperative support programme and a regulatory environment for cooperatives is being implemented.

· · The government will support the development of a cooperative Apex structure, together with the National Association of Cooperatives (NCASA) to provide services to cooperatives country wide.

3.5 Partnerships

Utilising the approach followed in liquid fuels the government will, together with the private sector design measurable and realistic empowerment programmes and targets for core industries and reach agreement through accords.

· · To unlock productive investment into underdeveloped areas, the government is designing targeted investment vehicles, which will enable us to mobilise social and private capital behind investments of national interest. In line with the partnership approach, our first project combines allocations from private sector funds, co-investment contributions from the DC, the DBSA and the PlC and a portion of grant funding.

·

The Black Economic Empowerment Commission (BEECom) under the auspices of the Black Business Council (BBC) submitted its report "An Integrated National BEE Strategy" to the Government on the 11th of April 2001.

·

The DG mandated appointed facilitated departments Cluster on Employment and Investment was to coordinate a response to the BEECom. It an interdepartmental working group, which submissions from various Government

·

The DG Cluster agreed that it should draft a Strategy for BEE, which would in effect be a response to the BEECom report.

·

THE RATIONALE FOR BEE

The Strategy Document was presented to the Cabinet Lekgotla in January.

·

South African society remains characterised by vast racial inequalities in the distribution of and access to wealth, income, skills and employment.

·

Consequently, the economic potential and wealth creating contribution of black people to growth and development in the economy is restricted. With the majority of the population excluded from meaningful participation in productive economic activities, the ability to expand the material base of the economy is likewise limited.

·

To promote favourable conditions for private investment and economic growth, government must intervene in a targeted way to enhance a wider and deeper involvement by the majority of South Africans in meaningful economic activity.

·

DEFINITION

Government accepts BEECom approach to defining BEE broad /Iocated in transformation programme

Black Economic Empowerment entails an integrated and coherent socio-economic process located in the context of the country's national transformation programme, the RDP. BEE is aimed at: -

This will liberate enormous resources, energy and creativity, enhance dignity and benefit all sectors of society.

·

Redressing the imbalances of the past by seeking to substantially and equitably transfer the ownership, management and control of South Africa's financial and economic resources to the majority of its citizens.

·

Ensuring broader and meaningful participation in the economy by black people, in order to achieve sustainable development and general prosperity.

·

BEE: FOUR PILLARS

1. AN ENHANCED ENVIRONMENT FOR BEE

Realising a substantial change in the racial composition of ownership, management and the control of economic activities.

·

Empowerment policy statement - definitions /guidelines

·

Sectoral legislative amendments

·

2. THE ESTABLISHMENT OF A BLACK ECONOMIC EMPOWERMENT ADVISORY COUNCIL AND MONITORING PROCESS

Company law amendments - to require reporting and disclosure form companies of a certain size and listed companies.

·

Measurement indicators: Ownership, control, skills, and income

·

Targets set: e.g. 25% ownership of the economy in black hands within ten years

·

The Council will promote an Empowerment auditing or measurement system

·

3. MOBILISATION RESOURCES & OPPORTUNITIES/ NEW PRODUCTS TO FACILITATE BEE

Established in June

·

Procurement reform: reviews of the regulatory and institutional framework. E.g. policy on early payment.

·

Cooperative legislation and support programme. E.g. support to the National Cooperatives Association of SA to provide capacity building and training to cooperative; Cooperative Bill.

·

Entrepreneurship advice network (focus on target groups such as youth, promote coordination, and encourage private sector participation.

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3.1 ACCESS TO FINANCIAL SERVICES & CAPITAL

Local level chamber capacity building

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Disclosure legislation for financial sector, including agreement on government procurement guidelines for services from the financial sector

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Through a regulatory review and a partnership programme with established banking sector, the government will promote and support alternative financial institutions, second tier institutions and community-based saving schemes.

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The dti will conduct a regulatory and institutional assessment in the area of micro finance, examining the capacity of Khula, the Postbank and other institutional frameworks.

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Postbank - to facilitate the provision of affordable banking services for the poor

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Design an Empowerment charter for the financial sector with all stakeholders, including the Banking Council and the Association of Black Securities and Investment Professionals

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Enhance the mandates, coordination and streamlining of DFI activities

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Launch of the Risk Capital Facility: IDC, the dti, the EU, and the EIB. To provide venture capital for SME, plus finance for business support and mentoring.

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- Micro Finance

- Incentives

- Guarantees

- Grantfacilities

- Risk capital facility

- Specialist funds: youth, women, rural

- Debt and Equity (start-up to big ticket) e.g. Khula \NEF equity funds

Establish an Integrated Financing Institution with key components focused on empowerment & small businesses (consolidation of existing vehicles)

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4. PARTNERSHIP PROGRAMMES WITH PRIVATE SECTOR

Central role for NEF - operational, venture capital functioning in April 1.

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Targeted investment: Agree with the financial sector on guidelines for socially responsible investing and mobilisation of resources into national projects

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Design charters for key industries; agree on targets, mechanisms to achieve targets (e.g. financial sector)

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Follow similar model to that of liquid fuels.

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Leverage BEE through various interventions such as incentive schemes, industrial participation.

 

Powerpoint presentation: STRATEGY FOR BLACK ECONOMIC EMPOWERMENT BACKGROUND

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