Broad-Based Black Empowerment Amendment Bill: public hearings (day 2)

This premium content has been made freely available

Trade and Industry

12 March 2013
Chairperson: Ms J Fubbs (ANC)
Share this page:

Meeting Summary

The Committee continued public hearings on the Broad-Based Black Economic Empowerment Amendment Bill.  Submissions were received from the Banking Association of South Africa, SADECO Quantum Consulting (Pty) Ltd, Telkom SA SOC Limited, Business Unity South Africa, Solidarity Trade Union and the American Chamber of Commerce in South Africa.

The Banking Association of South Africa expressed general support for the Bill.  The Association warned of potential unintended consequences resulting from the proposed provisions allowing the cancellation of contracts.  Other suggestions and recommendations concerned the definitions of ‘broad-based black empowerment’ and ‘fronting practice’; the provisions dealing with Codes of Good Practice; the establishment of the Broad-Based Black Economic Empowerment (BBBEE) Commission; the extent of the investigations that would be undertaken by the Commission; the issuing of summonses by the Commissioner; reporting requirements; the confidentiality of information disclosed to the Commission and the inclusion of a rehabilitation mechanism for transgressors.

SADECO Quantum Consulting (Pty) Ltd highlighted the plight of the black disabled sector of society, which was particularly disadvantaged and in need of intervention measures.  The submission included an overview of and the rationale for black economic empowerment, the legislative framework, Government’s black economic empowerment strategy and the challenges faced by management in implementing the strategy.  Specific suggestions were made to amend the provisions in 5 sectors of the principal Act.  Ministers and senior officials in State-owned entities should be held accountable for implementing the black economic empowerment strategy.  A range of recommendations were made to improve the access of the disabled community to the economy.

Telkom SA SOC Limited suggested that the concepts and definitions in the Bill were aligned with all related legislation.  The establishment of the Commission was welcomed but more clarity on the status, role and functions of the Commission as necessary.  Specific recommendations were made concerning the definitions in the Bill; including an exemption clause for the private sector; clarity on whether or not compliance was mandatory for the private sector; where reports needed to be submitted in the absence of sector councils; the provision for the cancellation of contracts or authorisation; the term of office of the Commissioner and Deputy Commissioner; the functions of the Commission; the interaction between the Departments of Trade and Industry and Labour; reporting on the status and progress of broad-based black economic empowerment; the reporting mechanisms for organisations; the accountability of company officials and the calculation of penalties.

Business Unity South Africa disagreed with the proposal to establish the Commission as a trading entity.  The Commission should be independent and be provided with adequate funding.  The organisation disagreed with the proposal to levy a fine of 10% of the annual turnover of a company that transgressed the Act.  Potential unintended consequences were disinvestment, bankrupting the company and job losses.  An alternative proposal was to levy a fine as a multiple of the value of the irregular or fraudulent contract.  NEDLAC to be consulted before the regulations, guidelines and practice notes were issued.

The Solidarity Trade Union took the approach that the Bill facilitated the reallocation of capital according to political priorities instead of consumer priorities.  Such transfer of capital to less effective entrepreneurs would have a detrimental effect on the production of goods and services, ultimately resulting in an increase in the cost to all consumers.  Solidarity recommended that the Bill was withdrawn as it would have consequences that would be detrimental to all consumers in South Africa.

The American Chamber of Commerce in South Africa stressed the importance of policy certainty, policy clarity and policy simplicity to encourage foreign direct investment.  Foreign direct investment in South Africa had declined by 43.6% in the first half of 2012 while investment in the African continent as a whole had increased by 5% during the same period.  South Africa ranked lowest on the list of countries being considered by businesses for international expansion.  Specific comments and suggestions regarding the Bill included the need to clarify most definitions; the Commission to be subjected to a monitoring and evaluation mechanism; adopting an integrated and uniform approach towards organs of State; retaining the sectoral charters that were already in place and that functioned successfully and omitting the words ‘without limitation’ in the provision dealing with the disclosure of information.

Meeting report

Submission from the Banking Association of South Africa (BASA)
Mr Cas Coovadia, Managing Director, BASA presented the submission to the Committee (see attached document).

BASA expressed general support for the Bill, which addressed a number of concerns and issues regarding black economic empowerment (BEE) that had arisen.  Specific suggestions and recommendations included the wording of the definitions of ‘broad-based black empowerment’ and ‘fronting practice’.  Public sector institutions should be allowed to determine qualification criteria that exceeded the generic Codes of Good Practice.  BASA warned of potential unintended consequences resulting from the proposed provisions allowing the cancellation of contracts, which did not foster investor certainty. The term of office of the Commissioner of the Broad-Based Black Economic Empowerment (BBBEE) Commission should be limited; Commission employees should not have any links to BEE consortiums and the Commission should only investigate complaints over a certain value that involved fronting.  Provision should be made to limit the number of investigations undertaken by the Commission.  Frivolous complaints could be prevented by requiring complainants to pay a “non-refundable complaint lodgment fee” and requiring complainants to refund the costs incurred if the investigation revealed that the complaint was groundless.  “Naming and shaming” should not be allowed before alleged transgressors had been found guilty of an offence.  The legal standing of the Commission’s findings needed to be clarified.  BASA was opposed to granting the Commissioner the power to issue summonses. The confidentiality of information disclosed to the Commission should be guaranteed.  Companies listed on foreign stock exchanges should not be exempted from reporting requirements.  Provision should be made for a rehabilitation mechanism that allowed former transgressors to do business with the State at a later stage.

Discussion
The Chairperson reminded Members and delegates of the limited time available for the proceedings.  If necessary, more detailed written responses to Members’ questions could be forwarded to the Committee.

Mr G Hill-Lewis (DA) asked for more clarity on the assertion that there could be unintended consequences as a result of the cancellation clause.  The implication appeared to be that it would be more difficult to access funding from the banking sector for BEE transactions.  He asked if financial institutions would factor in the risk by charging higher interest rates or if funding would simply be unavailable.

Mr M Oriani-Ambrosini (IFP) was aware of certain BEE deals that could be regarded as fronting but this was not in fact the case.  He wondered if fronting should be outlawed entirely or if certain types of fronting could be regarded as legal.  The Codes of Good Practice would be established by regulation, which was not under the control of Parliament.  He asked if the legislation should include provisions that set out the basic parameters for the codes.  He shared the concerns over the powers of the Commission and that companies would be required to submit details of private and confidential transactions.  He asked if BASA had any alternative suggestions.

Mr B Radebe (ANC) asked if the imposition of a fee would discourage people from laying complaints at the Commission.  Such a fee might be unaffordable by poor people that had suffered financially from illegal BEE practices.  He felt that the cancellation of the contract would be the most effective measure to prevent fronting.  He asked if the banking sector had developed products aimed at assisting black people to obtain funding for BEE transactions.

Mr G McIntosh (COPE) observed that the banking sector played an important role in the economy.  He asked if the suggested inclusion of the word “sustainable” in the definition of BBBEE was meant to mean “viable”.  The intention was to have financially viable and sustainable black-owned businesses.  The concerns raised over the status of the Commissioner were valid.  The Bill proposed that the BBBEE Commission would be established under the auspices of the Department of Trade and Industry (DTI).  The Commissioner would have extensive statutory responsibilities and he wondered if the incumbent should be a retired Judge, preferably someone with commercial law experience.

The Chairperson observed that “naming and shaming” was a common practice, regardless of whether or not the allegations were proven in Court.  The Committee would request a legal opinion from the State Law Adviser on the issue.

Mr Coovadia explained that legislative provision that allowed unilateral cancellation of a contract created uncertainty and the financial sector would react accordingly.  There needed to be a reasonable degree of certainty over the viability of the transaction before a financial institution would be prepared to lend the money.  The concern was that the provision would result in the funding for BEE deals drying up.  The risk to the lender was increased and financial institutions were averse to risking public or private funds.  The BBBEE framework should not allow a situation where a black person was appointed as a director of a company but was not involved in the running of the organisation in any way.  Certain agency arrangements worked well and should not be regarded as fronting.  Legislation should not establish structures that exceeded the authority of the Courts.  The BBBEE Commission should be granted adequate powers to carry out its mandate but should not take over the function of the Courts.  The issue of the confidentiality of private transactions had been debated in the financial sector.  It was necessary that there should be a good relationship between the Commission and the suggested charter councils.  The charter councils would receive the reports from entities, which were verified by accredited verification agencies.  The role of the Commission and the various organisations involved in the process needed to be clarified in order to avoid duplication.

Mr Coovadia said that the objectives of transformation needed to be looked at in broad terms.  The intention behind the suggestion of a complaint fee was to avoid the Commission becoming bogged down in a mass of petty complaints and not to prevent people from lodging complaints.  It was necessary to balance the extent of the work that had to be done with the capacity of the Commission.  The banking sector had provided R15 billion in funding for BEE transactions over the previous five years and planned to provide substantially more funding in future.  Consideration should be given to the factors that made it more difficult for banks to provide funding for BEE projects.  A recent survey amongst 500 small, medium- and micro enterprises (SMME’s) found that the biggest complaint by entrepreneurs was compliance with regulation, which made it more difficult and costly to do business.  On average, SMME’s spent 5% of turnover on regulatory costs.  There was a tendency for the sector to employ staff on a contract basis rather than offering direct, permanent employment.  The SMME sector avoided direct employment because the process was too complicated.  Skills development was a major issue.  The Sector Education and Training Authority (SETA) for the banking sector had been more successful than other SETA’s in providing training that benefited the transformation of the sector.

Mr Coovadia said that the Commissioner should be a person of stature, who had no vested interest and who operated independently of the other parties involved.  He agreed that the practice of naming and shaming was widespread but that did not mean that it was right and should be perpetuated through legislation.

Advocate Desiree Swartz, State Law Adviser explained that the power to issue summons was necessary for the Commission to fulfill its obligations.  Such power was not uncommon, for example the Consumer Commission was granted the power to issue summons.  She needed more time to investigate before giving an opinion on the issue of naming and shaming.

The Chairperson advised that the Committee would submit a formal request if a legal opinion was required from the State Law Adviser or the Parliamentary Legal Adviser.

Submission from SADECO Quantum Consulting (Pty) Ltd
Mr André Ward, Chief Executive Officer, SADECO presented the submission to the Committee (see attached document).

The SADECO submission focused on the application of the proposed legislation on people with disabilities.  The presentation included an overview of the concept, rationale of BEE in South Africa, the challenges for BBBEE and management, the legislative framework for BBBEE, Government’s BBBEE strategy and the elements of the broad-based beneficiary base.  Black persons with disabilities were particularly disadvantaged and in need of intervention measures.

Specific suggestions were made to amend provisions in sections 1, 2, 7, 9, and 13 of the BBBEE Act.  Provision should be made to hold Ministers and senior officials in State-owned entities accountable for BEE.  The submission included appendices summarising the legislation applicable to persons with disability; the challenges faced by the disabled sector in South Africa and statistics on the income distribution of people with disabilities.  The presentation was concluded with a summary of SADECO’s recommendations.

Discussion
Advocate A Alberts (FF+) agreed that the disabled community faced greater challenges than able-bodied persons and that South Africa needed to do more to assist the community.  He disagreed that the interventions should be granted on the basis of race.  Disabled white persons were also disadvantaged in the past and this had been recognised in the BEE legislation.  He asked how the loss of the rights of white disabled persons under the proposed legislation could be justified.  It made no sense that preferential treatment was given to the black population when 20% of the white population lived in poverty.  It was immoral to deprive a person from receiving a disability grant on the basis of race.

Mr Radebe said that the accountability of public servants was easily dealt with.  Incompetent Ministers could be removed.  Currently, legislative provision was not made for including performance targets for people with disabilities in the performance agreements between Ministers and the President.

Mr X Mabasa (ANC) noted SADECO’s objection to referring to the list of BEE transgressors as a “blacklist”.  He wondered what an alternative word would be.  He asked what the various organisations representing people with disabilities could do to promote interaction with State institutions.  He agreed with the suggested amendments to the clauses to include more categories of the black community.

The Chairperson agreed that all Government structures as well as the private sector should include objectives to increase the number of disabled employees.  Although the relevant legislation was in place, implementation lagged behind.  The statistical data in the income distribution of people with disabilities dated from the 2001 census and was only for Gauteng.  The 2011 census data was not yet available but she had noticed that there were a much higher percentage of disabled people living in the rural areas.  The sub-committee appointed by the Committee to deal with the Bill would consider the point made by Advocate Alberts that the entire disabled community had been disadvantaged in the past, irrespective of race.

Mr Ward responded that all people were in fact not born equal and the black disabled community was the most disadvantaged sector of society.  White persons with disabilities had far more access to support structures than black persons with disabilities.  He felt that the previous BEE legislation had inordinately benefited white women.  He suggested “sanctioning register” as an alternative to “blacklist” or “whitelist”.  He could not comment on what action could be taken by organisations for the disabled to improve relationships with Government institutions.  The Employment Equity Act required that 2% of employees should be from the disabled community.  He felt that the percentage should be 10%, which was in line with the disabled percentage of the total population.  The target set by Government Departments was a mere 1% of staff complement, which was not acceptable.

Submission from Telkom SA Soc Limited
Ms Lindiwe Maepa, Executive: Empowerment and Sustainability, Telkom presented the submission to the Committee (see attached document).

Telkom supported the intention of the Bill to align the BBBEE Act with other related legislation and welcomed the establishment of the BBBEE Commission.  The DTI was urged to ensure that there was no room for uncertainty and misunderstanding of the concepts and definitions and that the status, role and functions of the Commission were clarified.

Specific recommendations were made concerning the definition of BBBEE, references to “effective” black-owned companies; the inclusion of an exemption clause for the private sector and clarity on whether or not it was mandatory for BBBEE to be implemented in the private sector; where reports needed to be submitted in the absence of sector councils; the provision for the cancellation of contracts or authorisation; the establishment and status of the BBBEE Commission; the term of office of the Commissioner and Deputy Commissioner; the functions of the Commission and the interaction between the DTI and DOL; reporting on the status and progress of BBBEE and reporting mechanisms for organisations; accountability of company officials and the calculation of penalties.

Discussion
The Chairperson advised that the senior executives of organisations were expected to attend submissions to Parliament even if the presentation was made by a suitably qualified person.  The Committee would write to the executive of Telkom.

Mr McIntosh asked what the meaning was of “SOC” in the name of the organisation.  The value of Telkom shares had declined recently.  He asked if Telkom perceived itself to be a member of the private sector or a State-owned Entity (SOE).  Telkom had commented that the proposed functions of the Commission seemed to be “fairly fine” but he would like to know what was meant by the phrase.

Dr W James (DA) asked for more information on Telkom’s programme to train recruits from disadvantaged communities to become specialists and engineers.  He asked how Telkom assisted members of previously disadvantaged communities to start their own small enterprises.

Mr N Gcwabasa (ANC) asked for more information on the suggested exemption clause for the private sector.  Telkom recommended that the BBBEE Commission was an independent entity but did not suggest to whom the Commission should be accountable.  He asked if the extension of the term of office of the Commissioner should be for a specified period.

Mr Mabasa commented on the relationship between the training and skilling of persons from disadvantaged communities and the empowerment objective.  He understood that Telkom had a training facility at Olifantsfontein (in Gauteng province) but had heard that only matriculants were recruited.  He asked what percentage of the workforce were persons with disabilities.

Mr G Selau (ANC) asked for more information on the suggested alignment of legislation.  He pointed out that legislation was generally applicable to all sectors and it was not clear what was meant by the recommendation that the private sector should be exempted from certain provisions.  The point made that the BBBEE Commission was being established as a trading entity needed to be considered by the Committee.  The extension of the term of office of the Commissioner and the Deputy Commissioner was not particularly problematic unless both incumbents left on the same date.

Ms Maepa explained that “Telkom SA SOC Ltd” was the company’s registered trade name.  Government through the Public Investment Corporation (PIC) was the major shareholder and Telkom would be re-classified as an SOE in December 2013.  Telkom was aware of the decline in the value of the shares.  Telkom had partnered with industry and universities to develop the engineering training programmes.  Telkom operated six training facilities, located throughout the country.  The company had no intake of matriculants for 2013.  Telkom had a range of training programmes, including masters and doctorate programmes and entrepreneur programmes.  Telkom encouraged employees to disclose their disability status. 

Telkom had recommended that the functions and status of the Commission were clarified.  The term of office of the Commissioner could be extended for any suitable period, for example one year.  The incumbent Commissioner and Deputy Commissioner should identify potential successors.  The Independent Communications Authority of South Africa (ICASA) could assist with identifying which laws should be included in the process of harmonising the various pieces of legislation.

The Chairperson advised that the Committee would submit further questions if necessary.  More detailed responses to Members’ questions could be sent to the Committee.  She explained that the Bill had been submitted to Parliament by the Minister of Trade and Industry and was now with the Committee.  The invitation to comment on the Bill was placed by Parliament and not by the DTI.  She assumed that Telkom had misunderstood the legislative process and had incorrectly referred its submission on the Bill to the DTI.

Submission from Business Unity South Africa (BUSA)
Ms Vanessa Phala, Executive Director, BUSA submitted the presentation to the Committee (see attached document).

BUSA supported the majority of the proposed amendments to the BBBEE Act but did not support the amendments to sections 13 B, 13 O and 14. 

The establishment of the BBBEE Commission was supported in terms of section 13 B but as an independent entity as agreed at NEDLAC.  The status of the Commission as a trading entity would inhibit the intended functioning of the entity.  The Commission should be provided adequate financial resources, be independent and should have adequate power and authority to allow it to carry out its functions adequately.

BUSA welcomed the provisions concerning offences and penalties (section 13 O) with caution.  The linking of penalties to annual turnover was not supported as the turnover of a company was not directly linked to the offence.  It was suggested that the clause be amended to allow the Court to consider the value of the relevant transaction in determining the amount of the fine.  The proposed fine of 10% of annual turnover would result in unintended consequences of discouraging investment and bankrupting companies, both of which would result in further unemployment.  BUSA suggested that provision was made for a fine to be calculated as a multiple of the value of the irregular contract.

BUSA recommended that NEDLAC was consulted before the regulations, guidelines and practice notes were issued (section 14).

Discussion
Mr Radebe noted that BUSA did not support the provision for a fine of 10% of turnover to be imposed.  However, it was essential that the economy was transformed to avoid South Africa having to face significant problems as a result of the majority black population being excluded.  Small fines for transgressions were ineffective and companies that violated the law had to be severely punished financially.

Dr James was of the opinion that a policy of incentives was more effective in changing attitudes.  The current scorecard system included incentives for companies.  It was necessary to establish a balance between incentives and penalties (such as fines) as it was not desirable to create a situation where participation became a disincentive.  He agreed that there would be unintended consequences if the imposition of fines and penalties was the only approach.  It was necessary for the Committee to obtain more information on what would be done with the fines that were collected.  He queried the suggestion that NEDLAC was consulted on the regulations, guidelines and practice notes as NEDLAC was not the most effective forum for dealing with such matters.

Mr Oriani-Ambrosini questioned legislation that prevented the white sector of the population from doing business with the State.  The Bill intended to benefit the black population only.  He asked what the moral rationale was for legislation that discriminated on the basis of race.  South Africa no longer had a population register that categorised a citizen by race and the question arose how it could be legally established that a particular individual was black.  He asked if any studies had been done on what the impact of the proposed legislation would be on the economy.  He had asked the Committee to obtain a legal opinion on whether the Bill violated international trade agreements.  World Trade Organisation (WTO) trade agreements included prohibitions on a country favouring the interests of its own population above the interests of the trading partner.

Advovate Alberts supported Mr Oriani-Ambrosini’s comments.  He asked how BUSA could support a Bill that discriminated against its white members and excluded white women and white persons with disabilities.  He asked if any studies had been conducted to assess the impact of the existing BEE legislation and the likely impact on the economy in future.  Nobody was against intervention and development measures but he was not convinced that BBBEE was the answer and wondered what alternatives there were for achieving the same objective.

Mr Gcwabasa said that penalties were intended to be preventative measures.  It was not clear how the alternative proposal put forward by BUSA would encourage companies to adhere to the legislation.  The regulations gave effect to the Act.  The NEDLAC process was too lengthy but it might be feasible if a limit was put on the time allowed for consultation with NEDLAC.  Ultimately, South Africa should be a non-racial, equal-opportunity society but black children continued to be disadvantaged and intervention measures needed to be in place.

Mr Mabasa agreed that the penalty for offences such as fronting needed to be large enough in order to be an effective deterrent.  He asked what action was taken by BUSA to encourage BBBEE in the private sector.  BBBEE would not be successful unless it was also embraced by the private sector.  He asked what programmes were in place to empower previously disadvantaged groups.

Mr Selau acknowledged that the exploitation of black workers continued despite the new political dispensation and the Constitutional requirements.  The BBBEE Act was not intended to discriminate against the white sector of the population.

Ms Phala responded that BUSA understood the purpose of the BBBEE Act and the Bill.  South Africa’s painful past was acknowledged and the Act attempted to address the consequences.  BUSA did not consider the legislation to be discriminatory against the white population.  The role played by the business sector was acknowledged.  BUSA had many small, medium and micro enterprise members.  It was necessary to consider the unintended consequences of imposing a fine based on the annual turnover of the enterprise.  The suggestion was that the fine should be linked directly to the offence and the fine could be substantial.

Ms Phala acknowledged that there were challenges in the NEDLAC process but the forum was necessary for engagement between Government, organised labour and organised business.  BUSA embraced the transformation agenda and had established a special committee to engage with members and to provide support.  She was aware of a study that had assessed the extent of female representation on the boards of companies.  The finding had been that women remained under-represented.  Projects to assist persons from previously disadvantaged sectors of society to develop skills that would allow them to progress had been initiated.  Suggestions for the utilisation of the fines collected included making the funds available for transformation programmes and to assist struggling communities.

The Chairperson asked for a more detailed written response to Members’ questions to be forwarded to the Committee.

Mr Sipho Zikode, Deputy Director-General, DTI advised that the legal opinion obtained by Mr Oriani-Ambrosini had been forwarded to the Department’s legal advisers.  There was a cost associated with obtaining a response from the legal advisers.  The basic principle of Most Favoured Nation clauses in trade agreements was that a country’s trading partners could not be treated differently than its domestic entities.

The Chairperson asked the DTI to provide a written response to the point raised by Mr Oriani-Ambrosini concerning the WTO trade agreements.  The issue was important and had to be considered by the Committee.

Submission from Solidarity Trade Union
Mr Piet Le Roux, Senior Researcher, Solidarity presented the submission to the Committee (see attached document).

The submission gave the background to Solidarity, a non-political trade union in the Christian-democratic tradition.  Solidarity noted that the key intention of the Bill was the ‘intensification of the programme of reallocation of capital according to political priorities instead of consumer priorities’.  The focus of the submission was to alert the Committee to the consequences of passing the legislation on ordinary consumers.  The allocation of capital was a consumer-led process.  Solidarity’s position was that the allocation of capital according to political ideology would have a negative impact on the capital structure of the country, to the detriment of ordinary consumers.  Solidarity argued that if ‘less efficient entrepreneurs managed capital structure, everybody loses’.  The submission included two graphs that attempted to illustrate the cost of ‘less effective entrepreneurs’ on consumer goods production.

Solidarity recommended that the Bill was withdrawn as it would have consequences that would be detrimental to all consumers in South Africa.

Discussion
Dr James observed that the basis for the Solidarity argument contained a number of errors and assumptions and was ‘conceptually confused’.  BEE was not a political allocation of capital.  The investment in education, health and BEE was for the public good and the South African economy would not be sustainable unless such investment was made.  The approach continued to be in racial terms and therefore redress also needed to be along racial lines.  The intention of the proposed legislation was to create opportunities for the empowerment of disadvantaged sectors of societies.  The DA questioned some of the concepts but acknowledged the need for legislative intervention to empower previously disadvantaged communities.

Mr Radebe asked for further clarity of the assertion that capital was being allocated according to political rather than free market factors.  Consumers included the groups intended to be benefited by the Bill and it was not clear what was meant by the statement that all consumers would be disadvantaged.  He asked if Solidarity was of the opinion that BBBEE would result in less goods and services being generated for the consumer market.  He asked if the implication was that black business was inefficient.  He asked how BBBEE suppressed consumer preference and if consideration had been given to the benefits of increased competition resulting from the establishment of BEE enterprises.  It would appear that Solidarity was opposed to the concept of BEE and wanted to see it scrapped.

Mr Gcwabasa asked where else previously disadvantaged entrepreneurs would obtain resources from.  He pointed out that all Governments allocated resources to foster their ideologies as soon as they came into power.  He stated that politics and religion should not mix.

Mr Mabasa said that the 1995 Constitution was intended to guarantee that the country would belong to all its citizens.  However, the economy was still dominated by white-owned companies.  Malaysia and Brazil had introduced legislation to benefit majority groups before the economy was successfully transformed.  BBBEE did not intend to take away from the sector of the economy that was already benefitting but intended to ensure that more black South Africans actively participated and benefited from the economy.  Current BEE legislation had significantly benefited white women.

Mr Oriani-Ambrosini wanted to know what data was used to develop the graphs included in the submission.  He disagreed with the implication that entrepreneurs from previously disadvantaged sectors of society would be less effective.  The Solidarity submission was basically a critique of the BEE system but that had not been created by the Bill.  The approach should have been on how the Bill could be improved to improve the system.

Advocate Alberts asked if Solidarity had undertaken any research on the impact of BEE on the economy.  It had become clear that income disparity was intra-race rather than inter-race.  The submission had not made any mention of persons with disabilities.

Mr Selau pointed out that Parliament represented all the people of South Africa and that all political parties were represented on the Committee.  The President had asked political parties to put their differences aside and to work together in the interest of the country.  The introduction to the submission was a political statement and he interpreted that statement to mean that Solidarity had political aspirations.  He was critical of Solidarity and questioned its motives.

Mr McIntosh found the submission to be ‘refreshing’.  Solidarity had attempted an analysis of the consequences of the legislation, which was worth considering.  Other South African trade unions approached every issue from a Marxist paradigm but Solidarity had a Christian-democratic approach.  The point of departure was the impact of BEE on the capital structure, which he felt added a valuable contribution to the debate.  The Bill was intended to benefit the small business sector but a number of successful black entrepreneurs had been critical of the proposed legislation.  Virtually every town in the country had trading stores owned by Chinese and Somali entrepreneurs who managed to make a living and the question had to be asked why these enterprises had not been created by South Africans.

The Chairperson said that Solidarity should have acknowledged that the South African economy was skewed and that interventions to address the imbalance were necessary.  Solidarity should have explored the issues the Bill attempted to address.

Mr Le Roux strongly denied that Solidarity had implied that black entrepreneurs were less effective than their white counterparts.  The issue was that the Bill would have the effect of increasing the political allocation of resources, which would skew the transfer of resources.  If a larger portion of resources was allocated to less efficient entrepreneurs the increased cost would be borne by the consumer, regardless of race.

Submission from the American Chamber of Commerce in South Africa (AMCHAM)
Ms Carol O’Brien, Executive Director and Mr Shibishi Maruatona, Head: Public Policy and Corporate Affairs, General Motors South Africa presented the submission to the Committee (see attached document).

The submission included an overview of the investment made by American-owned companies in South Africa.  Policy certainty, policy clarity and policy simplicity encouraged foreign direct investment (FDI).  The benefits of FDI in South Africa were summarised.  However, FDI in South Africa had declined by 43.6% in the first half of 2012 while investment in the African continent as a whole had increased by 5% during the same period.  South Africa ranked lowest on the list of countries being considered by businesses for international expansion.

Specific comments on the Bill concerned the vagueness of most definitions and of the provisions in section 8.  The establishment of the BBBEE Commission was welcomed but it was suggested that the Commission was subjected to a monitoring and evaluation mechanism to ensure delivery took place.  An integrated and uniform approach when dealing with organs of State was necessary.  Sectoral charters were already in place, functioned successfully and should be allowed to take precedence.  The words ‘without limitation’ in the provision in section 24 dealing with the disclosure of information should be omitted.

Discussion
Mr McIntosh observed that trade and industry was about job creation, the fostering of trade and encouraging direct foreign investment.  He asked how it was possible for a country like Thailand to manufacture a car, cover the cost of exporting it to South Africa, pay the import duty and still sell it for less than a locally-produced car.  The series of strikes at the Medupi power station, Kumba and the mining sector threatened FDI.  It was necessary to ensure that the Bill did not add to the threat.

Mr Radebe pointed out that the legislative frameworks of countries did not remain static and constantly underwent change.  It was regrettable that companies preferred to engage in fronting rather than adhering to the spirit of BEE.  Unless transformation took place, the South African economy would be destroyed.  South Africa appreciated the substantial investment made by the USA in the country and wished for continued good relations with the country.

Mr Maruatona observed that the submission from Solidarity illustrated the diversity of South African society.  Foreign investors considered the long term landscape of a country before making the decision to invest.  It was necessary to balance the needs of citizens and business when drafting legislation.  He invited the Committee to visit the Chamber and to interact with its members on the challenges faced by foreign companies doing business in South Africa.

Mr Xolani Qubeka, Chief Executive Officer, Black Business Council agreed that the business sector needed to have policy certainty.  The criteria for BEE needed to be clear and unambiguous.  The Council had recommended that the BBBEE Act was the primary legislation and as such the provisions contained in it needed to be clear.

The Chairperson was aware that there was some confusion over the structuring of the codes.  She agreed that policy certainty and clarity were necessary.  The Committee had noted the points made in the submissions and welcomed the input that had been provided.  The BBBEE Act was not intended to discourage FDI.  The intention was to grow the South African economy but there were differences of opinion on how the objectives could be achieved.  She thanked the stakeholders for the submissions received by the Committee.  The DTI would provide the Committee with the Department’s responses to the issues raised during the public hearings on the Bill.

The meeting was adjourned.

Share this page: