Broad-Based Black Economic Empowerment Bill: hearings

Meeting report

TRADE AND INDUSTRY PORTFOLIO COMMITTEE
26 June 2003
BROAD-BASED BLACK ECONOMIC EMPOWERMENT BILL: PUBLIC HEARINGS

Chairperson: Dr R H Davies (ANC)

Documents handed out:
 

Competition Commission Submission
National Co-operatives of South Africa (NCASA) Submission
Industrial Development Corporation (IDC) Submission (Appendix 1)
National African Federated Camber of Commerce and Industry (NAFCOC) Submission (Appendix 2)
African Council of Hawkers and Informal Businesses (ACHIB) Submission (Appendix 3)

Competition Commission Delegation: Mr Z Ntukwana, Manager: Compliance Division; Ms Z Ntuli, Head: Corporate and Mr F Sibanda; Head: Policy and Projects
Industrial Development Corporation Delegation: Mr T Mashabane, SBU Head: Empowerment; Ms S Sekgobena and Mr C Mhango
National Co-operatives of South Africa Delegation: Mr T Phadu, General Secretary and Mr D Naidoo, National Training Officer

SUMMARY
Hearings on the Broad-Based Bill continued and submissions were heard from Competition Commission, ACHIB, IDC, NAFCOC and NCASA. All the presenters, while welcoming the principles and objectives of the BEE Bill, raised some concerns on issues such as the definitions, restructuring of SOEs, preferential procurement, regulation of the Bill, composition of the BEE Advisory Council, the land question, the financial aspects of BEE, government participation and involvement in the process, scorecards and transformation charters and establishment of co-operative associations.

The Committee undertook to take the concerns raised in the submissions into consideration when deliberating on the Bill. But before that the department would furnish its response document to the submissions.

MINUTES
Competition Commission submission
Mr Z Ntukwana noted that that the Competition Commission can play a crucial role in facilitating BEE. It welcomed the new broad-based approach which aimed at advantaging much more than a small clique of the black population. The majority of Historically Disadvantaged Individuals (HDIs) who do not have the ability to buy company shares can now benefit from BEE through other means. He noted that access to finances by HDIs and SMMEs still remains the biggest stumbling block in the attainment of BEE. Any BEE strategy that excludes the role that should be played by commercial banks is far from being complete. There need to be general guidelines on how commercial banks could assist. It recommended that the President not be the Chairperson of the Advisory Council as this may lead to perceptions that the Council is not as independent as it should be. Comments were also made on the BEE policy instruments and its financing plus the question of land ownership (see document).

Discussion
Mr P Nefolovhodwe (AZAPO) asked if BEE new comers could be excluded from paying a filing fee to the Competition Commission, until such time as they have stabilized.

Mr Ntukwana said that the Commission had not thought of nor discussed the possibility of exempting BEE businesses from paying for filing. His personal view was that this is something that might be looked at by those involved in the process. However government should also ensure that BEE firms get adequate funding.

The Chair noted that the chairpersonship of the Advisory Council is a policy matter. He asked for comment on how the Bill gives legal effect the Strategy document and what kind of guide it can provide.

Mr Ntukwana replied that the Commission acknowledges the advisory nature of the Council and hence it feels that the person who is being advised should not be part of it, let alone chair it. The BEE Strategy is a good document since it encourages the creation of appropriate opportunities for BEE but the Bill does not give an appropriate legal effect to that document.

The Chair asked if the Bill could have an interpretation clause would that be an appropriate procedure to cater for the interpretation concerns raised by the Commission with regard to Clause 3 of the Bill.

Ms B Ntuli said that it is important to avoid any ambiguity in the interpretation of legislation and everything needing to be defined should be defined in the Bill.

Mr D Lockey (ANC) pointed out that while it is accepted that land is another means to empower people, this Bill is concerned with entrepreneurship and land is not only used for that purpose.

Mr F Sibanda noted that the Commission does acknowledge that fact and also accepts that there are other instruments, which clearly address the land issue. They merely mentioned the land question in passing and did not intend to put pressure on anyone.

Ms B Ntuli (ANC) noted that the Commission proposed that "established companies must involve SMMEs and BEE firms in core businesses and not simply in peripheral activities". She asked the Commission to expand on this and noted the SACOB submission on working with "unknown and unproven businesses".

Mr Sibanda said that it should be borne in mind that big businesses also started as small companies. They are proposing that big businesses should therefore partner with these BEE small firms so as to afford them an opportunity to develop. It is the Committee's responsibility to ensure that this is legislated in the Bill itself.

African Council of Hawkers and Informal Businesses (ACHIB) Submission
Mr L Muvundla (President) noted that ACHIB welcomes the inclusion of the concept of Broad-Based BEE as the title of the Bill. He criticised big businesses who have not embraced BEE and who are guilty of tokenism and fronting. He also criticised the black elite who have never empowered anyone but themselves and thus would not be helpful to this process. ACHIB requested that members of the Advisory Council not only consist of the black elite but also grassroot SMMEs, the informal sector and rural communities. Big businesses should be penalised for not adhering to the transformation charters. Also commented on was the Bill's consultation process and the funding of the BEE (see document).

Discussion
The Chair noted that the presenter makes a plea for a broader consultation and involvement. He asked him to expand on this since the Bill mentions the institutions that were consulted.

Mr Muvundla contended that those institutions which were consulted, mostly represented big businesses. The participation of the greater community should be sought.

Mr Lockey noted that R10 billion is said to be assigned to the BEE process. However this amount may only be available if the exchange control amnesty process is a success. Such an amount may not be reached by the exchange control amnesty. Would, say, R2 billion for BEE be enough to make a proper impact on poor people?

Mr Muvundla said that this would depend on the environment in which one is operating. If the environment is a good one, where the private sector is willing to assist then such an amount would be. However, if the environment is a hostile one then such an amount would not be enough for the BEE process.

Ms B Ntuli (ANC) noted again SACOB statement that had made it clear that it is not willing to work with unknown and unproven businesses. She asked what ACHIB is doing to train people so that they have the right credentials when they submit business proposals.

Mr Muvundla said that the reason why such statements are made is due to the fact that people, who knew nothing about business, were taken and put in high positions as either "fronts" or as a token. It is imperative that the concept of BEE business be changed from what it has become known to mean, that is, self-seeking, to what it really means, empowerment. While training and skills transfer is important - it is equally important that those people should be willing to be trained and also be trainable.

Industrial Development Corporation (IDC) Submission
Mr T Mashabane (SBU Head: Empoerment) noted that IDC supports the objectives of the Bill and as an implementing agency would finance any initiative that promotes these objectives. However, the Bill should provide well-defined objectives and measurable goals. The objectives of rural development, promotion of investment activities, and facilitation of meaningful ownership to black people should be viewed as secondary to and subsets of BEE, otherwise the focus on "Black" can easily be lost. IDC advised that the concept of "transfer of ownership" be avoided, as it has negative connotations of "nationalisation". Amongst other matters, IDC recommended that the duties and objectives of the Advisory Council be extended, its relationship to DTI needs clarity to ensure its independence. The definition of BEE should be broad enough to accommodate issues such as control influence and allow for fragmentation of incentives and benefits accessible by different categories. The definition of "black people" was narrow and should be properly detailed to avoid misinterpretation.

Discussion
Mr Lockey commented that the definition of 'black' in the Bill is not narrow as contended but rather simply enlightening and inclusive. He asked if IDC proposed that only those charters which are driven by growth should be considered.

Mr Mashabane replied that they do not say that there should not be charters but suggest that the emphasis should be given to those sectors which have a potential to grow rather than those which have became stagnant.

The Chair asked if their concerns about the definitions would be appeased if Appendix "B" of the Strategy document is attached to the Bill as an annexure.

Mr Mashabane noted that IDC is comfortable with the definition of black in Appendix "B". However it would be important to clearly define what a "black entity" is since a failure to do so might cause much interpretation confusion.

Ms Ntuli asked if the Minister is part of the Advisory Council, would that not affect the independence of the Council? Was IDC of the view that other funding institutions should be established, which would take care of the empowerment of youth and disabled people?

Mr Mashabane replied that the Ministry would be instrumental in the implementation of the Council's decisions but government's influence on the Council should be minimal so as not to affect its independence.

The Chair noted that IDC had not commented on the funding provision and asked if it is satisfied with the provision as it is.

Mr Mashabane replied that it would be important that a separate fund specifically focusing on those interest groups, be set up. This would bring about a better focus in the development of these sectors.

National African Federated Camber of Commerce and Industry (NAFCOC) Submission
Ms B Mthethwa (Secretary-General) noted that NAFCOC welcomes the Broad-based BEE Bill as it recognises the need for "accelerated economic growth" in order to achieve BEE. However it did criticise the Bill as being too vague. It noted that a "narrowly defined" BEE has the potential to benefit no more than one percent of the black population. Hence the Broad-Based BEE has to have, as its precondition, a substantially accelerated economic growth. BEE strategies should exclude any measures that compromises growth such as over-regulation. Unbundling contracts, red-tape reduction, prompt cash payments and guarantees of financial leverage are strategies used in the countries that have achieved high growth and economic transformation. Amongst other things, NAFCOC recommended credible Regulatory Impact Assessments on all measures affecting the economy, fiscal reform be added to the existing policy instruments and it also commented on the the charters and the issue of land (see document).

Discussion
Mr P Smith (IFP) applauded NAFCOC for the presentation, especially its approach on dealing with big conglomerates.

The Chair asked NAFCOC to comment on the debate on the feasibility of growth taking place without there necessarily being development. He also wondered if NAFCOC is suggesting that privatisation be extended beyond state-owned institutions when they speak of "people's privatisation".

Ms Mthethwa noted that growth and empowerment should go simultaneously since it is important that population growth should always equate economic growth of the country.

Ms C September (ANC) noted that the presentation made by NAFCOC is very moving. However some of the issues raised such as land cannot be dealt with in the Bill itself. She asked if NAFCOC had made any submission in this regard to other parliamentary committees such as Finance and Land.

Ms Mthethwa responded that at present they have not made such submissions, expect those that were made through Nedlac. She added that government should simplify its documents as most groups on the ground are illiterate.

National Co-operatives of South Africa (NCASA) Submission
Mr T Phadu noted that an enterprise based on the co-operative model is the suitable one for a broad-based BEE, since it offers greater advantages on economic and social value more than any other form of private enterprise. He said that the strategy document should clearly outline government's commitment in finding ways to facilitate growth of these co-operatives. Amongst other things, NCASA recommended that current legislative constrains imposed through the Bank Act exemption be removed and that the Nedlac Financial Sector Summit on financial co-operatives be implemented. Further proposed that government and its agencies should develop appropriate funding products so as to promote cooperatives and also that there should be provision of greater points to co-operatives (see document).

Discussion
Ms Ntuli asked them to elaborate on what they mean by community support programme.

Mr Phadu replied that since there are no specific direct projects to address the unique nature of the co-operatives then general support programmes and specific support programmes could be supplied to these co-operatives based on the nature and distinctiveness of each co-operative.

Ms September asked NCASA to comment on the financial aspect of these co-operatives.

Mr Phadu replied that public institutions could assist co-operatives with financial mechanisms, which could be instrumental in promoting broad-based public participation, such as workers co-operatives. However it is imperative for co-operatives not to rely so much on external funding but to develop their own financial institutions, so that they can be able to finance their own ventures.

The Chair thanked all the presenters for their submissions and noted that the Committee would definitely consider them when deliberating on the Bill. However before the Committee deliberated on the Bill, the normal procedure would be followed and all the submissions would be forwarded to the department for a response.

Ms September felt that the department should do some consultation before it submit its response, as it had the whole month to consider the matter since Parliament would be in recess. The Chair agreed.

The meeting was adjourned.

Appendix 1 : IDC Submission

Industrial Development Corporation's (IDC) position on Black Economic Empowerment (BEE) Bill

Submission to the dti Parliamentary Committee: 26 June 2003

A. Introduction
The IDC supports the efforts that are being made by Government to bring all segments of the South African population into the main stream of the economy. The South African economy is still dominated by large conglomerates and there is shortfall of active black entrepreneurial activities in the economy. The BEE Bill is a right step for the South African economy, the result of which should be integration of historically disadvantaged communities in the mainstream economy and broad economic development in the country.

B. Comments on the broad based BEE bill, 2003

1. Objectives of the Act
The IDC is in support of the objectives set out in the BEE Bill The IDC, as Government's largest industrial development agency, also believes that a broader and more meaningful participation of black people into the South African economy requires well-defined objectives and measurable goals.

Objectives such as rural development, promotion of investment activities, and facilitation of meaningful ownership to black people are of mutual interest. These objectives should, however, be viewed as secondary to and subsets of BEE, otherwise the focus on "Black" can easily be lost. Transfer of ownership has negative connotations as it tends to be understood to imply "nationalism" and should be avoided.

As an implementing agency, IDC will continue to financially support initiatives that would lead to satisfying these objectives.

2. Purpose of the Act
The purpose of the Act should also outline BEE and its objectives The Act should extend to
include other duties and objectives of the Council. Refer to comments on the Council (Section 7)

3. Interpretation of this Act
None

4. Code of practice
The IDC supports the Codes of Practices 1c, 1d and 1e which are stipulated in the Act
respectively as:

- Indicators to measure BEE,
- The weighting to be attached to BEE indicators
- The issuing of guidelines for stakeholders in sectors of the economy to draw up transformation charters.

The above issues are crucial in the effective implementation of BEE objectives and ensuring that performance is monitored. The following challenges remain to be addressed:

- The definition of BEE should be broad enough to accommodate issues such as control influence and allow for fragmentation of incentives and benefits accessible by different categories. An agreement on the BEE definition needs to be reached of all stakeholders. The BEE commission definition states:

= It is an integrated and coherent socio-economic process.
= It is located within the context of the country's national transformation programme, namely the RDP.
= It is aimed at redressing the imbalances of the past by seeking to substantially and equitably
= transfer and confer the ownership, management and control of South Africa's financial and economic resources to the majority of its citizens.
= It seeks to ensure broader and meaningful participation in the economy by black people to achieve sustainable development and prosperity.

- Qualification criteria for preferential purposes for procurement should be aligned to development of black entrepreneurs, black SME development and rural development focussing on black people and also Affirmative Action policy.

- The Act should state how monitoring and evaluation of performance will be coordinated among different role players, including Government Departments, parastatals and private sector

- There is need to align the Act with other Acts such as Competition Act, Minerals Act etc to ensure that neither frustrates the intentions of the present draft BEE Bill.

- Clarity is required on whether Government participation (including its agencies) is to be catalytic role or subjected to similar performance measures as private sector

- There is need to distinguish BEE participation in terms of creating incentives and its impact on:

= Rural Empowerment
= Women Empowerment
= Operational Skills
= SME Development
= Entrepreneurship

BEE should be diverse, broad based, have economic benefits and impact

5. Status of the codes of practice
The Act should cover both public and private sector Similar code of practice should be applied by private sector. BEE companies face a situation of limited market from public sector. The experience and the code will create opportunities for BEE companies especially in regulated industries.

The status of code of practice presents a challenge for government to develop an effective and appropriate communication tool especially in the public sector. There is a need to impose penalties for transgressors. Such penalties should target transgressions such as fronting, failures to implement procurement procedures and skills development.

6. Transformation Charters
IDC supports the publishing of general information of promotion of Transformation Charters for particular sectors. The Bill should be supported and can only be implemented effectively with the transformation and restructuring of the economy as well. Sectors that are crucial to the advancement of BEE such as Mining have implemented charters.

The main challenge will be to identify monitoring bodies for several aspects of the charter such as:

- Skills development
- Access to finance
- SME development

The IDC support government's position of creating limited charters in strategic sectors. It is believed that such charters will benefit non-strategic sectors through implementation of procurement and skills development. For instance: mining charter can potentially encourage:

- Sourcing of goods locally (SME support)
- Suppliers of Mining goods and services such as pipes will also benefit plastic and metals sectors

7. Black Economic Empowerment Advisory Council
The decision for the Council to report directly and work with the President demonstrates commitment on the part of Government to ensure effective and successful implementation of BEE. However, there is need to clarify on how the Council will relate and operate with the DTI (the custodian of the Bill)

There is a need to have a structure that depicts:

- Mandate of the Council
- Duties and level of responsibility
- Flow of information,
- Financial support
- Stakeholder
- Transparencies of decisions and governance
- Milestones
- Powers and duties - public responsibility

One of the challenges will be on ensuring that the Council is independent. There is a need to
specify in the Act:

- The kind of "necessary" support the Minister will provide for the Council
- The relationship with Department of Trade and Industry, Department Minerals and Energy and others
- Whether the Council will operate at National level or not, and how the functions will reach other levels of the economy

Apart from only advising, the functions and role of the BEE Council should be extended to include identification of scopes. These scopes should include:

- Advice on entrepreneurship and other skills development
- Presenting a business case (business plan support)
- Access to finance
- Post investment support (specifically marketing and technical exporters)
- Sustainable entrepreneurship (business mentoring programmes)

8. Definitions
The definition of "black people" is narrow and should be clearly defined. There is need for the definition to be properly detailed and outlined in the Act to avoid misinterpretation.

9. Short title and commencement
None

C. General remarks
The experience that IDC has in dealing with business and other role players is significant in assisting government to come out with an implementable BEE Bill.

Appendix 2 : NAFCOC Submission

Notes for submission to parliamentary hearings, 26 June 2003, on Broad-Based Black Economic Empowerment Bill

The accelerated economic growth imperative
By virtue of simple arithmetic, by far the most effective way of achieving Black Economic Empowerment (BEE) on a substantial scale is to achieve 'accelerated economic growth". In this Nafcoc concurs with the acknowledgement of this fact in 2.7.1, 3.3 and elsewhere.

At post-transition rates of economic growth there is virtually no per capita income improvement for the average South African since population growth equates economic growth. Under such conditions of effective stagnation, BEE can be achieved only by transferring wealth from non-blacks to blacks. Since this necessarily entails impoverishing non-blacks on average, it is met and will be met with intensifying resistance and measures by non-blacks to avoid impoverishment. These measures cover a wide range of strategies from seeking alternative sub-optimal forms of employment and investment to emigration (the brain drain). Between these two poles are a range of strategies including subterfuge such as concealment of income and falsification of records.

Since non-blacks constitute only 5-10% of the population, with those from whom significant wealth transfers are feasible being less than half, 2.5-5%, the amount of BEE achievable - with low economic growth - is negligible. For every R1OO reduction in non-black income only R5 increase accrues to blacks, assuming that such transfers will not be undermined by avoidance strategies by non-blacks. It is for this reason that the only BEE of significance achieved hitherto has been narrowly-defined BEE (referred to in 3.2), namely substantial gains for very few people probably numbering no more than a few hundred, or, at most, a few thousand Accordingly, this 'narrowly defined" BEE has benefited and has the potential to benefit no more than 1% of the population.

This is why, according to Nafcoc, any broad-based BEE has to have as a precondition substantially accelerated economic growth and BEE strategies should be carefully selected so as to exclude measures that would compromise growth and include a range of high-growth economic strategies.

If growth targets envisaged in government policies such as the RDP, GEAR and NEPAL)are achieved, or even higher growth of the kind that the world's high-growth countries have demonstrated are readily achievable at, say, 8% or above, the benefits for black South Africans, even without wealth transfers from non-Blacks, will be far in excess of anything attainable under conditions of low economic growth. If per capita income rises from present levels of close to 0 to 7%, the average South African's wealth will double every decade by virtue of simple compound interest.

In other words, high growth in and of itself will within just a few years produce BEE effects in excess of what would be achieved if most non-black wealth were transferred to blacks, assuming that could be done without severely damaging the economy, and thus counter-productively reducing empowerment levels of intended beneficiaries.

Accelerated economic growth as a precondition for meaningful levels of BEE is a policy objective in 3.3 which Nafcoc not only supports, but stresses as absolutely fundamental.

Policies that achieve high growth are now well documented and understood in economic circles. During recent years a great deal of empirical research has taken place, which Nafcoc will make available to the committee if necessary. There is no longer serious debate amongst researchers that sustained high growth is the consequence of' and only of' an unambiguous commitment by government to maintaining a business-friendly market economy with reduced levels of economic regulation and taxation.

For these reasons, Nafcoc suggests that explicit provision be made in the Broad-Based Black Economic Empowerment Bill for comprehensive and credible Regulatory Impact Assessments (RIAs) on all measures effecting the economy and, specifically, all measures in terms of the Bill once enacted.

Critical review of anti-BEE legislation and regulation
The policy instruments articulated in 3.5 include reference to "Legislation" (3.5.2) and "Regulation" (3.5.3). Whilst these references imply increased legislation and regulation, Nafcoc suggests a critical review of existing and future legislation and regulation to ensure the removal or amelioration of measures that might curtail growth or BEE as an unintended consequence.

Nafcoc suggests the addition, to the policy instruments under consideration, of fiscal reform. Tax policy should be reviewed with two principle BEE economic objectives in mind. Firstly, the government should continue with and intensify its resolve to reduce the fiscal burden on the economy in general, and the propensity for previously disadvantaged people to accumulate capital. Secondly, Nafcoc points out, as it has done repeatedly over the years, that its constituency, primarily SMMEs, are typically not sophisticated enough to cope with complex tax and other laws. The effect is that they end up paying more tax than they should or that they find themselves in breach of the law unintentionally. Nafcoc repeats its call for a fundamental revision and simplification of tax laws.

Subject to these comments, Nafcoc acknowledges and supports the specific measures envisaged in the Bill. However, Nafcoc queries whether the Bill is sufficiently clear to satisfy the constitutional requirement of, inter alia, the rule of law, and the requirement that executive power must be accompanied by adequate criteria. Is the Bill not too vague to be fully constitutional? Nafcoc does not, in this submission, interrogate this concern, but draws it to the government's attention with a request that it be considered critically and carefully, and if necessary, that the Bill be redrafted so as to be unambiguously constitutional.

Specific comments on the BBBEE Bill

Since there is little in the Bill other than the creation of a Council, the articulation of broadly described objectives and the publication by the Minister of Codes of Conduct, Nafcoc's comments are confined mainly to the DTI's Report on Strategy for Broad-Based Black Economic Empowerment.

Nafcoc's comments on the Bill are confined to the following:

Section 2: Objectives of Act. Nafcoc notes with approval the emphasis on objectives that would benefit its constituency and black South Africans in general as opposed to, or in addition to, earlier conceptions of BEE which envisaged small numbers of beneficiaries in established big businesses and government undertakings.

Nafcoc particularly welcomes and supports the emphasis on "new enterprises" and repeats its comments above to the effect that a critical review of existing measures that inhibit SMMEs is essential.

In supporting the objective of substantially increased numbers of new enterprises and increased participation by blacks in the ownership and management of existing enterprises including small and medium enterprises, Nafcoc recommends that the Bill provides specifically for government procurement, outsourcing and privatisation to be informed by the following four strategies. These are the proven strategies adopted by the public and private sectors in the Asian tiger "economic miracles", and elsewhere where countries have achieved high growth and economic transformation benefiting previously disadvantaged people simultaneously.

1. Small units

Contracts and entities for privatisation (by government) and empowerment partnerships (by the private sector) should be in small enough units for broad-based participation by black South Africans ~ general, who start handicapped by relatively meagre resources and unsophisticated competencies for historical reasons.

2. Red tape reduction

Specific administrative provision must be made for the paperwork to be done largely on behalf of intended beneficiaries who are in no position to comply with sophisticated and demanding hurdles before they are eligible for participation in BEE activities.

3. Prompt cash payments

Since a shortage of capital (human and non-human resources) is the problem being addressed, BEE strategies must be based on the principle that payment for performance under procurement and outsourcing contracts is:
a. Prompt.
b. In cash or its banking equivalent.
C. At early and appropriate stages along the way (rather than On final completion).

4 Financial leverage
BEE projects (procurement, outsourcing, privatisation, partnerships, new enterprises) should be accompanied by guarantees and other instruments to enable envisaged beneficiaries to use the fact that they are BEE participants to leverage (secure) finance in the market place - from formal financial institutions as well as semi-formal and informal sources.

On this last point, Nafcoc stresses that a broad-based BEE strategy must be weaned of the premise that BEE 5 a phenomenon confined to the formal (historically-white) economy, and particularly big government and big business. For BEE to be truly 'broad based", a fundamental paradigm shift is needed. BEE that benefits black South Africans in general is conceivable only to the extent that it acknowledges the reality of the average black South African. Nafcoc's constituency and the intended beneficiaries of broad-based BEE are ordinary people who operate now and for the foreseeable future in independent small and informal sectors of the economy. Broad-based BEE needs to entail substantial improvements in the economic and regulatory environment for people who access private finance, establish community-based partnerships and networks, and operate in substantially diverse local contexts from urban slums to commercial far]us.

Sections 7-9: Codes of Practice and Transformation Charters. By far the most substantial and immediate contribution government can rnake directly to BEE, apart from its procurement policy which has already been addressed, is what we might call "people's privatisation". One of the apartheid regime's many sins was that it amassed vast quantities of wealth in the hands of the state. For the last two or three decades of apartheid, more than half of all capital formation was in the government's hands. It created an awesome empire of state undertakings for the purpose of white Afrikaner male patronage Virtually all capital of relevance to black South Africans was state-owned. Including land, transport, education and training, quasi-state corporations, and agriculture (especially forestry). Even liquor distribution was a state activity and the privileged blacks who were allowed to run businesses were confined to running small owner-operated retail trading outlets subject to a radius restriction which created an elaborate network of patronage monopolies to the exclusion of would-be black entrepreneurs and competitors. It is for this reason that historically black areas had no central business districts to speak of of the kind that are taken for granted as normal throughout the world. Many nominally white-owned companies were, in fact, funded largely by such government structures as the DC and the Land Bank, which retained vast share-holdings.

Utilisation of apartheid assets for BEE
On transition to democracy the new South African government inherited all this state-owned wealth. Nafcoc calls on the government to adopt as part of this Bill an explicit and systematic programme whereby government assets will be utilised to bring about broad-based black economic empowerment directly.

Such a strategy would include specifically

1. The immediate conversion of all lawfully black-held land, outside traditional areas, to full and unambiguous ownership at little or no cost to existing registered holders of that land.

2. The immediate empowerment of all traditional authorities so as to enable them to upgrade some or all of the land under their jurisdiction to secure and tradable forms of title, including full ownership. Nafcoc calls for specific attention to be given to the creation of secure and tradable title in respect of all business sites in historically black areas.

3. The immediate identification of land held by government in all its forms and at all levels with a view to empowerment of landless people by way of free or low-cost transfers from the state to them - into full ownership.

4. The transfer of other state assets from the state in all its forrns and at all three levels to BEE beneficiaries by way of procurement, privatisation and outsourcing in accordance with the four principles above.

Regardless of what forms of land title and ownership of non-land and assets are called, Nafcoc stresses the importance of basic economic principles being the decisive criteria of substance. Firstly, human and non-human resources need to be in such forms as to be readily tradable. BEE beneficiaries must have the freedom to buy, sell, mortgage, let, hire, sub-divide and consolidate their assets. The labyrinth of laws inherited from the past which prohibit or inhibit BEE in this sense must be critically reviewed, and Nafcoc calls for specific provision to this effect to be included in the Bill.

In general, Nafcoc points out that much of the "legacy of apartheid" referred to in the DTI document (2.2) is still in place, including the laws governing land and business in historically black areas where almost all black South Africans still live, such as Proclamations 199 and 293. For broad-based BEE to become a reality as envisaged by the Bill, a ruthless and systematic critical review of such laws and policies is necessary. Only then will broad-based BEE be achieved and the legacy of apartheid ended as the living reality for ordinary black South Africans.

Conclusion
Apart from the amendments and additions recommended above, Nafcoc repeats its support in general for the specific measures articulated in the DTI document and its appendices. Nafcoc is concerned that these measures, however appropriate, will be ineffective unless accompanied by the measures recommended above.

Nafcoc repeats its concern that the Bill may be too vague to be fully constitutional and that, in any event, it should be more explicit about what the economic policy and transformational preconditions &e for broad-based BEE to become a living reality

Appendix 3 : ACHIB Submission

BROAD BASED BLACK ECONOMIC EMPOWERMENT BILL (B23/2003).
African Council of Hawkers and Informal Businesses (ACHIB), Honourable members, Chairman, Dr Rob Davies, Presenter Mr. L.B. Mavundla.

Honourable members, who ever included the term Broad Based Black Economic Empowerment as the heading of this Bill, did a good job. Honourable members, big businesses in this country supported apartheid, job reservation and every part of apartheid, this is evidence by the fact that for the past nine (9) years government relied on big businesses to come on board by deracializing the South African economy.

Honourable members, big businesses have been playing hide and seek, romanticizing apartheid and our suffering, they designed certain positions that could be occupied by blacks, either to get businesses from government, or to fool the public that they are doing something or creating "tokenism" blacks that we referred to as "fronts" or "rent a black". The usual positions that are known for such are, non executive chairman, director, corporate affairs, human resource, business development and or government relations.

The silly ones are, when they name people who make tea as food and beverages displayers or calling messengers input and output technicians.

These games honourable members have not worked, we are entering the most frustrating moment in our history, where in the elite whom we don't know, how they get appointed, since most of them don't even have a history or their history only starts after 1994, who we refer to as peace heroes are leading the process for Broad Based Black Economic Empowerment, when none of them have ever empowered anybody but themselves and they will never help government empower anybody but themselves.

The Bill covers the number of areas but we would like to comment as follows:

We support the Bill as ACHIB, with certain proposed amendments especially in the following areas.
1) The establishment of black economic advisory council.

Honourable members, it cannot happen that the future of our country gets decided by self centered elite, as we refer to them, since we have already seen that those people are not used to consulting anybody, even organizations that we are associated with do not consult us.

We have never been invited to a report back meeting; neither do they seek a mandate prior to going to such meetings. I therefore suggest that the members of such council should be sectorally based, e.g. the informal sector, transport, manufacturing, retail, mining, professionals, contractors, farmers, etc and the president must be able to have a balanced view especially because the views of SMME's at grass roots level are never carried forward. Instead, there are suppressed by the elite.

2) The constitution of and appointment of members, establish a mechanism that guarantees the representation of the poorest of the poor and the rural communities. Presently those sectors are not represented at all. If they were represented we wouldn't be having the laws and the restrictions that are still imposed by the government on SMME's especially the poor and the women.

3) Transformation charters. This is one of the very important sections of the Bill. We would like the situation wherein big businesses are penalized if they do not conform to the charters, and that the groupings that are affected most should have inputs when these charters are drafted.

4) Organizations consulted; as you would see honourable members, the organizations that were consulted and listed in the bill are mostly representatives of big businesses, with maybe the exception of one or two. I am suggesting honourable members, that the consultation should further be done to seek the input of the poorest of the poor who are the intended beneficiaries of the Bill.

The last contribution I want to make honourable members is that funding of the Black Economic Empowerment deals should be done by the government since we have had an experience whereby blacks or assets that were financed by financial institutions, which are all loyal to the past, create an environment where we can predict who is going to buy shares of FNB, ABSA, NEDCOR, etc, since these institutions' viable and bankable transactions are only those that come from the "adopted" sons and daughters, and people end up having no say whatsoever in the running of the company and in some cases poor people have lost money.