Issue: June/July 2006
Cream and crumbs
B-B BEE is supposed to counter inequities, not create a new category of them.
We live by the terms we create. Whoever invented “broad-based black economic empowerment” deserves a medal for marketing or to be shot for introducing a censorship of political correctness. To criticise B-B BEE is to risk the opprobrium normally reserved for heretics, even where purportedly B-B BEE isn’t factually B-B BEE at all. It’s not unlike another period of uncherished memory.
There was a Suppression of Communism Act, which had little to do with suppressing communism; an Immorality Act, which had nothing to do with immorality; an Extension of University Education Act, which closed off opportunities for university education; an Abolition of Pass Laws Act, which extended pass laws to African women. And so on to the social engineering, such as “homelands” for dumping grounds.
Despite the nobility of its concept and intent, as a term B-B BEE can degenerate into a similar category of propagandistic misnomer. To have credibility, it must have consistency. “Broad” shouldn’t polish the appearance of deals where a few at the top get cream and those at the bottom get crumbs. Neither should “empowerment” be tolerated as a synonym for elitism.
A few examples suffice.
From the first publication of B-B BEE codes, TT has argued that black members of retirement funds had to be recognised for purposes of the ownership scorecard. This follows from the fact of their membership; as a matter of fact, they do share in company ownership. No legislative sleight, by deeming that they aren’t recognised, can alter this reality. Yet there have been serious attempts to try, and whether they will succeed is still undecided.
Equally topical is the mockery that Mzi Khumalo has made of B-B BEE, and not for the first time. Because he’s black, he gets shares in Basil Read at a discount to the market price at no risk to himself. Eight months later, he sells them to make a R70 million profit at no benefit to anybody else. The windfall is subsidised by shareholders, including retirement funds, who allowed his participation in the first place.
At least Khumalo has highlighted the abuse to which B-B BEE is open. Here’s a man, buying gold mines and entertaining his pals on the Med, who does qualify for recognition under the scorecard. Broad-based? Empowerment?
It serves to contextualise another example. B-B BEE has created a coterie of newly rich black people at whom shareholder money is being thrown. Any one of them can walk into a company, with nothing but family friends and their ID books. Allocate to them a chunk of shares, no questions asked, and hey presto! The company is “empowered”.
But come along as a broad-based entity and there’s a tome of criteria for compliance. Reading the relevant ownership Code 100 of Statement 100, let alone understanding it, isn’t for the faint-hearted. So contradictory and ambiguous is it that non-government organisations (NGOs), for instance, cannot be certain they are B-B BEE in law, no matter how B-B BEE they are in practice.
What they do suspect, these veterans of the anti-apartheid struggle who’ve turned their focus to services and support for the underprivileged, is that they won’t be as fully recognised for ownership points as the fellows who’ve taken to playing golf and sitting in the front of aircraft. Kagiso might be the NGOs’ role model, but it’s taken over 10 years for Kagiso investments to realise the cash that can now flow upwards to its controlling trust for societal pursuits.
Much as other NGOs would like to emulate Kagiso, first-mover advantage happens only once. Many of the best deals are long gone. Time is not on the side of these other NGOs. Neither, without a leg-up from the B-B BEE codes, is their access to funding for the investment opportunities that remain.
This is surely another intended consequence of the codes as they stand, another that must be put right. South Africa needs Kagiso clones, not obstacles to them. And it needs B-B BEE that is B-B BEE, that can help finance ownership equity and skills development and social upliftment, not a huge transfer of wealth as an end in itself.
Allan Greenblo, Editorial Director