Black business leaders salute new BEE rules

imageBlack business leaders have come out swinging in favour of a controversial new empowerment rule, which critics said would only entrench the power of fat-cat businessmen at the expense of the truly disadvantaged.

his comes as the government faces a backlash from companies and lawyers over a "clarification" on the new empowerment rules issued this week.

The new rules stipulate that companies that have broad-based ownership and employee share schemes will score only three points out of a possible 25 for "black ownership" on BEE scorecards. Companies that have at least one "black individual owner", who holds 25% of its shares, will score far more.

This led critics to suggest that the government was in favour of enriching individuals at the expense of broad-based empowerment for communities.

Late on Friday, the Department of Trade and Industry backed down, saying Minister Rob Davies has "decided to appoint a task team that will look at the right balance between direct ownership and broad-based scheme ownership". That task team will report back to Davies with recommendations within 30 days.

But top black business leaders said the change was welcome.

Popo Molefe, a former top member of the ANC who has been involved in a number of BEE deals, said: "When a white person becomes a millionaire, no one asks: 'What about the millions of white people that are poor?' But when a black person becomes a millionaire, everyone always asks: 'What about the black people that are poor?'"

Nolitha Fakude, a highly rated executive at Sasol and former president of the Black Management Forum, said that although she was "all for broad-based BEE, I think there should be a balance".

She added: "There is space for broad empowerment of the communities, but these communities also need certain champions - strong, empowered individuals who can lead those value transactions and be the interface between the communities and companies."

Fakude said that without the involvement of "someone who can influence company decisions", any BEE deal became more like a corporate social investment project.

Molefe said the new rules were necessary because "you need economically strong individuals at the apex of the economy to drive transformation" in management and on boards.

He said there would still be scope for broad-based BEE, but companies often used these schemes as an "easy way out".


"Even if these employees, through employee share schemes, get seats on the board, what is the chance that they will rock the boat? They need their jobs. And this way companies can avoid having to deal with those raucous and radical corporate black people," he said.

Richard Maponya, a self-made millionaire, said he was "very grateful to see the government is getting rid of the system", which he believes was exploited by firms that gave shares to staff who "never benefited fully".

Themba Dlamini, MD of the Black Management Forum, said his organisation "wholeheartedly support the clarification. We need to get capable black professionals in positions where they are decision-makers."

Sandile Zungu, a vice-president of the Black Business Council and an economic adviser to President Jacob Zuma, described this as a "most welcome" move that would help create new black industrialists.

"Whoever hates this clarification notice is trying to vulgarise it, [by] saying it is now going to create 'black oligarchs'. It is an insult, it is wrong."

The aim of these rules was to "banish fronting to the dustbins of history", he said.

"Most [employee share schemes], especially in the retail sector, have become synonymous with fronting, where there are claims of people being empowered, but when you look deeper into it, there has been no such empowerment."


Saki Macozoma, president of Business Leadership South Africa and a former ANC national executive committee member, said there needed to be a balance between "broad-based and entrepreneur-based" black empowerment.

"The department is correct in recognising that many companies have avoided opening up space for black voices in the running of companies in the boardroom by doing exclusively [employee ownership deals]" - which has been an "impoverishment of the BEE process".

Macozoma said companies were driven to do those employee deals by the "political attack on the so-called fat cats".

However, a number of law firms said the government was trying to push far-reaching new laws through the back door.

Webber Wentzel partner Safiyya Patel said the notice violated several legal requirements and was done without consulting stakeholders.

"By referring to this notice as a 'clarification', the DTI has sought to avoid the provisions of the BBBEE Act, which requires that any amendments to the [codes] must first be published in draft form and be open for public comment for 60 days."
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