Tuesday, July 20, 2004

Few would contest the notion that the imperative of the new order is the creation of a society different from our socially degrading and economically exploitative apartheid past. However, the true meaning of social transformation is as highly contested, as it is difficult to formulate. The Constitution provides a framework for socio-economic transformation. It instructs the government to create a more inclusive and equitable economy through the implementation of legislation and other measures.
The Broad Based Black Economic Empowerment Act, 2003 (the BEE Act) is the most recent legislative measure taken in fulfillment of this constitutional mandate. The BEE Act is a significant legislation for at least three reasons:

Firstly, it consolidates a number of economic empowerment initiatives taken by government and the private sector since the early 1990s;
Secondly, it spells out in a coherent way the government’s vision for economic empowerment; and
Thirdly it spells out clear pillars on which economic empowerment will be based and specific areas to measure the success or failure of empowerment.
Black economic empowerment is defined as “an integrated and a coherent process” that directly contributes to the economic transformation of and increases in a significant way the numbers of black people that manage, own and control the country’s economy. The BEE Act also spells out the following as the pillars through which black economic empowerment will be measured:

Direct empowerment through ownership and control of enterprises and assets;
Human resource development and employment equity; and
Indirect empowerment through the preferential procurement and enterprise development.
It is therefore clear that the contribution of enterprises to BEE will be measured using these pillars. In recent times, we have witnessed a number of “BEE transactions” in the media. However, a close analysis of a number of these transactions reveals that a common thread is their focus on acquisition of equity in existing enterprises and different financing models for BEE.
The change of equity in existing enterprises is an important component of BEE. However, it benefits only those who can access the necessary capital. For the others, access to finance remains a real stumbling block to genuine participation in the economy. For this reason, the government established funding agencies like Khula and Ntsika chiefly to assist previously disadvantaged individuals to have access to finance. Perhaps it is time to review the effectiveness of these institutions and if appropriate to refocus their mandate.
Further, the narrow focus on ownership and acquisition of equity misses the “broad based” character of black economic empowerment which the BEE Act correctly sees a central objective. To realise its true meaning, BEE should also be about developing people through the provision of training. In this regard, the SETAs must play a central role. BEE should also be about the creation and the development of sustainable new enterprises. This has the necessary consequence that the financial institutions may have to change their policies to facilitate access to finance for small and medium enterprises. The Strategy document of the Department of Trade and Industry also encourages companies to embark on corporate social responsibility programmes as a means of contributing to BEE. It is crucial that such initiatives should be sustainable and have an impact on the lives of the targeted people.
Undoubtedly social transformation is a complex process. The BEE is an attempt to clarify in juridical terms the government’s vision for the attainment of a truly egalitarian society. However, the real impact of the BEE Act will not be felt in courts and similar other institutions. True to this, the BEE Act, for instance does not impose any criminal sanctions for non compliance. Its real impact will be the extent to which ordinary South Africans have been enabled to play a meaningful role in the economy. Everyone has a duty to make this happen.