Johannesburg - Amendments are needed to Broad-Based Black
Economic Empowerment (BBBEE) legislation to ensure that South Africa's economy
is more inclusive, Trade and Industry Minister Rob Davies said on Monday.
"We cannot run an effective economy that draws its
leadership and entrepreneurial capacity only from a small minority of the
population," he said in Johannesburg at a breakfast briefing hosted by the
New Age newspaper.
The proposed amendments to the BBBEE Act would define the
practice of fronting, including "complex fronting", and introduce a
commissioner with the power to impose penalties.
Complex fronting involved companies drawing up complicated
contracts which deprived black managers of the appropriate authority for their
Davies said the codes by which compliance was assessed also
needed to be revised to encourage symbiosis between large and small companies.
"(President Jacob Zuma) has said: 'Where are the black
industrialists?' and of course we have one or two, but what we are looking at
is to create many more real players in the productive economy."
The categories of the scorecard used to measure BBBEE
compliance would be reduced from seven to five, under the proposed amendments.
The categories of employment equity and management control
would be merged into a single category, as would preferential procurement and
Davies said the amendments also sought to introduce
sub-minimum requirements for the priority elements of ownership, skills
development and the enterprise and supply development categories,
"If you don't score sub-minimum and you are a large
business, we will reduce your overall score by two places," he said.
Qualifying small enterprises would be downgraded by one
place for failure to meet the 40% requirements.
"We cannot any longer regard people as significant
contributors to BEE if you are not involved in the broad categories of
The proposed bill, which was in the public consultation
phase, would also do away with the necessity for small, black-owned companies
to have their status verified by agencies.
At present, small companies had to pay a verification agency
for a certificate as proof of their BEE rating, but Davies said this placed an
"inordinate and unnecessary burden" on these enterprises.
As such, a 100% black-owned, small enterprise would
automatically be regarded as level one.
"Essentially, I think the slogan might be that we want
to turn BEE essentially from supporting passive shareholding to something that
supports a much more active and productive empowerment of black people across
the economy," Davies said.
He warned that the proposed legislative changes would not be
a "magic wand", and that other initiatives were needed to support
Some companies held a "tick box mentality", and
were more interested in being seen to be compliant than actively seeking the
long term economic benefits to society presented by BBBEE, Davies said.