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Large sectors fall short of BEE laws

Jan 29 2013 20:18 Sapa

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Cape Town - There are low levels of compliance with black economic empowerment (BEE) laws in large sectors of the economy, MPs heard on Tuesday.

These included agriculture, manufacturing, and retail, trade and industry director general Lionel October told parliament's trade and industry portfolio committee.

He said planned changes to current BEE legislation, contained in the Broad Based Black Economic Empowerment Bill, aimed to make "fronting" a criminal offence. It would also be punishable by up to 10 years in jail.

Fronting refers to instances where, among others, companies misrepresent themselves to achieve BBBEE status. This is done by either falsely appointing black people, or listing them as shareholders.

October said the bill sought to deal with more than just "crude fronting".

"That's not the big problem... you have sophisticated bypassing of the law. We're not just trying to deal with crude non-compliance or fronting, but also [with] sophisticated circumvention."

The intention of the draft legislation was to link BEE more closely to the overall goals of increasing employment, expanding the productive sectors of the economy, and reducing inequality.

This was necessary because census results showed white household income was more than five times that of black households.

"We need to address the central challenge of inequality by expanding our entrepreneurial base, our productive base, and integrating black business into the mainstream," October said.

It was hoped the amendments would take BEE to a new level of ownership, specifically in sectors lacking empowerment.

"While, for example, we see strong BEE in the information technology sector, in the communications sector and in the finance sector, we find very low levels of BEE in the agriculture, manufacturing and retail sectors."

He said more opportunities needed to be created for black industrialists.

"We're giving more points to procurement and enterprise development, but we're also trying to link procurement and enterprise development... It's no use training people and just giving them the finance if you don't give them market opportunities."

October said a new act would lead to the establishment of a BEE commission to monitor compliance.

"Unless you have proper monitoring, evaluation and reporting systems in place, it's difficult to monitor the actions of people; but also you have no sense of whether you're moving in the right direction, [or] what's the real impact of BEE," he said.

He said the aim was not to create a new bureaucracy, but to have an independent commissioner and commission, which would operate from within existing department infrastructure.

The commission would investigate allegations of fronting, either on its own, or after receiving complaints.


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