BEE+codes+for+development,+not+elites,+Makgetla,+Business+Day

Business Day, Johannesburg, 24 March 2006
=BEE codes must assist development, not new elites=


 * Neva Makgetla**

IN THE past six months or so, tripartite discussions have been all but consumed by negotiations around broad-based black economic empowerment.

I personally have had days that began with breakfast on the financial sector charter, continued with a morning of Nedlac (National Economic Development and Labour Council) debates on the empowerment regulations and ended up with the health sector charter.

It is hardly surprising that these engagements are intense. Broad-based black economic empowerment is probably the state’s most hard-hitting and far-reaching effort to reshape the economy. As a result, negotiations on sector charters and the empowerment regulations often end up in open class contestation, as different groups try to grab more benefits or avoid costs.

It is, then, extremely disconcerting that understanding of the process inside government seems both uneven and unfocused, with only rare interventions by senior political leaders.

This new version of class conflict emerges because the Broad-Based Black Economic Empowerment Act moves beyond ownership to give all major stakeholders in the black community a chance to win something. The result is endless debates over who should get how much.

Rising black businesspeople want more ownership, more financing, and less risk; workers demand higher targets for skills development, employment equity and local procurement to safeguard jobs; communities want more appropriate, lower-cost services.

Labour and poor communities prefer collective forms of ownership, such as pension funds and community trusts, over shareholding by a few rich individuals. And union members fear big companies will boost their empowerment scores by outsourcing activities to black entrepreneurs at the cost of workers’ conditions and security.

As so often, the devil lies in the detail. The draft black economic empowerment codes provide equal incentives for:


 * Ownership and control by black individuals;
 * Employment equity and skills development; and
 * Support for small enterprise.

The codes do not, however, explicitly incentivise expanded services to poor communities, and they provide comparatively weak support for local procurement and collective ownership.

Trade-offs emerge because there are limits to what big business will sacrifice in the short run to ensure long-run stability and prosperity. If it must pay more to bring in black shareholders, it may invest less in skills, job creation and services to communities.

Negotiations on the codes, as well as the sector charters, have seen some business groups hard at work whittling away the broader elements to expand gains for new elites. For instance, the current draft codes set employment equity targets only for management and professionals, leaving out skilled production jobs — a central issue for most workers. They reduce targets for skills development and employment equity for small enterprise, while effectively increasing the importance of black ownership.

In short, the endless engagements to hammer out agreements on broad-based empowerment are effectively setting social priorities for the economy. That process would be strengthened by consistent high-level government leadership. Instead, the discourse in government on empowerment has clearly been less than systematic. References to the project remain scarce in government documents, such as the president’s state of the nation address, Asgi-SA and the budget review.

Moreover, we have repeatedly seen government departments initiate sector charters with no visible reference to empowerment legislation.

Typically, they start by negotiating exclusively with business. Yet the act recognises only charters that also involve community groups and organised labour. In the end, government’s engagements on broad-based empowerment often seem guided not by the goals spelt out in Asgi-SA — accelerated growth, employment creation and reduced poverty — but by the leanings of individual public servants. There has been no coherent effort to ensure that the codes and sector charters advance broader developmental aims.

A central characteristic of the developmental state is the ability to negotiate clear priorities and then align its activities around them. From this standpoint, it is crucial that broad-based empowerment be reviewed to ensure that it supports core government objectives.

Above all, given the huge short-run cost to business, government should be much more consistent in ensuring that broad-based empowerment incentivises the priorities set by Asgi-SA. That would require substantial modifications in the draft codes to ensure that they do more to encourage not the enrichment of individual entrepreneurs, but inclusive growth across the economy.


 * Makgetla is a Congress of South African Trade Unions economist.


 * From: http://www.businessday.co.za/articles/opinion.aspx?ID=BD4A174606 **