Broad-based+BEE+a+synonym+for+elitism,+Greenblo,+Business+Report

Business Report, Johannesburg, June 15, 2006
BLACK EMPOWERMENT

=Is broad-based BEE a synonym for elitism?=


 * By Allan Greenblo**

Broad-based black economic empowerment (BEE) is supposed to counter inequities, not create a new category of them.

We live by the terms we create. Whoever invented broad-based BEE deserves to win a medal for marketing or to be shot for introducing a censorship of political correctness. To criticise broad-based BEE is to risk the opprobrium normally reserved for heretics, even where purported broad-based BEE isn't factual broad-based BEE at all.

It's not unlike another period of uncherished memory. There was a Suppression of Communism Act, which had little to do with suppressing communism; an Immorality Act, which had nothing to do with immorality; an Extension of University Education Act, which closed off opportunities for university education; an Abolition of Pass Laws Act, which extended pass laws to African women; and so on to social engineering terms such as "homelands", which really meant dumping grounds.

Despite the nobility of its concept and intent, broad-based BEE can degenerate into a similar propagandistic misnomer. To have credibility, it must have consistency. "Broad" should not polish the appearance of deals where a few at the top get the cream and those at the bottom get crumbs. Neither should "empowerment" be tolerated as a synonym for elitism.

A few examples suffice. From the first publication of BEE codes, Today's Trustee has argued that black members of retirement funds had to be recognised for purposes of the ownership scorecard. The fact of their membership, means they do share in company ownership. No legislative sleight, by not recognising them, can alter this reality. Yet there have been serious attempts to do so, and whether they will succeed is still undecided.

Equally topical is the mockery that Mzi Khumalo has made of broad-based BEE, and not for the first time. Because he's black, he gets shares in Basil Read at a discount to the market price, at no risk to himself. Eight months later, he sells them to make a R70 million profit, at no benefit to anybody else. The windfall is subsidised by shareholders, including retirement funds, who allowed his participation in the first place.

At least Khumalo has highlighted the abuse to which broad-based BEE is open. Here's a man, buying gold mines and entertaining his pals on the Med, who qualifies for recognition under the scorecard. Broad-based? Empowerment?

Broad-based BEE has created a coterie of newly rich black people at whom shareholder money is being thrown. Any one of them can walk into a company, with nothing but family friends and their ID books. Allocate to them a chunk of shares, no questions asked, and hey presto! The company is empowered.

But come along as a broad-based entity and there's a tome of criteria for compliance. Reading the relevant ownership code 100 of statement 100, let alone understanding it, isn't for the faint-hearted. So contradictory and ambiguous is it that non-governmental organisations (NGOs), for instance, cannot be certain that they are broad-based BEE in law, no matter how broad-based and black they are in practice.

What they do suspect, these veterans of the anti-apartheid struggle who have turned their focus to services and support for the underprivileged, is that they won't be as fully recognised for ownership points as the fellows who have taken to playing golf and sitting in the front of aircraft.

Kagiso might be the role model for NGOs, but it has taken more than 10 years for Kagiso investments to realise the cash that can now flow upwards to its controlling trust for societal pursuits.

Much as other NGOs would like to emulate Kagiso, first-mover advantage happens only once. Many of the best deals are long gone. Time is not on the side of these other NGOs. Neither, without a leg-up from the broad-based BEE codes, is their access to funding for the investment opportunities that remain.

This is surely another intended consequence of the codes as they stand, another that must be put right. South Africa needs Kagiso clones, not obstacles to them. And it needs broad-based BEE that is broad-based BEE, which can help finance ownership equity, skills development and social upliftment, not a huge transfer of wealth as an end in itself.


 * Allan Greenblo is the editorial director of Today's Trustee (www.totrust.co.za), a magazine primarily for trustees of retirement funds. This article appears in the latest edition of the publication.


 * From: [|http://www.busrep.co.za/index.php?fSectionId=553&fArticleId=3293243]**

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