Second+raft+of+BEE+codes,+thumbs+up,+B+Rep



=**Second raft of BEE codes gets thumbs up**=

Business Report, Johannesburg, December 21, 2005

 * By Mzwandile Faniso**

Johannesburg - Black economic empowerment (BEE) commentators have welcomed the second phase of the BEE codes of good practice, which were published by the department of trade and industry (dti) yesterday.

This was despite the codes exempting multinational companies from selling equity to local black people. Vuyo Jack, the chief executive of Empowerdex, a BEE rating company, said the exemption was not a bad thing as it emphasised the balance between equity ownership and other areas of the codes.

Jack cited preferential procurement, skills development and small business development as areas where multinationals could score points. In order to do so, however, the companies would have to perform more aggressively in these areas.

Foreign companies also had the option to participate in public programmes, which would be regarded as equity equivalents, Jack said. Participation would, however, have to equal 25 percent of their local operations in order for them to score full ownership points.

"This is a substantial amount of money and the companies have to make it sustainable, which would mean creation of jobs," Jack said.

"There are other aspects of the economy that need to be considered when coming with strategies like this, such as the foreign direct investment and job creation," he said, adding that these strategies were important in terms of boosting and stabilising the economy.

Loyiso Mbabane, a senior lecturer at the University of Cape Town's Graduate School of Business, said equity would not benefit as many people as would areas such as skills development, preferential procurement and small business development.

In terms of the codes, equity ownership scores 20 points out of 100, but foreign corporates would be allowed to accumulate the 100 points through other requirements.

The minister of trade and industry, Mandisi Mpahlwa, said there were ways in which foreign companies could make a more meaningful contribution towards empowerment other than relinquishing equity to black people.

"Buying a 1 percent stake in IBM [the information technology company] would require BEE partners to raise billions of rands, but the stake would not even have a vote," Mpahlwa said.

"The company [IBM] would contribute better to the local economy by training people and promoting small business development through preferential procurement."

Mpahlwa added that South Africa was trying to attract foreign direct investment, and prescribing strict equity requirements would not help.

Polo Radebe, the acting chief director of the BEE unit at the dti, said foreign companies could score ownership points by selling offshore equity equivalent to 25 percent of domestic operations to local black people.

The draft codes, which are largely based on existing legislation, have not introduced new methods to control and punish the fronting practices that are distorting the gains of empowerment for black people.

Radebe said that only those companies caught misrepresenting information when applying for government contracts - which would be regarded as fraud - would be prosecuted.

This would be done in accordance with existing criminal laws and if fronting companies were found to have acted illegally, they would be stripped of their BEE status or advised on how to comply with empowerment.

From: http://www.busrep.co.za/index.php?fSectionId=552&fArticleId=3042155&fPreview=1&fMakeMirror=1