In Industry News

by Mark Allix, 15 August 2014 – Business Day

THE government will take control of the black economic empowerment (BEE) verification process to drive the creation of 100 “black industrialists” over the next three years.

Verification agencies will be downgraded to become “empowerment advisers” so that the private sector does not issue verification certificates to itself, the Department of Trade and Industry said on Thursday.

The department is aiming to address frustrations over the perceived slow pace of black economic empowerment (BEE), especially business ownership, and to correct empowerment policies seen to benefit “the few” and spur “rent-seeking”.

The department would stimulate the creation of “black billionaires and millionaires” across all sectors of the economy, Deputy Trade and Industry Minister Mzwandile Masina told the first Black Industrialists’ Stakeholder Engagement forum at the Industrial Development Corporation’s (IDC’s) offices in Sandton on Thursday.

The department’s director-general Lionel October told the forum that BEE verification had become a “fly-by-night” business. The department was establishing a Broad-based BEE Commission to speed up empowerment processes in line with “instructions received from the executive”.

Mr Masina, former national convener of the African National Congress Youth League, said BEE verification agencies undermined the government’s development goals.

BEE rating and research agency Empowerdex said yesterday it had not been informed that the department would take the verification process in-house. “It’s news to me. I will be interested in how they are going to do it,” said MD Lerato Ratsoma.

“We hope that whatever they come up with will not have unintended consequences that will drive us away from the goals of BEE.”

She said it was possible to have “myriad interpretations” of the legislation, and there were “issues” created by this problem. “We would welcome any opportunity to engage properly,” Ms Ratsoma said.

Mr Masina told the black industrialists that the government had to create an enabling environment with legislation that can “radically” change the economy to move from consumption to production, “focusing mainly on the growth of our economy, but especially jobs”.

The first lever for such growth was the policy of preferential procurement, which mandated state-owned companies to set 75% levels of local content.

State-owned enterprises did “not know how and where to procure”, but the department would change this by “taking control” of BEE, while making the verification agencies mere “advisers”.

“It must be difficult for you to get a (BEE) certificate. We will go to court to defend ourselves,” Mr Masina said, adding that the government would tighten up on fronting.

Mr Masina criticised the Treasury for being out of step with the process of empowerment. “National Treasury is not in the space of transformation but in the space of the public purse — this needs to change. We will continue to pursue National Treasury and the government to make sure transformation takes place,” he said.

Black industrialists had to do business with the rest of Africa, and take part in the entire productive value chain, Mr Masina said. “We want set asides for black people — we see it in a lot of countries, why not South Africa?”

Big business in South Africa only gave “crumbs” to everyone else and the Preferential Procurement Policy Framework Act needed to be changed to achieve South Africa’s developmental goals, he said.

“We want to change that law — and don’t need a majority from anyone to do it — we are the ruling party,” he said to applause. “We have to reform this to align with the new manifesto of the ruling party.

“We want to touch and feel billionaires and millionaires. There are young black aspirant billionaires who must help government think fast and quickly (on this),” Mr Masina said.

The government will now focus development funding initiatives towards black industrialists through the IDC, the Development Bank of Southern Africa, the Public Investment Corporation, National Empowerment Fund and the Small Enterprise Finance Agency.

Though the pledge to create 100 black industrialists in the coming three years was welcomed by the Black Business Council, Business Unity SA, the BEE Charter Council and the State-Owned Enterprises Procurement Forum, delegates pointed to the government’s poor record in paying BEE suppliers and a lack of access to markets and funding.

They also said black business was frequently unaware of government incentives and programmes, and had to deal with “procurement brokers”.

The department acknowledged that the last-minute event was hastily organised, and the IDC conceded black entrepreneurs had been treated in a tardy and even hostile manner.


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