This week, Parliament heard of how Rob Davies, Minister of Trade & Industry, will be revising the BEE codes to ensure "greater participation by black people in productive activities and tackle what is now emerging as increasingly complex practices of fronting".
BEE consultant EconoBEE welcomes the initiative and believe a long process of evaluation and re-evaluation of the B-BBEE codes lies ahead. While this process may take many months or even years to finalise; Keith Levenstein and his team of BEE experts have projected the following possible amendments to the codes:
* Ownership – Ownership indicators will change to award more points to broad-based and employee ownership schemes. Individual ownership will be awarded less points. Less emphasis will be placed on direct voting rights and more emphasis placed on a new form of economic interest to ensure that new owners get direct benefit out of their investment. To date many companies do not declare dividends so a minority owner has no benefit, other than when he sells his shares, and in private companies there is no good way to value shares like the JSE does.
* Management control – It is anticipated that management control will be worth fewer points than at present. Currently one new black director can be “worth” up to six points. This is seen as only benefiting a few; and is not broad-based enough. Management may be reduced to five points or even consolidated into the employment equity element reducing the number of elements to six.
* Employment equity – Definitions will be clarified; allowing for a significantly more objective measure of "senior, middle and junior" management employees. It is also foreseen that more points will be awarded. There is a possibility that the definitions will be expanded to broaden the reach of the management levels. It should be noted that as from next year the targets for EE will go up anyway.
* Skills development – Skills development is anticipated to be the biggest beneficiary of the re-evaluation and will certainly be worth more points. Additional indicators, similar to the excellent construction charter, will be created. This will include a more detailed breakdown including mentorships and bursaries. The cost of skills development will not be a major discussion point, rather what does that spend get used for. The cost will therefore be targeted in more specific and beneficial areas.
* Preferential procurement – Already gazetted, the targets for procurement will be increased as of 2012. Definitions and interpretations, especially around exclusions for imports and third party, will also be cleared up. The procurement element cannot change substantially as it is the theoretical driver behind black economic empowerment.
* Enterprise development – Points may drop slightly and more indicators, like those in the construction charter, will be added. Some “easy” points may decrease in importance. Mentorships for developing enterprises will be added. Increased emphasis will be placed on the type of beneficiary ensuring better enterprise eevelopment opportunities and not generic spend with any qualifying beneficiary.
* Socio-economic development – Points may drop slightly in favour of the employment equity and skills development elements. QSEs may find that the “easy” points on Enterprise Development and Socio-Economic Development will have less value. It is also predicted that the thresholds on EMEs will rise.
The charters will also have to be re-evaluated, so there may be a recommendation to decrease the number of gazetted charters.
Keith Levenstein, CEO of EconoBEE, comments: “The minister’s commitment to re-evaluating the BEE codes to combat fronting and ensure true transformation is the result of the policy; is applauded. We hope to see a move away from BEE benefiting a small group of passive elite towards the empowerment of black entrepreneurs through active involvement in business activities.”