BEE should be scrapped, not ‘reformed'
"Already, far too much scarce capital, skill, entrepreneurial effort, and bureaucratic oversight have been ploughed into trying to make black economic empowerment (BEE) succeed. But BEE cannot be made to work and should be scrapped, not ‘reformed'," says the South African Institute of Race Relations in a submission made last month to the Department of Trade and Industry (DTI) on its proposed BEE codes of good practice.
The DTI says it is trying to reform BEE by putting more emphasis on ‘broad--‐based elements' such as procurement, skills development, and promoting new black businesses. This is intended to counter widespread criticisms that BEE has done little but enrich a small elite, ‘without making South Africa a fairer and more prosperous place', as the minister of finance, Pravin Gordhan, has noted.
The Institute's submission to the DTI on the draft codes, as summarised in this press release, urges an end to BEE rather than further futile attempts to improve it. "The Government assumes that tightening up the BEE codes will help solve deep-rooted problems of poverty, inequality, and unemployment," says Dr Anthea Jeffery, head of special research and Gawith Fellow at the Institute. "In fact, no such quick fix is feasible."
After more than a decade of BEE policies covering the elements set out below, it is more than ever apparent that:
- preferential ownership transfers do not build entrepreneurship or the ‘visible black industrialists' whose absence President Jacob Zuma laments;
- appointing people to board and management positions without the necessary experience undermines efficiency;
- preferential procurement frequently inflates costs while eroding performance;
- enterprise development is unlikely to succeed without adequate skills, infrastructure, and markets;
- skills development is crucial to South Africa's success but is best achieved via tax incentives for on--‐ the--‐job training of a kind decided by business, not bureaucrats; while
- ‘socio--‐economic development' (in the form of the state--‐directed corporate social responsibility required by the codes) can do relatively little to meet social needs or counter the negative consequences of widespread and persistent unemployment.