Broad-Based Black Economic Empowerment Amendment Bill: continuation of deliberations

Meeting report

The Chairperson welcomed Ms S van der Merwe (ANC) back to the Committee.  Some apologies were tabled, and the agenda for the meeting was adopted.

Broad-Based Black Economic Empowerment Amendment Bill: continuation of deliberations
Ms Nomonde Mesatywa, Chief Director (CD): Broad-Based Black Economic Empowerment (BBBEE), Department of Trade and Industry (dti), said that the Department had done an analysis of the challenges to the legislation.  There was a proposed provision on the trumping issue.  She had discussed the matter with the state law advisor (SLA), and there was agreement on the principle involved.  Individual entities should be able to develop their own targets, but the principles had to be harmonised.  A generic scorecard could be used.  The first wave of BEE had been narrow, but it had now been broadened.  Some consistency was needed.  All companies should be measured on the same elements.  The trumping provision had been used in the past, and she quoted a number of Acts in which the principle had been used.  The provision was well entrenched.  The trumping provision should apply only to existing legislation.  The rationale was to ensure greater diversity.  The environment had changed since the original legislation had been tabled.  The considerations in the past had only been for management and leadership.

The other provision was regarding Section 10 of the principal Act.  These had to be read together, so there was no disjuncture with Section 10 (1).  It was important that there be a situation where public entities and organs of state followed a clearly defined framework.  Organs of state had set their own criteria in the past.  The dti was now saying that there must be a consistent approach across all public institutions.

Ms Mesatywa added that if all else failed, the ultimate goal was to ensure consistency and alignment.  The market needed a tool that was easy to apply.  The trumping provision could have a caveat, such as coming into force only a year after the Bill was enacted.  The Committee could consider this proposal.

There was a misalignment on procurement policies.  There was an attempt to align to the BEE scorecard, which had been an interim arrangement.  There were still broader principles of BEE to be sorted out.  Only the regulations had been aligned and not the Act.  The goals of BBBEE were not being achieved by using the old procurement scorecard.  One of the things that bothered the dti was the narrow base, which was still finding expression at present. 

Ms Mesatywa explained how the trumping provision could apply to issues of licences and authorisations.  As much as they wanted to create a better environment, the economy could not come to a halt.  Exemptions might be needed in certain cases.  There might be a need to import skills from overseas, for example, but in such a case this had to go together with a skills transfer programme.  Exceptional circumstances would need to be catered for.

In the Marine Life Resources Act, particular regard was needed to encourage new entrants, especially those from the formerly disadvantaged community.  Any endeavour around transformation needed to be considered.  The Oceana Group case was an example of where a company had used Section 10 as a defence, and this had been accepted by the court.  The court had ruled that the dti should have been clearer in its codes and policies. 

Ms Mesatywa also highlighted areas in the Mining Charter where there were different scorecards.  Preliminary discussions were taking place with the Department of Mineral Resources on alignment.  A concerted approach was needed.  Employment Equity (EE) was also highlighted.  An element of EE was also included in the scorecard.  Whatever was submitted, it had to agree with information provided to the Department of Labour (DoL). 

The Chairperson assumed that the State Law Advisors (SLA) were familiar with the information given.

Adv Herman Smuts, Principal SLA, maintained his support for the trumping provision.  This would not in itself be sufficient, but would go a long way to achieve the goals of the Act.  In the Oceana case, the judgement was based on the absence of a relevant code.  If there were to be a code under the Act relevant to the fishing industry, the BBBEE Act would trump any policy made by the Minister in terms of the Environmental Act.  If the Committee were to adopt the trumping clause, he would also support a one year delay in its implementation.  In relation to Section 10, the dti proposed that the words “as far as reasonably possible” be omitted.  He suggested that the words preceding this phrase should also be omitted.

The Chairperson said that the issue had been raised, and the words “public must take into account, and” would also be deleted as a consequential amendment.  Any public organ would be forced to adopt a code of good practice.

Adv Smuts said that the amendment was a significant departure from the provisions of the current Act.  The Committee might have to consider delaying the amendment to Section 10, as well as the suggestions for the trumping clause.

Mr G McIntosh (COPE) said that the SLA had raised a second matter.  The provision raised by the SLA had not been part of the original Bill, and Members had felt that the suggestion made was not needed.

The Chairperson contradicted Mr McIntosh.  The issue had been raised, and the Committee had considered that a loophole would be created if the phrase remained in the Bill.  At that meeting, the Committee had been persuaded by an advocate that the trumping clause would then be contradictory.  The sub-committee had brought this matter forward.

Mr B Radebe (ANC) said that the dti had gone out of its way to make a case for the trumping clause.  It was reasonable for the Committee to include the clause, and it was also reasonable to provide for a one year delay.  Without the delayed implementation, there would be undue pressure on organs of state to implement the provisions of the Act.  On the 'reasonably possible' issue, he said that the issue of foreign skills in key industries had to be borne in mind.

The Chairperson asked what would be done in respect of those strategic industries which might not comply with the law.

Adv Desiree Swartz, Parliamentary Legal Adviser, had looked at the trumping clause, and at other legislation where there was a contradictory situation.  Some Acts had stricter BEE provisions.  The amendment in the current Bill would modify Section 9 (6) of the Act.  This made provision for alternative criteria to those set by the Minister to be allowed.  In the Electronic Communications Act, the Minister of Communications could apply to the Minister of Trade and Industry for a stricter code to be applied.  On the issue of a scarcity of skills or service providers, a licence could be granted on condition that the service provider be given time to work towards complying with the Act.

Adv A Alberts (FF+) said that that Mr Radebe had raised an issue around skills and he had raised an issue around emergencies at a previous meeting.  He gave an example of earthquake relief, where it would be crazy to ignore the only company which could help and happened to be predominantly white.

Mr McIntosh agreed that the example raised was extreme, but this is what the intention of the 'reasonably possible' rider was.  If an organisation was in a jam, then a case could be made.  It would be up to the service provider to argue what was reasonably possible.  He felt that the phrase should be retained.

Mr Radebe said that the CD had raised a legal precedent.  The issues of skills and emergencies could be tackled explicitly in the Regulations to the Act.

The Chairperson did not want to adopt a position that became law, only to find that in serious situations the requisite skills could not be accessed.  The intention was to broaden BEE.  Members were expressing some reservations.  Not all the necessary specialist skills were available in the country.  There were some very real concerns being raised.  The dti and SLA needed to look at the situation seriously.

Ms Mesatywa replied that the present situation was that certain commodities and services were not available in the country, such as in the defence industry.  It was important to get these skills into the country while there were national concerns about implementing BBBEE.  Where an organ of state in a strategic industry had applied to the dti for a BEE compliance certificate, any supplier would be deemed as being compliant.  This had been done in the past.  There were different elements in the scorecard, and if there were some where implementation of BEE principles was difficult, more of an effort could be made with the other elements.

Mr McIntosh took the point made by the CD.  A big ship-building industry had been started in Durban some thirty years previously.  At the time, a Scottish company (Dorbyl) had assisted and this capability had since been lost.  In the 1960s there had been a potential investment from Japanese interests, and Japanese people had been declared 'honorary whites' by Dr Verwoerd.  Now it would be expedient to declare suppliers 'honorary blacks' in some situations.

Adv Alberts said that the Preferential Procurement Act would have to be changed to be aligned with the amended BEE Act.  This was contained in the Memorandum in the Bill.  Clause 10 of the Bill stated that there could be no deviations.  This could be interpreted as preventing the Minister from making any exceptions in emergency situations.  The Minister would have to abide by the law.

The Chairperson said that the situation was now getting complicated, and the SLAs would need to confer on the matters being raised.  The Act would apply to both public and private companies.  The Committee would revisit this clause, but she asked Members to consider another issue that had been flagged.  On page 8 of the Bill an issue had been raised.  The amendment was to omit subsection (2) and to add “all public companies”.  In line 44 it was necessary to omit the word 'assignment'.  The amendment to 13 H was agreed to.  The amendments to 13 I (1) to (9) were adopted.  Clause 13 J dealt with investigations by the Commission, and was adopted.

The Chairperson moved to Page 10, Line 9.  A new paragraph 7 (B) would be added on the publication of decisions of the Commission.  A number of conditions had been added.  The amendment was adopted.

The Chairperson led Members through the proposed amendment of Section 13 K.  The clause was adopted.

The Chairperson read the amendment to Section 13 L.  Some amendments to the original Bill had been put forward.  The time period of 15 days was amended to 60 days, to be in line with the Promotion of Administration of Justice Act.   The clause was adopted as amended.

The Chairperson read through the amendment to Section 13 M.  The clause was adopted.

The Chairperson read the amendment to Section 13 N.  She had noted a discussion on this clause.  The clause was adopted.

The Chairperson read the amendment to Section 13 O on offences and penalties. 

Mr McIntosh felt that a radical presumption was being made.  There were obligations on some people, like accountants and whistle-blowers.  Human rights might be infringed.  A person overhearing a conversation might be guilty of an offence if this was not reported.

The Chairperson said that sub-section (1) and (2) applied.  A professional in the field of BBBEE should be responsible for reporting any occurrences of fronting.  There should surely be an obligation to report such matters.  She felt it was clear that this clause pertained to professionals in the field.  The amendment to section 13 O was adopted.

The Chairperson said that on page 12 line 36, after 'not', the phrase 'for a period of 10 years after conviction' in terms of being barred from doing business with any organ of state, was in the amendment to section 13 P.  The clause was adopted.

The Chairperson said that the next Clause dealt with the substitution of Section 14.  This was the only place she recalled where there was a reference to private enterprises.  All previous references were to state and public companies.  The provision required that information be provided in the normal course of business.

Mr McIntosh said that an interesting point had been raised.  He asked for comment from the CD.

Ms Mesatywa said that the private sector had been mentioned as all transactions above a certain amount, as determined by the Minister, would have to be lodged with the Commission.  There was no portal to capture the information at present, hence the need for transactions to be registered.

Clause 9 was adopted.

The Chairperson said that Clause 10 was the short title and adoption date.  The trumping provision would be in the Bill itself. 

Mr Radebe said that only the section dealing with trumping would be delayed.

Proposal by Dr Wilmot James
The Chairperson returned to page 3 -- the definition of BBBEE practitioner and the definition of 'black people'.  The sub-committee had suggested that the latter definition be changed to 'persons classified as Africans, Coloured, Indian and Chinese under apartheid laws.'

Dr W James (DA) distributed a written proposal to Members.  Had the Bill been called the 'Historically Disadvantaged People Economic Empowerment Bill' it would have been a different matter.  In the modern science of human beings, it was argued that all human life originated from Africa.  The only real difference was between male and female.  Skin colour was a trivial difference, due to exposure to the sun historically.  Even gender discrimination was difficult in certain cases.  Using skin colour as a determinant was absurd.  The term 'black' was a matter of convenience.  He raised a Constitutional Court case, in which judgement had been delivered in November 2010 (case number CC 10).  This defined 'historically disadvantaged individuals' (HDI).  There were definitions of HDIs in other Acts.  He had drawn up an alternative definition.  The term 'black' included people who were not black in colour.  HDI could be defined in different ways, such as those who were not enfranchised before 1983 or before the adoption of the interim constitution in 1993.  Even this could be problem, as his own grandfather had enjoyed the franchise at one time.

The Chairperson had refreshed her mind with the definition in the National Credit Act (NCA), which had been cited by Dr James.  She felt that the parties should discuss the issue in caucus.  The issue did need serious consideration.  The written submission he had made would be useful for Members.  She called a brief adjournment.

After a short break, Mr McIntosh said that the proposal put forward by Dr James was a fresh piece of thinking.  He realised that the SLA would not make a snap decision, and it would not be a crisis if Members took a few days to consider it.  He did not see humanity so much in terms of genomes, and looked deeper than mere skin colour.  He was pleased to hear President Mandela being quoted on his vision of a non-racial state.  The proposal by Dr James would pull the racial teeth out of the Bill.  He quoted a definition by a Constitutional Court judge -- there would be no hope if the country's thinking lay rooted in the past.  There were highly competent black people.  In terms of the objectives of what he called corrective action, the definition provided would be a very constructive and positive contribution.

Adv Alberts said that the submission from Dr James was a good one for various reasons.  He quoted Clause 9(2) of the Constitution.  This referred to persons who had been disadvantaged in the past, although this had largely coincided with race in the past.  Various groups had been disadvantaged in the past.  The definition offered had no reference to race or 'African'.  He felt that all persons born on the continent were African, even if people in the north of the continent were of a lighter hue.  The definition referred to those who were economically disadvantaged, and included white women and white people with disability, who had been excluded under the apartheid regime.  These people would now be excluded again.  Their rights were being taken away, and he asked for a legal opinion.  Many organisations representing people with disabilities were not aware of the provisions of this Act, and they should be given the chance to make submissions.  Such organisations had not been included in the public hearings on the Bill.

Dr James said that the Amendment Bill dealt with fronting and the establishment of a Council.  A third very important element was enforcing black empowerment to become broad-based through a scorecard.  It was done against a history of asset stripping from mainly black people, and a denial of business opportunities.  Redress was needed to correct this.  A system was needed to create special opportunities to those that had been denied such opportunities.  It was therefore necessary to define historical disadvantage.  It was dangerous to define race, as had been done by the apartheid government, as well as by colonial governments and Nazi Germany.  'Black' was being used as a term of convenience.

The Chairperson said that the laws against Jews in Nazi Germany were also based on biology. 

Mr Radebe appreciated the input made by Dr James.  What his argument was missing was that the apartheid policy had been based on race.  This was undeniable.  The only way to reverse this policy was by taking a racial approach.  In the National Credit Act (NCA), a person defined as being historically disadvantaged was one who had been disadvantaged by discrimination based on race before 1994.  The Population Registration Act had defined racial groups.  There had been a lot of unfairness.  Those classified as black had been subject to inferior education, and the effects were still evidenced by the unemployment levels.  In the professional fields, one could see how few black engineers there were.  Property ownership had also been generally denied to black people, especially in terms of industrial sites.  In the so-called townships, those people categorised as black were further divided by language groups.  Cross-cultural influences had also been denied.  The Population Registration Act had huge consequences for people.  Rural land was given to chiefs imposed on the people.  The implication of 'historically disadvantaged' had to be understood.  He contrasted the cases of two people born on 28 April 1994, but one in Sandton and one in the nearby squatter camp.  The one born in Sandton would be classified as white and the one in the squatter camp as black, with no access to clinics and well-equipped schools.  The BBBEE Bill would only amend certain sections of the BEE Act.  The goal of the Act was still to provide opportunities to black people against a background of historical disadvantage.  He had wanted to be an engineer, but this opportunity had been denied him on the basis of pigmentation.

Ms S van der Merwe (ANC) wanted to emphasise some points.  She agreed that it was an interesting discussion, and there was merit in it.  What government was trying to do was to right the wrongs of apartheid, which had been based on racial discrimination.  The franchise had been only one element of a plethora of discriminatory practices.  She felt that the proposal put forward by the sub-committee should be maintained.

The Chairperson noted that the qualification 'under apartheid laws' was very specific.  It was an important piece of legislation, and would be controversial in some quarters.  All parties had been given the opportunity to persuade each other. 

Dr James pointed out the implications of the sub-committee's proposal.  If there had to be a dispute, he asked how it would be resolved.  It might be necessary to perform the 'pencil test'.  He wanted to propose a robust alternative way of defining who was 'black'. 

Adv Smuts said that there were still some laws dating back to the apartheid era, but as far as he was aware, all of the discriminatory legislation had been repealed.

The Chairperson said that there was no longer a 'pencil test'.  Strong positions were emerging from Members, and she felt that the best solution would be the definition of HDIs, as put forward by the sub-committee.

Mr Radebe proposed that Ms Van der Merwe's proposal that the definition as put forward by the sub-committee be adopted.

The Chairperson said that a formal proposal had not been made.  She asked for a proposer for the proposal of the sub-committee.  Mr Radebe proposed, seconded by Mr X Mabaso (ANC).

Mr McIntosh objected to the proposal.  He had listened carefully to the speech of Mr Radebe.  He agreed with the thinking, but disagreed with his conclusion.  The Bill might achieve what Mr Radebe wanted to see, but he felt that more consideration was needed.  His assessment of Dr James's proposal was that it would achieve the same objective sought by Mr Radebe, while avoiding further controversy.

The Chairperson summarised the differing positions taken by Members. 

Adv Alberts had done some technical research on the Population Registration Act.  The word 'African' had not been used under apartheid law.  Using 'African' in the current Bill would create ambiguity.  Derogatory words should not be used, but some clarity was needed.  Dr James had not made use of words with a derogatory connotation.  If used, 'African' would need to be defined.  The implications of exclusion under this Act would force employers not to employ white women and white persons with disability, as employers would earn no points in terms of the legislation.  He asked the dti if this was an intended consequence, as the rights of such people would be denied.

Dr James had not heard a single argument that made a case for his recommendation stopping the cause of BEE.  If there was such an argument, he would like to hear it.  His proposal would prevent race from being entrenched in law.  A dangerous precedent would be set.  A claim to be black, coloured or whatever racial category would have to be proved in some manner.  Current disputes would have to be solved.

The Chairperson said that a proposal had been put forward, and she wanted advice from the dti and the SLA.

Adv Swartz said that the Population Registration Act referred to a 'native', rather than an 'African'.  This had been discussed in the past.

Adv Smuts said that the same words were not being used as in apartheid laws.  Section 2 of the Act said that the Act must be read in conjunction with the Constitution, and this would guide the understanding of the term 'African'.

Mr Radebe said that when Members reconvened, the Bill should have an indication of what had been agreed to.  There would still be time for debate, as this was not the final adoption process. 

The Chairperson said that there was another opportunity to consider further amendments.  She noted that COPE, FF+ and the DA had registered their objections and would be discussed after the Creda version was published. 

The Committee Secretary confirmed that a further version of the Bill would be provided to Members for consideration and debate in the Committee before it would go to the National Assembly.

Adv Smuts asked for confirmation as to whether the amendment was just regarding the trumping clause.

The Chairperson said that there would be both a trumping clause and a reference to section 10.

Adv Smuts had not yet reflected on this properly.  There would be sub-clauses to specify that given sections would come into effect only a year after the commencement of the Act.

Mr Radebe proposed that the trumping clause be accepted, and Members adopted the clause.

The Chairperson hoped that the Creda version would be available shortly.

The Secretary said that the next meeting would be on Thursday 23 May. 

The Chairperson said that the Committee's programme had been revised due to the schedule of the National Assembly.

Adv Swartz said that there had been an objection to the 'reasonable delay' clause.

Adv Smuts put forward a verbal proposal on how this clause dealing with emergency situations could be worded.

Ms Mesatywa concurred with the SLA on the proposal.  There was a provision in the codes, but not in the principal Act.  She agreed that some clarity was needed.  On the delay of the coming into effect of Section 10, a number of practices were regulated.  Only the trumping should be delayed, not the codes. 

The Chairperson said it was agreed that the delay would apply only to the trumping, not the whole of Section 10.  The revised Bill should be returned to Parliament by the following Wednesday.  Members with further amendments should put these forward in writing, as Dr James had done.  Members were agreed on the intention of the Act, but not necessarily on the wording.

Dr James made it clear that there was agreement on the intention of the Act.  The only dispute was the nomenclature used.

Adv Alberts said that clarification was needed from the dti on whether white women and white people with disability were excluded.

Ms Mesatywa said that this position had been clarified at the dti.  The Bill was for broad participation by black people.  White women and those were disability had never been included in the designated groups for this legislation.  It was not true that such people would not get employment opportunities, and these categories were included on the scorecard.

Mr Radebe said that when the BEE Commissioner and Deputy Commissioner were appointed, there had been no provision for the Minister to appoint an acting person should both of these be incapacitated.

The Chairperson noted that Members agreed with Mr Radebe.  She instructed the legal team to draft a provision to cover the situation described by him.

The meeting was adjourned.