SUBMISSION TO PARLIAMENT ON THE BROAD BASED BLACK ECONOMIC EMPOWERMENT BILL, 2003
PREPARED AND SUBMITTED BY THE KZN BEE ALLIANCE ON BEHALF OF BUSINESS STAKEHOLDERS WHO DISCUSSED THE BILL AND EXPRESSED THEIR VIEWS ON THE 13TH OF MAY 2003 AT SICA’S CONFERENCE CENTRE - DURBAN
PRESENTERS
- Don Mkhwanazi (Durban Investment Promotion Agency)
- Ndumiso Mlambo (Durban Investment Promotion Agency)
- Neville Matjie (Trade & Investment KZN)
- Themba Mthethwa (Justice Centre)
- Basil Sikhakhane (Development Interface)
- GENERAL SUBMISSION
- Scope and clarity
The Bill should define precisely what is meant by Black Economic Empowerment. Although a definition is contained in the DTI strategy, it should also be clearly spelt out in the Bill. A uniform definition of BEE needs to be included within the Bill as there has not been an agreed definition of BEE. Due consideration should be given to the Priority Population Group as there are geographic disparities from Province to Province.
1.2 Level of Preparation, Analysis and Focus
There is a strong need for serious amendments to the current draft Bill. It currently lacks completeness in terms of clearly identified programme activities (implementation).
1.3 The Consultation Process
It is understood that the Bill was drafted as a result of the Black Economic Empowerment Commission’s recommendations. It is further understood that a BEE Presidential Task Team has been set up which is made up of Gauteng people. However, it is not clear whether the Presidential Task Team consulted with various interest groups. If the mandate of the task team is also to contribute to the Bill, then there should be a consultative process which would be transparent and inclusive.
Further, the DTI and various responsible authorities should consult widely on the finalisation of the legislation, the views of all the provinces should be taken into account.
2. SPECIFIC SUBMISSIONS
- Recommendations on Industry Charters and Evaluation Measures
- It is recognised that an Industry Charter by its very nature will be a voluntary agreement by the industry participants to implement certain BEE objectives. If participants have agreed to it, why then should it not a have legal standing.
- It is recognised that industry charters are sector-specific, even though charters are sector-specific they should include pertinent generic points. The industry charters should set targets in terms of ownership/control, financing mechanisms, training mechanisms and time frames should be clearly outlined. It is further recommended that there should be clear punitive measures for non-compliance.
- There must be an alignment of the intended Charters with spatial and demographic considerations and this must further be aligned to specific delivery time frames.
- It is recommended that an over-arching Charter should be developed to include targets in terms of ownership and control, and timeframes for the achievement of the objectives. It is recognised that there will be industries/sectors which will not have industry charters, therefore, the Minister must be given powers to impose the over-arching Charter in those industries/sectors.
- It is recommended that there should be incentive schemes for sectors that comply, such as publishing regular reports which are based on point scoring for achievers.
- The time frames must be legislated. (2014).
- BEE Financing
- BEE Financing is not explicity mentioned in the Bill. This needs to be addressed & interventions such as Khula, NEF & IDC need to be mentioned as mechanisms for financing. The agencies mentioned above were created through statutes, therefore the establishing Acts of these agencies should be revised to give effect to the new BEE Bill. Enforceability is the key to give effect to the objectives of the Bill.
- Commercial terms of loans for BEE must be reviewed and be more "BEE Enabling". For example;
There is a need for creative lending methods which could include:
- Preferential interest rates for BEE ventures.
- There should be a shift in emphasis from collateral to viability focus.
- There should be more "weighting" on intellectual capital.
- There is a need for the regionalisation and decentralising of structures like NEF, IDC, Khula. The regional branches of these institutions must not be marketing centres but be fully fledged support centres with decision making powers. Financing companies should have support structures to assist in taking entrepreneurial ideas and develop them into viable and real business plans to make access to finance easier. In order to achieve this, BEE Support Centres are needed in all Provinces. Government financing interventions should filter down to the "person on the street" and awareness campaigns are needed to ensure that information about the existence of such structures is disseminated. Support structures will also assist applicants in the completion of relevant documents in order to eliminate unnecessary consultation costs.
- There is a need for the IDC to shed the Industrial mode that is currently portrayed in order to play the role of a financial services provider. In other words IDC should not be seen as financing transactions only in specific industries/sectors, for example manufacturing. Therefore, it should broaden its scope and offer financial services across the board, that is, across different industries and sectors.
- The Risk Capital/Venture Capital/ Angel Financing. The creation of more venture capital funds to finance BEE is needed. It is recommended that Black Entrepreneurs who have become multi-millionaires should finance emerging/new Black Entrepreneurs. This "Angel Financing" is very popular in the USA, Europe and Britain. It refers to financial assistance granted by sympathetic individuals/groups who are financially able. BEE is not necessarily riskier than traditional business.
- Target Investments and Project Financing must also be looked at seriously as methods of financing.
- The R10 billion (NEF) must be disbursed immediately and greater clarity needs to be given in terms of where the funds are coming from and what contingency measures are in place if funds are not forth-coming from identified sources. Disbursement criteria and channels need to be spelt out, as the public remains in the dark as to how this will be done.
- Black Economic Empowerment Advisory Council
- It is recommended that public nominations be done on regional Izimbizo basis in order to identify representatives preferred by BEE stakeholders to serve on the advisory council.
- It is recommended that representatives should be nominated on the basis of organisational submissions and the current practice of identifying "representatives" on individual popularity should be stopped.
- Specific provincial economic attributes, demographics, spatial detail and the rate of economic development and growth must be taken into account in determining representation. In other words provinces should have differentiated and weighted representation.
- The definition of black empowerment must be reviewed in order to achieve focus on the previously disadvantaged especially from an economic perspective in general terms and commercial activities specifically.
- Chambers must be represented and there must be a focus on organised formations as opposed to the current focus on high profile business personalities.
The KZN provincial BEE stakeholders introduced by this submission must be included in the consultation process leading up to the finalisation of this enactment process and others of a similar nature in the future.
- General/Additions
- A Statutory Body should be created with a mandate that will include, amongst others;
- Monitoring compliance with the provisions of the BEE Act.
- Assess the impact and fulfilment of the objectives of the Act and the DTI strategy.
- Investigative and punitive powers.
- Issuing detailed public reports regularly (annually or biannually) on sectors that comply, or do not comply, interventions they have made to make companies/sectors comply and punitive measures taken against companies/sectors that did not comply. The reports should also indicate the status of BEE progress in South Africa.
- It must be accessible to the public as opposed to the current situation which prevails in our courts which make it difficult for a person on the street to secure funding for a protracted litigation process.
- Procurement should be addressed as a critical mechanism to assist in the finalisation of contracts which create strategic partnerships between BEE stakeholders and established big business.
- There should be clear government delivery milestones on major opportunities to be accessed through participation in organised black business formations.
- The commercial risk as set out in the strategy document is acknowledged as a burden of business. The government however, cannot abdicate its responsibility in the transformation of industries, capacity building and other support programmes and interventions required for the achievement of specific BEE objectives.
Signed by: ____________________
The Chairman of the Steering Committee
Attachment : Attendance register (BEE Workshop held on 13 May 2003)