South African Communist Part

Submission to Public Hearings on Broad-Based Black Economic Empowerment Bill and BEE Strategy Document

The SACP welcomes this opportunity to present our views on both the Broad - Based Black Economic Empowerment Bill (B27 - 2003) and the Strategy Document, published by the DTI in March this year.

The SACP sees the fundamental challenges of the present phase of our national democratic revolution as ending poverty, reducing inequality and creating sustainable livelihoods for millions of mainly black people disadvantaged and discriminated against by colonialism and apartheid. As a party rooted among workers and the poor, we are all too aware of the reality of acute dualism in the economy and social structure of our country. As President Thabo Mbeki noted in his State of Nation address at the opening of Parliament earlier this year, ours is a reality in which two worlds exist in one territory. One is the world of the so - called formal economy still characterized by race and gender hierarchies as well as by class inequality. The other is a so - called informal economy, almost exclusively black, characterized by acute poverty and increasing marginalisation. Our view as the SACP is that the current process of capitalist globalisation, and processes associated with the integration of parts of our formal sector into the networks of contemporary capitalist globalisation, are tending to reproduce and exacerbate this dualism.

Arising from this perspective, the SACP is of the view that changing the racial and gender composition of agents in ownership or leadership positions in capitalist enterprises operating in the formal sector of the economy, although an important and valid objective in its own right, must be subordinated to, and located within a broader programme to transform our existing dualistic socio - economic reality in ways that benefit working people and the poor.

 

Definition of BEE (para 3.2.2)

The SACP, therefore, agrees with the point made in paragraph 3.2.1.of the draft Strategy Document, which cautions against reducing the entire programme of "economic development and transformation" to BEE. In this respect, the recently concluded Growth and Development Summit represents, in our view, the most comprehensive widely canvassed and endorsed statement of priorities for the period immediately ahead. The clear focus of the GDS is on reducing unemployment, poverty and inequality. Like other policies and programmes, BEE needs to be judged and evaluated by the contribution it makes to advancing these objectives.

While we agree with the DTI about the need not to define BEE too broadly or too narrowly, we are concerned at the definition offered in paragraph 3.2.2 and some aspects of the policy objectives in section 3.3. The definition tends to assume that "economic transformation" and "decreases in income inequalities" will emerge automatically from "significant increases in the numbers of black people that manage own and control the country's economy", and the latter points appear, in practice, to be privileged. Besides, inequalities are not limited to income inequalities". They also include asset and skills inequalities.

We would propose instead a formulation along the following lines:

Policy objectives (paragraphs 3.3)

The policy objectives in paragraph 3.3, likewise, in our view, tend to privilege changes in agents occupying particular positions over broader transformations. The first three bullets make no distinction between increasing black ownership in existing enterprises (likely to involve only a small number) and new enterprises, which if conceived of broadly could embrace many. Gender is only mentioned as an objective for new enterprises. Is this not be pursued in existing enterprises?

We welcome the inclusion of "community and broad based enterprises" in bullet 5. Cooperatives are, however, mentioned almost as an after thought. This is in contrast to the GDS, which highlighted the need for "special measures" to support cooperatives "as enterprises and organizations inspired by solidarity".

A final point, we would make about the policy objectives is that as Marxist we are well aware of the fundamental reality that it is capitalism that separates and excludes the majority of produces from ownership and control of the means of production. Under capitalism, both the powers of economic ownership (the powers to dispose of economic surplus, to decide on how it is invested) and the powers of possession (the powers over organization of labour processes) are appropriated by a minority of capitalists at the expense of workers. In the context of an own race and gender demographics, this means all too frequently these powers being appropriated by a minority (in class, race and gender terms) at the expense of a majority (overwhelming black and also more representative of gender realities).

However, workers around the world are challenging the exclusive exercise of these powers by capital and are engaged in struggles for a collective reappropriation by direct producers of at least some of these powers. A broad - based approach to black economic empowerment should, in our view, support and encourage such possesses. More specifically, it should recognize and encourage consultative and inclusive processes of decision - making at firm and industry level, and allow for some assessment of this in the "balanced score card".

The "balanced score card" (Appendix A)

The "balanced score card" appears to apply only to private capitalist firms seeking to interact with government in regulatory relations or tendering for contracts. While we do not dispute the importance, or even centrality, of government finding points of intervention or leverage for the transformation of the private sector, it is also necessary to recognize that there are also government departments, parastatals and public institutions. These, too, need to contribute to - indeed take a leading role in promoting - broad based black economic empowerment. The Strategy Document appears not to include any proposal to assess and evaluate the performance of public entities - which, in our view, needs to be different from that applicable to profit maximizing institutions. A matter of concern in this regard is that paragraph 3.5.4. appears to see the major contribution of SOE's to BEE as "restructuring" meaning the "transfer or sale shares" - although "preferential procurement" is also mentioned. This, in our view, is a narrow and potentially misguided focus. Any potential benefits from transferring shares need to be weighed against the impact of privatization (partial or whole) or commercialization on the ability of public entities to deliver on public and developmental mandates. These two elements must be weighed against each other and if a proposal for restructuring weakens the public and developmental mandate, this must (on abroad definition of BEE) be counted as a loss for empowerment.

As to the "balanced score card" for private firms, we agree with the proposal for a flexible approach that allows different sectors to define detailed targets as well as methodologies for measuring progress. We would, in general prefer to see a greater weighting to contributions which benefit larger numbers of people, communities and collectives over those in which small numbers of people hold shares or become members of boards etc. We would suggest that some indication be required, not just of percentage of total shares in black ownership or percentage of total procurement from black owned firms, but also of the numbers of black people benefiting in various ways. This would enable some assessment to be made of how "broad" the empowerment process is.

Comments on the Bill

In general we do not have serious problems with a short bill giving effect to specific parts of the Strategy Document that need legislative authority. We are, however, concerned at the status of the Strategy Document and its relationship to the bill. The Strategy Document is a government document, but does not have the authority of a White Paper. What then is its legal and policy mandating status?

Section 7 of the bill, read on its own in isolation, seems to give the Minister carte blanche to define the approach to BEE. If the Minister, or a successor, were to decide to abandon a broad - based approach, he or she in terms of the bill would appear to have unfettered powers to do so. At the very least some part of the appendices should be included as a schedule to the bill.

Finally, Section 5 identifies only one member of the BEE Advisory Council - the President. A broad based approach needs to be premised, in our view, on a recognition that business - even black business - is not the only stakeholder. The Bill should provide for recognized Nedlac constituencies to be represented on the Council.