Legislation for economic transformation

07 November 2017 00:00

In addition to one of the most progressive constitutions in the world, South Africa has a plethora of transformation-related legislation to enable the economic empowerment of its citizens, previously (and currently) disadvantaged as a result of the apartheid policy of economic exclusion.

Recently, the term radical economic transformation has been bandied about by politicians and the media in general. But what is radical economic transformation? Unless the term is unpacked and linked to a measurement tool, it will remain nothing more than a political mantra. In May, at the World Economic Forum on Africa, President Jacob Zuma said that radical economic transformation means a change that will lead to inclusive growth. He has also alluded to the fact that this would include forced land distribution, black ownership and management of companies, and the hiring and training of black people – more importantly, African and female South Africans.

Existing transformation laws address all of the above except for two crucial points: land distribution (although agricultural land is partially covered in the AgriBEE B-BBEE Sector Codes) and the focus on ‘African’ versus ‘black’ people in general.
The main transformation legislation in the country includes the:

  • Employment Equity Act (EEA)
  • Broad-Based Black Economic Empowerment (B-BBEE) Act and Codes
  • Skills Development Levies Act
  • Preferential Procurement Policy Framework Act.

One also needs to take into account various other sources and programmes such as the National Development Plan and the Black Industrialist Programme. Why, with these various laws and programmes in place since as early as 2008, is economic empowerment still not a reality for the majority of South Africans? Perhaps the following issues contribute to the lack of radical economic transformation.

Inconsistency and lack of incentives
Currently, the transformation laws are “managed” by three government departments. Employment equity is the domain of the Department of Labour, broad-based black economic empowerment is assigned to the Department of Trade and Industry, and the Preferential Procurement Policy Framework Act falls under the National Treasury. This spread of responsibility leads to complications and inconsistent application of the laws across the departments.

In addition, there is little or no incentive for job creation in any of the above-mentioned legislation.

Complexity of the B-BBEE legislation
The B-BBEE codes (the measurement principles) are badly drafted and littered with interpretational issues, and the formula for establishing scores is complex. As a result, the codes are sometimes unscrupulously applied, a practice which, with few B-BBEE experts in the industry, is difficult to detect.

No focus on African economic empowerment
The draft Preferential Procurement Regulations introduced the concept of additional preference points for African Women Owned Businesses. However, the final version of the Preferential Procurement Regulations (published in January 2017) reverted to the definition of black as being African, Indian and coloured. African economic empowerment is a hugely politicised area, which needs to be dealt with boldly by law-makers if radical economic transformation is to be a reality in South Africa. There has to be an acknowledgement that under apartheid black people were treated unfairly, with Africans being discriminated against the most. Current transformation legislation treats all ‘black’ people equally.

There is an urgent need for real statistics on the level of government and private-sector procurement from African-owned businesses in South Africa and for the allocation of additional preference points, for the purposes of procurement, to African-owned businesses.
The current legislation requires amendment to provide for radical economic transformation. If it is not, South Africa will face more of the same for another 23 years.

Brigitte Brun is co-author of The Practical Guide to the Amended B-BBEE Codes of Good Practice for Specialised Entities, written with Maxi-Lee Machado and published by LexisNexis South Africa.

This is the first comprehensive workbook aimed at public entities, government departments, universities and non-profit organisations. The book will assist these entities with the development of their transformation strategies in line with the B-BBEE rules and regulations. Readers will gain a better understanding of how to calculate their B-BBEE score through the practical calculation examples. The Practical Guide to the Amended B-BBEE Codes of Good Practice for Specialised Entities also covers the new PPPFA Regulations, which came into force on 1 April 2017.

Brun and Machado previously partnered with LexisNexis in 2014 to publish The Practical Guide to the Amended B-BBEE Codes of Good Practice, the first book available on the Amended B-BBEE Codes of Good Practice. Their newest book can be ordered through LexisNexis at a cost of R733.24 by clicking on  this link: The Practical Guide to the Amended B-BBEE Codes of Good Practice for Specialised Entities

About the Author
Brigitte Brun (B.Science Human Resource and Labour Relations – University of Stockholm,  Sweden; Honours Degree in Business Administration – University of Stockholm, Sweden) . She is the chief operating officer of a SANAS accredited Verification Agency, one of the first agencies to be accredited to issue B-BBEE Certificates in February 2009. Brigitte has also served as a director of the Association of BEE Professionals (ABP) for two consecutive terms, guiding the young verification industry in its infancy. She has been appointed by the Department of Trade and Industry (DTI) as a material developer and facilitator on the compulsory DTI Approved Management Development Programme on B-BBEE provided by Wits and Unisa for all SANAS technical signatories.