Should Government still apply BEE policy in times of Covid?

By Thulebona Buthelezi

President Ramaphosa on Monday March 23, 2020 announced the lockdown in South Africa from March 26 to April 16, 2020 to contain the spread of the coronavirus. This move had an impact on many business, as operating costs grew.

To aid business and society, on the April 21, 2020 President Ramaphosa introduced a Covid relief fund amounting to R500 billion. Within the relief measures, tax incentives were introduced to lessen the cost burden on businesses.

Despite the various interventions from the government to alleviate the cost burden on businesses operating in different industries, there were calls for the government to scrap BEE legislation so that restrictions on operating in certain industries could be relaxed. The Solidarity and AfriForum took the Department of Tourism to court over its BEE policy application on companies in the tourism sector that required access to Covid relief funds.

The purpose of the Black Economic Empowerment policy is to ensure transformation in the economy in terms of:

Ownership:

In this component, we look at the ownership of businesses. In a 2017 news article by Moneyweb, it was stated that 40% of JSElisted companies were owned by foreigners while 22% were owned by black people (Indian, Coloured, Chinese and black South African) and 23% owned by white South Africans. If this policy is upheld, we would see the gap widening, with fewer established black-owned companies.

Management control

In this component we look at who runs the company. The directors and the employees are responsible for running the company. The Broad-Based Black Economic Empowerment (B-BBEE) Commission recently published a report on transformation in South Africa for the 2019 calendar year. The Commission found that companies in South Africa are not fully transformed. There is a dearth of black directors and senior managers in many companies, an indication that transformation is slow.

Skills development

This is the most imperative component. It involves training of people so that they can be equipped enough to run and manage companies. In South Africa, many people have low levels of education, which exacerbates the unemployment problem.

Enterprise and supplier development

In this component small businesses benefit from large companies through procurement and enterprise and supplier development policies. Industrial policy released by the government requires many businesses to support small, black-owned businesses through procurement. This is to encourage entrepreneurship, which leads to increased employment.

Socio-Economic development:

We look at the wellbeing of society. Companies must create initiatives that enable the ordinary man on the street to access the economy. These initiatives include grants and mentorship, and assisting with skills development.

Taking the above into consideration, BEE in times of Covid is still relevant. If these BEE policies were to be abandoned now, it would worsen the poverty situation in the country. In an article published by IOL, on November 12, 2020, President Cyril Ramaphosa is quoted as saying: “If we take steps to promote BEE it is wrong for those who think it is a racist policy. I’m frankly surprised at those who, having enjoyed the privileges of the past regime take umbrage, are very angry when those who did not enjoy the privileges are lifted up”.

Transformation is a continuous process and the gap between the poor and the wealthy is still too wide. It is imperative that companies through the BEE policy should assist the Government to close this Gap. The government has special measures in place for companies that serve as a hedge against economic difficulties caused by Covid.

The BEE policy should not be abandoned by the government.