By Andile Ntingi
opinion
BLACK ECONOMIC EMPOWERMENT
Tender set-asides rather than B-BBEE
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Photo: Shutterstock
Government should overhaul its empowerment policy to reserve a set value of procurement for black-owned businesses. On the other hand, a 100% black-owned company that does not romises are the sweetest lies, reads a five-word train more people and renovate schools or clinics is outcompeted by inscription on my daughter’s WhatsApp profile picture. white companies because tender adjudicators feel that it is doing less She is only 14, but this message struck a chord with me to empower communities than the white firm. when I first saw it, something that caught me by surprise Buthelezi is advocating for the unbundling of the policy from the introverted teenager. I recommended that whereby elements of B-BBEE such as equity ownership, The message forced me to reflect on a string of skills development, management control, enterprise broken promises made by our elected politicians under and supplier development (ESD), and socioeconomic the guise of broad-based black economic empowerment development are implemented separately and not (B-BBEE) policy, which has throughout its various combined into a single overarching policy. iterations over the past 26 years only benefitted a of procurement spend All three panellists agreed that ESD, which is premised tiny politically-connected black elite, while widening in the public and private on giving black businesses preferential market access, inequality among the people it was supposed to uplift. sectors be set aside for black suppliers that are at must be tweaked to introduce tender set-asides, whereby The policy’s failure to deliver on its promise of radically least 51% black-owned, a portion of procurement spend is ring-fenced for blackincreasing black economic participation is becoming controlled, and managed. controlled suppliers. a source of frustration and disenchantment among its I recommended that 50% of procurement spend in the intended black beneficiaries. As a result, an opposing public and private sectors be set aside for black suppliers that are at least view is beginning to emerge that B-BBEE will have to be completely 51% black-owned, controlled, and managed. In addition, about 80% overhauled or scrapped if black participation is to be deepened after the of procurement spend must be placed in the hands of suppliers that Covid-19 lockdown is lifted and the economy re-opened. directly produce the goods and services – not middlemen, who inflate This alternative, anti-B-BBEE view emerged at a recent live costs of goods and services that are supplied mainly to municipalities and Facebook panel discussion, known as Lockdown Convo, which I government departments. Taxpayers bear the brunt of this pillaging, with participated in alongside Thabo Masombuka, a lawyer and former little or no jobs created by these transactions. policymaker at the department of trade and industry, and Tender set-asides must be strategically implemented to entrepreneur Mxolisi Goodman Buthelezi. help black entrepreneurs own the means of production, Panellists in the discussion, moderated by Miso Tini, thereby enabling them to own factories, banks, mines, retail agreed that B-BBEE was utterly ineffective and stuck supermarkets, telecoms, farms, and many other businesses in the mud. Simply put: The policy is encouraging that are primary producers of goods and services. conspicuous consumption by the black elite Masombuka, who is also the former CEO of the instead of aiding black people to be producers and Construction Sector Charter Council, recommended that distributors of goods and services. corruption in government procurement be dealt with by Therefore, B-BBEE is not contributing to law enforcement and prosecutorial arms of the state. He employment creation and industrial development, agreed with the idea of the implementation of tender sethence South Africa continues to struggle in eradicating asides and conceded that B-BBEE must be overhauled to uplift high unemployment and inequality, currently sitting with a Gini the majority of South Africans, not a few people. coefficient of 0.63, the world’s highest. But he emphasised that the policy must remain a condition for doing First on the attack was Buthelezi, who argued that B-BBEE was business in our country, just like in Malaysia, where SA policymakers anti-black and benefitted mainly white businesses. His argument was premised on the logic that B-BBEE scorecards – used in the evaluation of borrowed B-BBEE from. In Malaysia, it was used to increase economic participation of ethnic Malays in a Chinese-dominated economy. tenders – heavily favoured large white-owned companies during bidding As a start, the state must deploy its R800bn annual procurement for contracts in both public and private sectors. spend to circumvent gatekeeping and fronting to reduce barriers to This is because B-BBEE laws are structured in a way that make it market entry for many skilled black entrepreneurs, who want to be easy for white companies to comply, thereby attaining higher ratings involved in the production of goods and services. Gatekeepers are not on their B-BBEE scorecards to the disadvantage of small black-owned, only an impediment to economic participation; they are also a drag on black-run companies. In other words, white companies end up becoming employment generation and economic growth. blacker than black firms. To drive his point home, Buthelezi pointed out If our recommendations could be adopted by government, B-BBEE that white firms – many of which have been in business longer than black could go a long way towards forcing gatekeepers to be job-creating companies – have the advantage of accumulating B-BBEE points on producers instead of big-spending consumers who instantly buy requirements that have nothing to do with their capabilities to execute Range Rovers from merely levying exorbitant mark-ups on goods jobs when bids are evaluated. For example, a white company with 25% black ownership will attain supplied to the state. ■ a higher B-BBEE rating for employing more black people in senior editorial@finweek.co.za management, training more black staff, and renovating a school in a Andile Ntingi is the chief executive and co-founder of GetBiz, an e-procurement and tender poor black township. notification service. @finweek
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