Press Statement on BEE Codes of Practice

Democratic Alliance joint press statement by
 

Geordin Hill Lewis MP
DA Shadow Minister of Trade and Industry, and
Toby Chance MP
DA Shadow Minister of Small Business Development

DA will make extensive submissions to amend BEE Codes of Practice

14 October 2014

Release: immediate

The Democratic Alliance notes the release of the draft BBBEE Codes of Good Practice by the Minister of Trade and Industry, Rob Davies, for public comment. 

The DA will submit extensive proposed amendments to the Codes, during the public comment period which ends on 14 November 2014.

The Codes, as they are currently drafted, will not achieve the stated objective of preventing fronting. They do not promote redress or decrease inequality, and they certainly do not help to grow the economy or create jobs. In fact, in many respects, they will achieve the opposite of what the ANC says they want to achieve. 

Our amendments will ensure that the Codes are a genuine tool for redress and not just a means to enrich a few politically-connected millionaires and billionaires. 

The DA will also insist that the draft Codes come to Parliament for careful consideration by the Portfolio Committee on Trade and industry, and the Portfolio Committee on Small Business Development. 

These Codes will have a profound impact on the economy, and they should be carefully considered and debated to avoid unintended consequences. 

Crucially, there are several aspects of the draft Codes which may well render them counterproductive. These are as follows: 

• The Codes are likely to encourage continued re-empowerment of an elite, narrow pool of BEE beneficiaries by reducing the target for the involvement of “black new entrants” in ownership transactions from 10% to 2% of shareholders. Rather than broadening the base of participation in empowerment transactions, this revision makes it even more likely for BEE to continue benefiting those who have already been empowered.
•  Worse yet, the definition of “black new entrants” has been broadened to include any person who holds less that R50 million in shares. In the previous Codes this threshold was R20 million. Again, this increases the likelihood that the wealthy and connected will be the only ones to benefit. This flies in the face of the intention of the Codes, which is to involve more South Africans in the mainstream economy.
• The Codes include no direct points incentive or reward for job creation. This means a company employing just one person could easily obtain a higher score than a company rapidly growing its workforce and creating jobs. With unemployment currently at 35%, job creation must be recognised as a contribution to empowerment.
• The revisions made under the 'Ownership' section may actually encourage more fronting, as businesses find it difficult to achieve what the new Codes demand. 
• The DA also believes that the thresholds for Exempt Micro Enterprises (EME’s) and Qualifying Small Enterprises (QSE’s) should be raised, to ensure that the Codes do not burden entrepreneurs and start-ups with more red tape. 
• Lastly, there seems to be several typos and errors in the draft which make it difficult to complete some of the calculations. 

Unlike these Codes, B-BBEE should be a tool for the genuine transformation of the economy, by encouraging new entrepreneurs, opening up opportunities to new entrants, and incentivising business to participate in the diversification of the economy.

These Codes are a blunt instrument, which if implemented, will have unintended consequences that will take the redress project backwards. 

Media enquiries:

Geordin Hill Lewis MP

DA Shadow Minister of Trade and Industry

072 320 1289 

Toby Chance MP

DA Shadow Minister of Small Business Development

083 251 5613 

Graham Charters

Media Officer

072 635 0440