The current formulation of government’s empowerment objectives, BEE encourages illegal “fronting” in which some companies superficially use black people as token directors for the purpose of winning government contracts. Because the policy rewards the appearance of black ownership and management, it unwittingly invites companies to use superficial means to seem compliant. This is fraud and must be punished. But it is not enough: even if BEE was not being cynically abused; we need to move away from its narrow focus only on boardroom transformation to broad-based economic empowerment. Rather than just promoting a small elite, we must get business to commit to skills development and on-the-job training so that marginalized workers can enjoy economic freedom.

 

The deeper problem is that BEE focuses so heavily on company ownership and management that companies cynically think that this is all that is required for transformation. The problem of businesses latching on to politically connected individuals to benefit from government empowerment contracts is well known. This creates the problem whereby BEE does nothing to actually create further opportunities for the marginalised in society as the BEE model usually means that only the same minority of connected elites benefit from empowerment deals. Having benefitted from the model, these individuals, who should no longer qualify as economically disadvantaged, often continue to benefit to the detriment of real redistribution of wealth to the majority. An additional though more insidious problem is of much smaller firms demonstrating that they are supposedly BEE compliant and thus eligible for government contracts. Thus, ‘transformation’ as currently conceived , operates as nothing more than an additional bureaucratic hurdle for businesses, something akin to an additional business licence, without actually doing anything to change the dynamics of poverty in South Africa. 

 

As such, to address these problems, the DA adds to its support for this anti-fronting legislation a call for a shift to Broad-Based Economic Empowerment (BBEE) and thus a definitive move away from cosmetic economic redress in South Africa. 

 

To keep the policy pro-poor, BBEE would:

 

•    offer wage subsidies to BBEE compliant employers

•    extend the Expanded Public Works Programme so as to up-skill workers

•    give opportunity vouchers to first-time job-seekers, making them more attractive to employers who will get a tax break for hiring and training them

•    simplify labour and tax regulations so that companies can hire and fire with greater ease

•    eliminate the skills development levy, which is more punitive than productive

 

We need to punish firms that cynically abuse the BEE system, but we should go further to move beyond the narrow and ill considered scorecard mentality which actually encourages fronting and also allows some individuals to be repeat beneficiaries of empowerment to the detriment of the majority. If we focus on broad-based economic empowerment instead, we could achieve the economic transformation we seek and put an end to fraudulent business practices in the process.