The duplications and contradictions in the BEE Codes of Good Practice and sector charters are counter-productive to their smooth implementation — one of the two is unnecessary
The Department of Trade and Industry (DTI) spent about three years engaged in a consultation process that culminated in the gazetting of the Broad-Based Black Economic Empowerment (BBBEE) Codes of Good Practice last February. The codes provided a one-year grace period during which our economy’s various sectors could continue to use the outdated, narrow Black Economic Empowerment (BEE) approach, which focused on ownership and management control.However, the current impasse in the Financial Sector Charter (FSC) on the question of ownership targets is now threatening to derail the whole FSC process.
Surely logic would dictate that if you have two pieces of documents that mirror each other, then one of them is unnecessary. Yet the charterists claim that the codes are not always able to accommodate sector-specific nuances and that if the charters are ditched, certain “undertakings” would be lost.This claim reflects an incorrect understanding of the codes, which state that “the fundamental principle for measuring broad-based BEE compliance is that substance [ie, any reasonable interpretation consistent with the objectives of the BBBEE Act and its associated strategy] takes precedence over legal form”.
The principles outlined in the codes provide a direct answer to the accusation that they are inflexible. The irony is that it is the sector charters which are inflexible, as they prescribe exactly what must be done under each element, rather than providing a general guide.It is interesting to note that the information and communications technology sector charter, despite its unique characteristics, includes elements identical to the codes; so does the sector charter for accountants, who have found innovative ways to craft its elements in accordance with the codes.
Furthermore, the recent baseline study by the Presidential Working Group on Black Business, the DTI and the Presidency will be meaningless if the sectors continue to employ different standards.The Black Management Forum (BMF) advises the charterists to seek alignment of sector nuances with the generic codes, rather than inadvertently increasing business costs by proliferating charters and different standards.
By way of example: investing in black small and medium enterprises, assisting with access to finance and targeted investment can easily be accommodated in the enterprise development element of the codes. The Mzansi account and low-cost housing are excellent examples of executing the socio-economic development category. Given the present focus on the number of points needed, rather than on the spirit of the codes, may we point out that these two elements amount to 20 points on the scorecard!? If one removes the question of BEE financing (which should not have been there in the first place, since it is a normal business transaction from which the banks profit), there is nothing to lose by ditching the FSC.
Some people believe the proliferation of sector charters is an indication that industries are serious about transformation. On the contrary, the BMF believes the charter processes have opened a window for those who do not support transformation to try to legitimise current business practices – with the added benefit of scoring transformational points.