New Draft B-BBEE Codes: Are we Rushing Transformation to the Detriment of SME Development?
By Sibusiso Nkosi, B-BBEE Specialist with over 10 years’ experience in Broad Based Black Economic Empowerment.
This the first time that we have had two changes to the B-BBEE Codes in a short space of time.
While waiting for the outcome of the March 2018 draft, in mid-June we were hit by more changes on the B-BBEE Codes.
[Editor’s note: On 29 March 2018, the Minister of Trade and Industry proposed amendments to the B-BBEE codes. Key proposed amendments include B-BBEE recognition for large enterprises (with R50million+ turnover) which will allow them to also qualify for deemed level 2 or level 1 B-BBEE recognition based solely on black ownership of at least 51% or 100% determined using the flow through (and no other) principle.]
Based on both changes, it seems that Radical Economic Transformation is the driving force of those changes. There is a level of haste in pushing transformation in the country.
In my view, government is either taking a new direction in using large corporations to drive economic change speedily or they are contradicting themselves completely
I have questions
The first draft completely exempted large black-owned businesses from having to do any initiatives under the B-BBEE scorecard, except to prove that their black ownership is legit. That means, only those businesses who are not majority black-owned would have to pull their weight to close the gaps that they are benefiting from. With these latest changes, a large black-owned business can now qualify as an Enterprise and Supplier Development (ESD) beneficiary. Where is all this going?
In my view, government is either taking a new direction in using large corporations to drive economic change speedily or they are contradicting themselves completely. Government once said that small businesses are the drivers of the economy, hence, only Exempted Micro Enterprises (EME) and Qualifying Small Enterprises (QSE) could be Enterprise Supplier Development (ESD) beneficiaries.
However, now large businesses with a better business case of why they should get the ESD funding will trump the needs of the small businesses with these changes. This could be a contradiction to small business growth in changing the economy, or it could be the aim. School might be out for ESD programmes on EMEs and QSEs.
I feel that government was looking to the growth of small businesses in hopes of creating jobs, however, their growth has remained slow and they [since] become a far-out future pipeline of economic change, but people feel that change needs to happen now. So, by making big black businesses ESD beneficiaries and exempting them from spending large amounts on other elements, you are basically setting a stage for them to grow exponentially and create economic change on a large scale (like to grow their capacity to create lots of new jobs for black people).
Instead of using a large number of small businesses to change the economy, it seems like we will be using large black businesses to do so. What will happen to small business development then?
The question is: Are we rushing transformation and missing the point on small business growth or are we completely changing the strategy?
It may seem like the strategy is being changed. Instead of using a large number of small businesses to change the economy, it seems like we will be using large black businesses to do so. What will happen to small business development then?
Well, it [small business development] might move from being a national agenda to being Corporate Social Investment. Or, maybe this is all a contradiction that will fixed by not allowing these changes to go through. We will have to wait and see.
My question is: Are we rushing transformation or is it about time we do something this drastic? I would love to hear your views.
This article was originally published on Linkedin, it is republished here with permission.