15 April 2005
	BEE CODES COULD BE TANGLED IN RED TAPE

The chorus of complaints from black and white business over government's latest initiative to accelerate broad-based black economic empowerment is growing louder. The source of the unhappiness is the codes of good practice tabled by the department of trade & industry last December, designed to plug weaknesses in various sectoral charters and to bring companies outside the main sectors under the rubric of empowerment. As with many regulatory initiatives, the motive behind the codes is exemplary. They aim to weed out bad practices such as fronting, where white companies get credit for doing deals with black partners without ceding anything. They are also meant to make empowerment deals durable by ensuring that they offer real and more immediate benefits to new black shareholders. The problem is that the regulatory cart has been put before the horse. While the aim of the codes is to introduce uniformity and clarity, they are being superimposed on eight sectoral charters which are already at advanced stages of negotiation, or already gazetted, as in the mining and liquid fuels charters. Imposing uniformity in these conditions causes consternation. Business's main preoccupations are that the misalignment between the charters and the codes is creating uncertainty: it remains unclear which takes precedence. The effect is that empowerment deals are frozen as companies wait for clarity. Companies that already fall under the charters are dismayed that they could be told to go back to the drawing board after expending time and energy hammering out sectoral deals. Ideally, the codes should have formed the bedrock on which the charters were built. Since that opportunity has now passed, it is incumbent on government to ensure that the empowerment process doesn't become ensnared in complexity and confusion. SA cannot attain the economic growth it needs without a more equitable distribution of wealth. But that won't be achieved, nor will SA earn a reputation as a desirable haven for investment, if bureaucratic zeal trumps commonsense and simplicity.