New BEE codes 'will bankrupt the little guy'

New black economic empowerment rules - set to come into effect in three months - could see many businesses in the red.

Some of the sectors that were required to implement the BEE codes from May are running on very thin profit margins, according to Free Market Foundation analyst Loane Sharp.

Companies in the construction and the transport and logistics sectors had profit margins of between 3% and 4% of revenue, Sharpe told The Times.

This put them in an awkward position as the new codes require them to spend as much as 6% of payroll on training and development.

"This is the most important incursion on the market-orientated nature of the South African economy in 20 years," said Sharp.

According to Keith Levenstein, CEO of BEE advisory firm, EconoBEE, businesses with a turnover of over R10-million are at risk of becoming non-compliant when evaluated.

"A company currently at a level 4 will almost certainly fall to level 6, and possibly even further. Management will need to do additional work to retain their current BEE status," he said.

Levenstein thought the codes could be delayed as it would be near-impossible for the department to have worked through all the responses and comment it received from the public.

Sharp described the codes as a government scheme to shun JSE-listed companies in its R1-trillion of planned infrastructure investment, hoping to channel state spending to emerging black-owned businesses instead.

But JSE-listed companies are sitting on a mountain of cash for projects, as much as R760 billion by Sharp’s calculations.

“They have been sidelined to such an extent that they are looking for opportunities mostly outside the borders of this country.”

ANC secretary-general Gwede Mantashe has accused the private sector of being on an “investment strike”. But big business has often said onerous regulations and red-tape as the reasons for not investing more.

Sharp thinks the economy could return to growth of more than 4% within six months if business was able to pump this money into the economy.