The equity-equivalents policy, which allows foreign companies to invest in South Africa without ceding directorship or an ownership stake in local companies, is being considered insofar as it can preserve the advancement of economic transformation.
This is according to the minister of trade, industry and competition, Parks Tau, who was replying to questions in a plenary of the National Assembly in parliament on Wednesday afternoon.
The original question came from DA MP Toby Chance, who asked the minister what form of B-BBEE he intended to initiate in light of his recently announced review of the policy.
Chance asked how the review would fit in with the growth and inclusion strategy of the GNU. Later in the session, Bosa MP Mmusi Maimane asked if the extension of equity equivalents would be applied to local companies.
The question also emanated from an interview the minister had with veteran journalist JJ Tabane.
“The provision for equity equivalents was created to enable foreign direct investors that are multinationals to be able to invest and benefit as empowered companies, if you like, using equity-equivalent programmes,” Tau replied.
“This would be on the basis of companies saying: ‘I’m a multinational. I’m listed on the New York Stock Exchange, or wherever. I’m investing in South Africa. I do want to meet your B-BBEE policy objectives. Therefore, can we have a mechanism through which we do everything else, but on the equity side, be able to invest cash in the programme?”
Equity equivalents re-entered the discussion on economic transformation policy when news emerged that the richest person on earth, Elon Musk, was interested in having his satellite internet business, Starlink, enter the South African market, but the SA-born American billionaire did not want to cede equity or leadership in the business.
At the time, communications minister Solly Malatsi indicated that equity equivalents could be considered instead of B-BBEE for Starlink to enter the local market. This got considerable pushback from the ANC and communications committee chair Sangoni Diko.
In reference to Maimane’s question, Tau said while the question of equity equivalents does not immediately apply to South African companies, there was room in the review to consider equity equivalents for local companies, so long as it did not reverse the progress that B-BBEE has made in the patterns of ownership in the South African economy.
“You are not talking in the context of South African companies because these are already invested in the South African economy. Are we looking at mechanisms through which locally based enterprises could be able to participate in a scheme of one form or the other? It is part of the discussions that we are pursuing in terms of the Transformation Fund.
“One of the things, though, that we should guard against is the dilution of transformation and empowerment by creating multiple schemes that undermine the transformation objectives. So, as long as we put the objective there and we achieve the mechanics, we can always work around [that].”
The minister said B-BBEE was covered in the statement of intent of the GNU, as a key need to transform the economy. Redress of historical economic inequality will remain a central objective of the current GNU in line with the constitution and prevailing legislation, he said.
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