New BEE codes likely to do more harm than good

26 January 2015 - 09:07 By The Times Editorial
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You would have to look hard to find someone who says that black economic empowerment should not have happened. South Africa needs to create wealth and spread it, and black participation in the economy must be broad and deep.

But growth and redistribution do not necessarily go hand in hand and we need clever incentives to get these two concepts to work in harmony.

The amended BEE codes, due to come into effect in May, sound like a good idea. If implemented in the right way they could draw in many small enterprises. And today's small could be tomorrow's big, which would mean more jobs. With one of the highest unemployment rates in the world, South Africa has no time to waste.

But incentives can have unintended consequences. Surely we should act to prevent outcomes that look highly likely to be calamitous - such as those emanating from the amended BEE codes.

Small businesses usually mix management and ownership. The shareholder is involved in day-to-day operations, especially in the R10-million to R50-million company value bracket. Owner, founder, manager and hardest worker usually have the same ID number. So time is his most valuable resource.

To accelerate black business, bureaucratic requirements must be as simple as possible.

Do not bog down the entrepreneur with forms and call centres. Burgeoning businessmen need time to think, to be creative, to manage their people, to find and work with partners.

Onerous spending obligations for training can be more of an albatross than an incentive. And if companies cannot afford legal advice on how to comply, they simply won't.

Surely the idea should be to draw in emerging entrepreneurs, not drive them out.

The Department of Trade and Industry needs to re-engineer the amended codes if it wants to create and spread wealth.