AFRICANGLOBE – South Africa introduced new ownership regulations to encourage large companies to support and invest in small, Black-owned businesses instead of issuing them shares, according to Trade and Industry Minister Rob Davies.
The changes are aimed at improving Black people’s “real involvement” in the economy, Davies told reporters in Johannesburg on Thursday. The new rules will put more emphasis on pushing large companies to develop and support the growth of smaller manufacturers, he said.
“That is the model of industrialization which has characterized Asia and which I think is very much the type of industrialization which we want to see in South Africa, where big companies work with small companies as suppliers,” he said.
South Africa’s empowerment regulations are designed to boost participation in the economy by Black citizens and other groups who were disadvantaged during apartheid, which ended with all-race elections in 1994. Black empowerment programs benefiting community and special-interest trusts and employees will carry less weight when setting a company’s compliance rating than previously, the Department of Trade and Industry said in a notice on Tuesday.
Companies that don’t participate in developing smaller businesses will lose points in their compliance assessment, Davies said. The rating is required to secure contracts from government and some other companies.
“If it means that somebody was scoring high in the old codes and they go down on the new codes, well, we’d expect that,” Davies said. “We want it to be a tool of encouraging people to change behavior.”
The new rules threaten the empowerment of workers and communities, the National Union of Mineworkers said in an e-mailed statement on Friday. The union, an ally of South Africa’s ruling African National Congress, said it continues to seek 10 percent employee-share ownership across all sectors.
The changes will be an “unwelcome surprise,” to South African companies, which have already taken steps to comply with the previous rules and compliance scoring methods, according to Bravura Consulting, which advises White-owned companies on Black-empowerment legislation.
“It appears as though companies will need to adopt very different strategies” for empowerment, the adviser said in an e-mailed statement.
Industry-specific Black empowerment codes must be aligned to the Department of Trade and Industry’s scorecard, according to Tuesday’s notice. Mining companies are subject to a different set of Black-empowerment regulations under the mining charter “at this stage,” Nick Holland, chief executive officer of Johannesburg-based miner Gold Fields Ltd., said by phone on Thursday.
“It’s disturbing if the goalposts keep changing,” he said. “The one thing we would prefer as a country is to have a unified set of rules that are stable and consistent because it’s much easier for anyone to make long-term business decisions.”
Standard Bank Group Ltd., Africa’s largest lender by assets, is considering the implications of the notice, particularly the parts dealing with the status of industry-specific codes and the measurement of ownership, according to Wendy Orr, the bank’s head of inclusion.
“Once we have fully understood the implications of these clauses for our business and the sector, we will be in a position to provide an informed response,” she said.
South Africa’s empowerment program has helped create a generation of Black businessmen, some of whom are now worth hundreds of millions of dollars. Prominent beneficiaries include Patrice Motsepe, the first Black South African dollar billionaire and the brother-in-law of Deputy President Cyril Ramaphosa, who also took stakes in assets ranging from mines to a McDonald’s Corp. franchise in his time out of government.
By: Rene Vollgraaff And Liezel Hill
White South Africans And The Economic Apartheid