LAST month, Trade and Industry Minister Rob Davies presented his proposed amendments to the broad-based black economic empowerment (BEE) codes of good practice to the public.
The rationale behind the call for new codes is that, in Mr Davies’s opinion, transformation has not taken place in the workplace and the private sector requires a little more encouragement to transform so that the "country’s economy, control, ownership and leadership are reflective of the demographics of the society in the same way the political space does".
To achieve this, Mr Davies has proposed an extreme policy that has caused many sectors of society to question the efficacy of these codes and ask whether the current codes are such a failure at all.
Should these codes be gazetted in their current form, they will most certainly have a detrimental effect on a large number of South Africans who depend on the nonprofit sector for their welfare.
The sector is made up of 85,000 organisations formally registered as nonprofit organisations by the nonprofit directorate in the Department of Social Development.
The vast majority of these organisations are community-based organisations that provide a range of critical welfare and social development functions — often in partnership with the government.
This crucial sector of our society has been the most vocal about the proposed socio-economic development (SED) code specifically because it precludes any person who might not be black from benefiting under an SED donation. This race issue has caught the attention of the press but is certainly not the biggest problem the nonprofit sector faces when it comes to Mr Davies’s new codes.
There are four major issues that the nonprofit sector must be cognisant of when it comes to their longevity under the proposed BEE codes:
• Only black beneficiaries may benefit under the SED code. The simple definition of black people is a natural person who is an African, coloured or Indian and is a South African citizen by birth or descent.
This means that white people and foreign nationals who do not fit into this definition cannot be regarded as black.
The current SED code requires that 75% of any SED contribution must go directly to black people.
This leaves scope to include a broader range of beneficiaries under SED. The code also prorates points for contributions to nonprofit organisations whose beneficiaries are less than 75% black.
The proposed SED code increases the beneficiary percentage to 100% black beneficiaries and does not permit a prorated calculation when it comes to allocating points. In other words, if less than 100% of the beneficiaries are black, then no points will be awarded.
As has been widely reported, this jettisons the estimated 450,000 destitute white people and unknown number of foreign nationals who do benefit currently under SED.
The Department of Trade and Industry has attempted to backtrack on the issue of prorating in a statement, but the code clearly does not recognise anything less than 100% black beneficiaries.
• Contributions under SED must be for the purpose of "facilitating income-generating activities".
If anyone was concerned about the number of people left out in the cold because of their race or nationality, then they should be very concerned about this definition, which in effect eliminates more than 90% of all nonprofits or community-based organisations operating in SA. In order to award points under SED, a BEE verification agency would need to satisfy itself that a contribution was made to facilitate income-generating activities. If this is not proved, the points cannot be awarded.
t would be very difficult for high-profile charities such as the Nelson Mandela Children’s Fund to prove that their work with children facilitate income-generating activities and so could not regard themselves as beneficiaries under the proposed code.
The definition precludes every charity that cares for orphans, victims of violence, pregnant teenagers, destitute families, the aged, etc. You can choose any charity and you’ll find that it probably does not meet the terms of the definition.
• Raising the exempt micro-enterprise turnover threshold from R5m to R10m. Such enterprises are exempt from implementing any of the requirements under the BEE scorecard. As such, there is no points incentive to make contributions under SED.
By raising the turnover threshold from R5m to R10m, the number of companies that used to contribute to charities because their turnover was more than R5m but less than R10m, will drop.
It is not known what the rand effect will be, but it will no doubt be felt.
• The codes themselves are very difficult to implement and the entry level has moved from 30 points to 40 points.
via www.bdlive.co.za
This is an opinion piece I wrote for the Business Day, it was published this morning. These are four very valid points and should be used in every submission to the DTI about the codes.
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