BEE codes provide scant clarity

By Nicola Mawson, Contributing journalist

Johannesburg, 15 Dec 2006

The Department of Trade and Industry's (DTI's) recently released phase two of its Codes of Good Practice on broad-based black economic empowerment (BEE) is expected to provide some clarity to the ICT industry, but failed to resolve a clash with another key piece of legislation.

Yesterday, the department briefed South African business on what the codes entailed and outlined the scorecard, levels of equity ownership and employment equity goals.

Andile Tlhoaele, executive director of Coral-I Solutions and a member of the ICT charter steering committee, says while government has clarified some issues, such as ownership equity equivalents, a lack of clarity between the codes and the Preferential Procurement Framework Act leaves the codes "toothless".

He explains vendors wishing to tender for government business have to comply with the Preferential Procurement Framework Act, as this is a National Treasury requirement. However, the Preferential Procurement Framework Act's definitions of historically-disadvantaged individuals clash with the codes' definitions, he says.

As a result, government's aims of transforming the economy and growing smaller enterprises on a sustainable level will be undermined until certain sections of the Preferential Procurement Framework Act are amended to fall in line with the codes, Tlhoaele says.

New dawn

Speaking at the launch of the codes yesterday in Sandton, DTI director-general Tshediso Matona said it was a historic moment that "all of us concerned about change have been waiting for".

He added that the codes provided for "sustained, inclusive, economic growth as we go forward". Matona also said that the release of the codes would provide for an environment of stability and certainty in the economy, enabling investment.

"A new dawn is beckoning for the future of this economy," said Matona. Tlhoaele disagrees, saying there is not much new information in the codes. "Basically, the wording has been clarified."

A handful of changes he cites include the focus on equity equivalents, which, chief director of BEE in the department Polo Radebe explains, allows multinational companies to make alternative arrangements to the sale of equity.

Instead of having to comply with the equity ownership requirement of 25% and one voting right, companies could run programmes instead, she says. However, Radebe warns that such programmes, which will have to be approved by government, would have to carry a weighting equivalent to the sale of equity.

Tlhoaele said other areas of clarification include follow-through processes and share ownership schemes. Weighting of points on the scorecard have also been changed, he says.

Radebe added that, once the codes have been gazetted early next year, previously approved industry charters would be aligned to the codes. However, Tlhoaele is confident the ICT industry's charter will be gazetted as a code as a matter of course and without much fanfare.

Last week, Department of Communications spokesman Albi Modise said once the final cross-sector BEE Codes of Good Practice had been gazetted, the next step will be to align the ICT charter with the provisions in these codes. The alignment process should be finalised by the first quarter of 2007, Modise said.