Black days for BEE

The government will not bail out black economic empowerment players whose investments have been hammered by the slowdown in the world economy.
The move has been welcomed by Cosatu and the Black Management Forum.

No instrument

"There is no instrument being considered for BEE companies taking a knock from the [financial] crisis," said trade and industry director-general Tshediso Matona. He said companies that needed assistance could approach the DTI's finance institutions, the National Empowerment Fund and the Industrial Development Corp. Those institutions, he said, could decide whether to "warehouse" BEE shares or employ other strategies to help ailing emerging market players. "I would encourage BEE players who need support to avail themselves to those agencies. As to whether they will help, I can't prejudge. Each case will be dealt with on its merit," Matona told journalists at an economic cluster briefing session yesterday.

Frencel Gillion, the NEF's chief investment officer, told Business Times yesterday: "The NEF typically funds medium-sized BEE transactions in an unlisted environment that have not had the same exposure to the fall in listed equity prices. "The institution has, however, had to put in place measures to support clients who have had to deal with the increased cost of borrowing and worsening economic conditions in general. "The NEF's view is that the BEE parties should engage with the vendors of companies and with financiers to find a solution for the particular challenges faced in the relevant transaction," he said.
Jimmy Manyi, president of the Black Management Forum, said BEE investors should already be aware of the ups and downs of business cycles and value fluctuations, and that a bailout should not be provided for the deals.

Morally bankrupt

He said: "It would be morally bankrupt to help only the investors and say nothing about the rest of the value chain. If this bail- out happens, it must benefit the whole value chain; from the social development level to employees, and enterprise development, and not just the investors." Though no specific measures have been devised for struggling BEE players, the government appears to be considering cushioning struggling sectors of the economy.
Matona said the government was keen to protect industries that were battling.
The implementation of textile quotas on Chinese imports was not enough to prop up the textile industry. The government, he said, would "do everything in our capacity" to help. He said there were discussions between his department and the IDC to grant concessionary loans to struggling companies.

Tiny minority

Patrick Craven, Cosatu's spokesperson, said: "We are not opposed to the principle of BEE in fact, we support it. But our support cannot be unconditional.
"Our concern is that too many BEE deals have benefited a tiny minority and have meant nothing to the majority. Any assistance must be on the condition that ownership should be distributed more broadly to the community and workers." Last month, Finance Minister Trevor Manuel told parliament he had no bailout plan for such companies. "If you do the auto [sector] today, will you do textile or footwear tomorrow? You can't be merely responding to those whose voices are the loudest.  "It has to be based on sound policy. It's hard at this time to distinguish between the necessity of policy, and favours."

Mpumelelo Mkhabela, Business Times, www.iafrica.co.za, 5 December 2008