state plan to bring retail, manufacturing into BEE net 
1 February 2007

CAPE TOWN — The Dti department is undertaking a review of the BBBEE Act to ensure that economic sectors such as retail and export manufacturing, which have little incentive to transform themselves, are brought into the empowerment net.

Amendments to the PPPFA are also being considered to strengthen the loading in favour of companies that comply with the empowerment codes in the awarding of government contracts.

Dti chief director for empowerment Polo Radebe briefed Parliament’s trade and industry committee on the final codes of good practice, which deputy director-general Lionel October said would probably be gazetted next week after state law advisers had fine-tuned them.

The codes provide general guidelines to firms and state-owned enterprises on how to achieve black economic empowerment.

Radebe said the black empowerment legislation did not give government punitive powers over noncompliance by the private sector companies. The only incentives to transform themselves voluntarily were economic ones, such as being able to qualify for government tenders and licences and to enhance their credibility as suppliers with firms which were eager to comply.

October noted that economic sectors such as retail and export manufacturing, which represented 20%-30% of the economy, were impervious to these economic incentives. This meant some of the biggest beneficiaries of economic growth were not required to do anything about empowerment.

“People are saying that it is unfair that they have to do empowerment — and there is a cost — and at the same time have to compete with companies, even if indirectly, which are not doing anything about empowerment,” October said.

Government had to devise creative ways to apply pressure without tampering with the right to trade, he said. One option would be to give Trade and Industry Minister Mandisi Mphalwa the power to set up charter councils in sectors which had not initiated their own process.

Also, government could restrict the billions invested by the Public Investment Corporation to com- pliant companies.

Of preferential procurement legislation, October said one measure being considered was to make compliance a prequalification criterion for government contracts.

Radebe said it was critical for the success of economic transformation that government departments and state-owned enterprises enforce preferential procurement and demand compliance by the private sector with the codes of good practice. Already, the use of this instrument was having a ripple effect in sectors of the economy engaged with government departments.

African National Congress MP Ben Turok was concerned that the codes of good practice were slanted towards personal enrichment rather than the social development of small, start-up companies.

But Radebe said only 45% of the scorecard related to elements important for the middle and upper classes. Most of it related to skills development, small enterprises and socioeconomic development through job creation.

Linda Ensor, www.businessday.co.za