KHAYA SITHOLE: Slow BEE progress a poser for policymakers

The debate on BEE policy escalated in the private and public sectors in the past few weeks.

Dis-Chem CEO Ivan Saltzman wrote in a clumsily worded internal memorandum that the group’s progress towards a demographically representative workforce was so woefully inadequate that its executives had placed a moratorium on hiring new white managers. He pointed out that the company risked being fined for failing to meet its employment equity targets, penalties the company would prefer to avoid.

The basis for this alert is a common problem across businesses in SA where the demographic profile of management — particularly senior managers — does not mirror the national demographic.

In its latest employment equity report, the BEE Commission indicated that while black citizens made up 79% of the economically active population and white citizens 8.8% in 2021, top management representation was 63% white and 17% black. This persists despite the business commitment to foster transformation in workplaces.

For policymakers, the slow progress towards a convergence in the demographics of the population and workforce is a political hot potato. According to the Employment Equity Act, the department of employment & labour may fine a company that fails to prepare or implement an employment equity plan up to 10% of its turnover. In the case of Dis-Chem this could amount to R3bn for its 2022 financial year.

Labour minister Thulas Nxesi has advocated still harsher penalties for companies that do not meet employment equity targets. With the general election not that far off, it is inevitable that such political rhetoric will escalate. At the core of the problem, according to the business sector, the managerial skills available in the market don’t mirror the national demographic, for various reasons. The difficult question is where the responsibility for co-ordinating the national skills pipeline and employment practice really lies.

This transcends the business sector. In 2017, the finance minister issued procurement regulations indicating that indicated state organs could apply BEE prequalification criteria, which in effect meant  noncompliant companies could be eliminated at the first hurdle — even before questions of technical competence and pricing feasibility were entertained.

The inevitable dilemma associated with this model is that organisations such as Eskom and Transnet, which need to acquire high-value, specialised goods that are not readily available in local markets, are unable to meet this hurdle unless local middlemen are created to facilitate the procurement process. Naturally, this delays processes and, depending on the financial modelling, also has cost implications.

Final nail

It was these issues that Eskom director Mteto Nyati raised in a recent interview that has now become a public debate. The invalidation of the 2017 regulations by the Constitutional Court earlier this year — on the basis that individual institutions rather than the minister should write the rules — resulted in hundreds of state enterprises applying for exemptions from the procurement rules in the absence of new regulations.

The new regulations, designed to be the place holder until a new procurement bill is finalised, omitted all reference to BEE and prequalifications. Rather, individual organisations are free to identify specific procurement goals they wish to pursue. Interpretation of the new regulations has been mixed, with some regarding it as the final nail in the pursuit of BEE.

The confusion created, with no-one seeming to know what happens next, is  indicative of a state struggling to find the right balance between ensuring agility and efficiency in public procurement, and using the state’s procurement muscle to drive empowerment.

Unfortunately for policymakers, political contestation in the build-up to the 2024 general election requires difficult decisions about what the plan is for dealing with this state of limbo.

• Sithole is an accountant, academic and activist.