For the past few months, an emotive, sometimes divisive, debate has been raging about the empowerment laws of the country. This debate has reached a stage where it could easily set the growth agenda back by policy inconsistency.
It needs to be managed carefully to avoid this negative outcome.
Two strands are fuelling this debate.
The first relates to Starlink’s bid to be licensed for its satellite internet operation in SA without following the country’s empowerment laws.
Related to this, this newspaper reported exclusively this week that Elon Musk’s Starlink has no intention of walking away from SA.
And second, two ministers — Parks Tau, the trade, industry & competition minister, and Solly Malatsi, the digital technologies & communications minister — have lobbed off two policy grenades.
The former has proposed a R100bn Transformation Fund seeded primarily from the fiscus and private sector’s enterprise and supplier development (ESD) contributions; and the latter has issued policy directives on equity equivalent investment programmes (EEIPs).
Tau’s grand fund, to be managed by the National Empowerment Fund will, if it sees light of day, invest in small, black-owned businesses across all sectors.
Musk’s stinging criticisms of the country’s empowerment laws, especially the requirement for 26%-30% black ownership of publicly licensed entities, have muddied the debate, and made Malatsi’s job difficult.
For over a decade, multinationals like Starlink, the satellite internet division of SpaceX, have been allowed to operate in SA without selling 30% of their equity to locals. Instead of ownership, they implement EEIPs by investing in socioeconomic causes like building schools, clinics and equipping police stations.
As well as hiring locals, they can also contribute to training programmes to make up for ownership. These EEIPs have been successfully used extensively by the motor, computer, cellphone manufacturing and banking multinationals.
SA-born companies have used management, ownership and ESD metrics to score BEE cards.
Through these, thousands, if not millions, have been brought into the ownership and management control of SA’s large companies. Thousands of small businesses have been integrated into big businesses’ supply chains, and a new industry of ESD practitioners was created.
In and of themselves, the two policy propositions are not problematic. But the current environment is not conducive to a constructive debate.
Extending EEIPs to home-brewed companies will likely be seen as weakening empowerment requirement. In an environment where the “once empowered, always empowered principle” remains contested, this is unlikely to pass.
Also, faced with electoral losses, the ANC is throwing everything at avoiding complete ouster. In the past month alone, President Cyril Ramaphosa has given about three public addresses in defence of BEE and transformation.
His party has been ignoring voices of its partners in the government of national unity (GNU). At least two laws, for example, the National Insurance Act and the employment equity regulations are headed for courts.
The DA, the second-largest partner in the GNU, has already shredded Tau’s fund. If he yields to the temptation of turning the fund into law, a good election tool, the DA will haul him before the courts.
Despite appearing to be a focused intervention, Tau’s fund has the potential of widening the empowerment debate to another BEE commission.
Judging by the vents of the past week, these two policy instruments are potential candidates for a tit-for-tat spat between the ANC and the DA.
As things stand, the DA has decided to pull out of the national dialogue if Ramaphosa doesn’t fire three ministers. If the DA follows through on its threat, the ANC might be tempted to put empowerment and other transformation measures on the dialogue’s agenda, paving the way for a broader confrontation.
Though EEIPs have been relatively successful, the misalignment between government agencies has worsened uncertainty. A case in point is Icasa, the communications sector regulator, which doesn’t regard EEIPs as binding to it.
Instead of piecemeal or overhaul changes, the government needs to bring back policy certainty through consistency and predictability in the application of existing laws and regulations.
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