Are B-BBEE schemes BEE fronting or creating wealth? Depending on who you talk to, on the one hand widespread BEE fronting occurs, while on the other hand BEE is creating wealth amongst the wider public.
BEE fronting is widespread
Commissioner Zodwa Ntuli says “it’s time South Africa deals decisively with fronting by terminating operating licenses of companies who lie about their black ownership status.” She maintains that economic ownership by black people in the country increased slightly from 29% in 2018/19 to 31%, according to her 2020 report.
She also pointed out that even though the Commission saw improvements on paper regarding ownership, this didn’t match black people’s voting rights in listed companies, nor did it match their representation in management that controls these companies.
BEE’s create wealth
On the other hand more than 150,000 SA workers now own listed shares through employee share ownership schemes (Esop), which are estimated by the department of trade, industry & competition to have a total market value of more than R100bn in 2021.
Esops have proven to be a reliable vehicle for increasing black equity ownership, hence they are commonly used as investment vehicles to advance broad-based BEE, whereby companies allocate shares to black employees when they conclude BEE transactions. Some of these schemes are listed on the JSE in the empowerment segment, to enable black retail investors to buy and sell BEE shares to grow their wealth.
Many BEE schemes are bona fide and successful
There is little doubt that many BEE schemes were established on a bona fide basis and are successful. By her own admission, the Commissioner has not interrogated the details filed with them by law. Furthermore, for her to maintain that companies who lie about their ownership status should have their operating licenses terminated, merely highlights her lack of understanding of the small number of businesses that require a license to operate, and the right of their owners to be in business.
The short answer is that the Commission must get on with fulfilling the statutory obligations associated with its establishment. The BEE commissioner appears to put her status above everything else, almost trumping the Constitution.
