RECENT

All too often, we see empowerment deals where BEE shares are not transferred to the deserving public, but instead go to a few individuals, who claim they will pass on the benefits to those they represent. 

This process is not transparent and does not make for broad-based ownership of South Africa. 

We need to make sure that those BEE consortia who, in published statements over the last decade and a half, claim to represent the 11,8 million people who should be receiving BEE benefits are, in fact, transparently transferring wealth and ownership. 

Benefitting is perhaps not the right word, as the leadership of these consortia are the ones who decide what to do with the value accumulated from these share transfers. 

Often, as a result, BEE deals benefit just this small elite. 

People have noticed this is happening, and there is concern that it does close to nothing to transfer wealth and income. 

What we need for BEE is a similar process to the one that unit trusts or retirement funds are obliged to follow. Yet beneficiaries are more often than not claimed and not verified at all. The gullible publish the numbers and the public is impressed by the big numbers - but wonder when it is their turn.

Like any other financial transaction, verification is needed and therefore the process must FICA people, formally identify them, and then show them the value they are entitled to stemming from the BEE deal – at least on paper. 

We must explain the rules of the trust, and so people will know when it will be possible to exit and sell. Yes, they must like in a property or share transaction have the “title deed”even if they may have a rule that they have to keep the value for a period of, say, five years before they may officially sell.

Then we must appoint outside asset administrators, who will be obliged to send a report with a yearly value of the share that each beneficiary holds. 

For really small schemes, a report every two years would suffice - through an agreed method, which includes the audited financial figures of the firm at the centre of the deal. 

People will then know that they hold a precise value in the BEE scheme.

Very little compliance, or none at all, for BEE consortia, has been a mistake that will cost SA. 

If we indeed have 11,8 million BEE beneficiaries, as has been claimed, then the wealth should have spread to many South African. 

Meanwhile, one must remember that the 16,5 million retirement accounts being held in South Africa probably represent about 12 million people in total - about 80% of whom are black. 

They, too, should hold value through the shares of listed companies, and they also need to be protected - from what is sometimes the enrichment of one or two already-wealthy individuals. 

We know that the value of the BEE deals of the Top 100 companies on the JSE was R350 billion - and I believe that at least another R50 billion can be added to this number for private companies, as well as smaller listed firms and property deals, and so on.......

Administering BEE in a transparent way, as must now happen, will show the majority of South African that serious wealth is, indeed, being transferred to them. 

The R400 billion figure, which was for 2015, would rank as the 8th biggest pool of retirement assets among emerging countries. It is bigger than the total pension assets of Nigeria or Argentina.
 
Per capita, it is one of the biggest transfers of wealth in the world, on paper at least. It has cost time and money and shareholders but it has enriched very few connected people! People are starting to notice that the there are no clothes on the BBBEE empire. 
 
To put the R400 billion in context, it was over 10% of GDP that was transferred in value and it “benefitted” over 20% of the population - on paper - since 2000. No other country has done anything like this transfer of equity on such a scale from the private sector.
 
But ask people on the ground and they say they got nothing. 

South Africa has allowed this massive value to be transferred to the control of very few people. This is the biggest con, that is repeated transaction after transaction, the comatose intellectuals lap it up, and companies hide behind it and tick another box on the regulation list.
 
Yes, one or two trustees can make most decisions, but they need to be representing real people, and those people need neutral, honest, feedback from administrators who are unconnected to the trust or the trustees. 

We are right to expect that companies should comply with BEE, but wealth will never be properly transferred unless BEE holdings are verified and monitored. It will remain a cost on the economy, slowing economic growth for decades, as BEE is seen as a cost by shareholders, workers and management.

So I recommend that no company should deal with a BEE partner without some verification of the real transfer of the shares. I also recommend that government should not accept any BEE deal without a FICA-type process - as these deals often involve billions. Meanwhile, while banks want people with R5000 in a bank account to be verified. The process has failed, in the main; to put it mildly!

Yes, you can state that they cannot sell the BEE shares for, say, seven years - but after that, the individuals should be able to decide for themselves on what to do with what is now their wealth. 

Without transparent rules, BEE will just increase inequality, enriching the few while failing to uplift the many. 

South Africa has missed a massive opportunity and the fruits are ever-increasing demands for equity - and people want their share. 

It is unsustainable, but it is certainly a disaster if no real transfer to the many takes place.
 
Thus far, for most people, BEE was and is a con.

Mike Schussler heads economists.co.za

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Peter Joffe 7/27/2018 12:36:14 PM
BEE Is a con and always has been. Strangely enough the rest of the world , excluding Africa have found out that hard work and knowledge are the only way to success. Fake education in SA is the path to destruction.
Klaus Muller 7/22/2018 11:38:51 AM
Thank you, you confirmed what I suspected long ago, this BEE in its various configurations is a con of gigantic proportions. Klaus Muller
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