This past Friday there was discussions with regard to tweaking the Black Economic Empowerment regulations with companies not listed. Companies looking to enter the SA economy could forfeit 3% of revenue paying towards a black business development fund then keeping the 33% they would have had to sell to black business partners. These black business partners offer no value and are just leeches looking for easy investment opportunities that are being sold off at cost prices. This BEE policy has benefitted a few and not the masses and is just a racist racketeering law guaranteeing those in power can earn more.
Existing companies who were not BEE compliant may take this opportunity paying in 3% allowing them access to various tenders and business deals they are currently excluded from. The idea you can keep your staff and board without including a black partner/owner would be appealing to many.
Many years ago I was involved with a company that added a black business partner only to regret this decision due to this partner adding zero value. The problem with including black ownership into various businesses there is no guarantees especially as most of these investors will not have experience in the various industries. In most cases when you add a partner this is not about the money, but the knowledge and expertise that person can bring to the business.
I think if this option was open from the very beginning of when BEE was first implemented the majority of companies would have very few or no black business partners on board. Many today are simply figureheads with their names on the directors list and that is where their value starts and ends.
If we contemplate Elon Musk's Starlink coming to South Africa this ruling would make the deal a very high possibility of happening. The no need to sell off 33% to black investors who were only interested in buying the shares at start up prices sitting back and reaping the guaranteed rewards, Offering a 3% on revenue is far more sweeter for a company to deal with without the extra baggage knowing through all your hard work you are only making 66% instead of now 97%. Actually the 3% is on revenue so in reality would be between 1% and 2% depending on your profitability percentages.
My businesses I am involved in have never had BEE status and never would as we have never needed this aspect. One could imagine the resentment of working with business partners who were forced upon you and don't deserve to be there. The question I have now is how many companies if given the opportunity would get rid of their black partners and swap them for the 3% deal? Yes there would have to be pay pouts for those partners with share holdings, but many must be without shares on the pay roll with inflated salaries. I wonder if the government has contemplated this type of scenario unfolding and if this would only apply to companies registering for BEE status and not existing companies. Many of these companies could save themselves a small fortune depending on how they have set their companies up and this will be a fascinating watch depending on how this new system is worded.
