At the end of January a proposal was put through by the Department of Trade, Industry and Compliance also known as the DTIC. The proposal is a real shocker and basically is an extra tax burden on every business sin South Africa.
The proposal is about creating more funding for Black Economic Empowerment (BEE) which is targeting 3% of annual business net profits after tax. What is being proposed is that all companies pay in the 3% to earn a maximum 20% BEE status points.
This is only the tip of the ice berg as the rest of the proposal is just as ludicrous. Points are awarded for businesses purchasing from black owned businesses and receive an additional 7 points. There are additional bonus point structures allowing for an additional 2 points to be earned depending on the percentage of purchases and whether those black businesses are less than 2 years old.
What this means is the government can grab an extra R100 billion from businesses and you have no say in where this goes or how it is being used. This is another ploy at stealing money where there was no money before and have made up new rules to create more wealth through "official" theft.
If BEE was run out as it should in the beginning offering those a helping hand then this would not be up for discussion with the only problem it only benefitted a few and will carry on benefiting those who are already wealthy.
This is going to put even more pressure on businesses trying to force them to comply with paying the extra 3% and who they procure their products from. This is starting to look like the tender game where price has no baring and is more about who you support. Tenders in my view should be down to price and service and not paying an over the top price to another company just because of ownership as that is crooked and not how business should be done.
This is going to impact businesses like never before because companies will lose business unfairly because of the ownership and not because they offer great service with a great price. This will directly impact employment and if this gets passed which it probably will at some point because it has already been put forward. Those voting on this will no doubt be the ones in line benefitting from these new changes.
This will destroy the current supply chains and increase the cost of those products with new companies springing up offering the same services at inflated prices because businesses are being forced to use them. At the same time this will dry up investment and those invested will leave the country. This is not a fair playing field and is more racist policies that will back fire resulting in increased unemployment.
This is the problem when you have government officials who do not understand business and the effects of their decisions on the economy. Those that are wealthy may think they are businessman, but in all reality they never made their wealth through normal channels so have no understanding how a business works. When you exclude businesses from being able to grow like they would under normal circumstances or even compete then you are removing the ability to trade and that is what is going to happen.
