NO COMPANY is forced to implement the government’s black economic empowerment policy, which is a voluntary programme, the director-general of the Department of Trade and Industry, Lionel October, said in Parliament on Tuesday.
Furthermore, foreign companies are allowed to opt for alternative schemes if they find the policy unacceptable.
He was responding to criticisms by opposition MPs about the proposed Broad-Based Black Economic Empowerment (BBBEE) Amendment Bill, which they argued would impose an excessive burden of compliance on business, was based on racial criteria and would act as a disincentive to foreign investment.
Mr October stressed the need to redress the past during a briefing on the bill to Parliament’s trade and industry committee.
Foreign companies, Mr October said, were not obliged to implement BBBEE if the policy did not gel with their business models, and could instead propose "equity equivalents", such as skills development or small business development.
He said that South Africa had opted for a voluntary and "very modest" path towards empowerment, unlike in Malaysia where it was compulsory, but he nevertheless believed the policy was an effective one.
The amendment bill will align the law with the codes of good practice, which have been amended to award more points for entrepreneurial and enterprise development, provided this was undertaken on a sustained basis by including the firms into supply chains.
Mr October told MPs that the government was moving into a new phase of BEE, which was to foster the creation of black entrepreneurs and industrialists in the productive sectors of the economy.
The first phase was an elitist one involving the transfer of share ownership, while the second phase was meant to redress this shortcoming by providing for more broad-based schemes such as employee share ownership, among other things.
The bill creates the offence of fronting (anything which undermines or frustrates the achievement of the act) and introduces stiff penalties for it.
The maximum penalty proposed for individuals for misrepresenting BBBEE status is 10 years imprisonment or both a fine and imprisonment. In the case of companies, a fine of 10% of annual turnover.
The bill also provides for the regulation of the verification professionals who rate the BBBEE status of enterprises for an accredited rating agency.
This will be an interim measure, as the ultimate aim is auditors registered under the Auditing Profession Act to perform this work and for the Independent Regulatory Board for Auditors to function as the verification agency regulator.
The bill proposes to set up a BBBEE commission within the department to conduct monitoring and compliance, as currently there was no adequate institutional mechanism for this, Mr October said.
Compliance in some sectors such as agriculture, manufacturing and retail was very low, and ownership patterns were still skewed.
Having the commission, with its own independent commissioner, within the department would eliminate the need to set up a costly independent institution.
There has already been wide consultation on the bill, the first draft of which was released in December 2011.
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