South African Chamber of Commerce and Industry CEO Neren Rau. Picture: BUSINESS DAY
South African Chamber of Commerce and Industry CEO Neren Rau. Picture: BUSINESS DAY

PRESIDENT Jacob Zuma’s signing into law of the Broad-Based Black Economic Empowerment (BBBEE) Amendment Bill 2013 last week has drawn diverse reactions, with Business Unity SA welcoming it while other organisations have criticised its interference with business and called into question the government’s ability to implement the new legislation.

The focus of the new law is on preventing fronting.

Most emphatically, Gerhard Papenfus, CEO of employer body the National Employers’ Association of SA, says that the new legislation, together with the Employment Equity Act, will make South Africa the most racially defined nation in the world.

Business needs to understand this is a "work in progress", he says, and that, in terms of the ANC’s strategy, legislation of this nature will systematically become more demanding, until South Africa’s racial demographics are reflected.

The legislation "makes it completely unattractive for white entrepreneurs" to start up a business in South Africa. The same applies to foreign investors.

Meanwhile, although the government talks about the importance of small business, its "actions illustrate the opposite", Mr Papenfus says, because "the inherent nature of business is a resentment of interference".

Neren Rau, the CEO of the South African Chamber of Commerce and Industry, says empowerment was not supposed to have been legislated beyond the voluntary codes of good practice, but this has rapidly gained momentum to the point where it is now.

He also says foreign investors do not have to abide by the regulations, and that the "punishment" comes where companies "lie and front". But the "codes are structured so strongly that not to comply is going to be very difficult".

However, Mr Rau also says the government struggles with enforcement of legislation across the board. So, despite the strong enforcement mechanisms in the new law, including from verification agencies — and possible lengthy jail terms for those deemed noncompliant — empowerment will be no exception. "They know they can’t police this effectively."

Business Unity SA (Busa) says it generally "welcomes and supports the act".

Vanessa Phala, Busa executive director for transformation and social policy, says: "We believe that dealing decisively with fronting will go a long way in speeding up the implementation of transformation in the country."

She also says the introduction of penalties is "cautiously welcomed", but that "we have to guard against unintended consequences".

"We believe the act will support the government’s efforts to reduce inequality and poverty and drive transformation," she says.

"We believe the regulation of the verification industry will bring consistency and credibility in the verification regime."

The body also says the inclusion of "organs of state and public entities is positively welcomed".

"The introduction of a BEE (black economic empowerment) commission to monitor (the act) is supported. However, the committee should have sufficient enforcement powers in order to perform its functions," Ms Phala says.

"We believe that the monitoring of any national policy is crucial and transformation cannot be an exception."

However, Mr Papenfus says the problem with fronting illustrates to what extent business will go to avoid implementing this legislation, but still be able to trade. "This legislation has the potential to make criminals of otherwise law abiding citizens," he says.