Opposition from business and other groups to a new fund that the government says will amount to R100-billion to fund black businesses and suppliers may well change the relationship between government and business.
While this issue will be used both by the DA and the ANC to demonstrate their positions on BEE, the real damage could be to the way government and business are working together. The government may find it difficult to make the case that it should receive and disburse more money, particularly when memories of the State Capture era are so fresh.
At the start of the year, Minister of Trade, Industry and Competition Parks Tau confirmed that the government wanted to start a fund with R100-billion to help fund black suppliers.
This came to light through a Parliamentary Question from DA MP Toby Chance.
Very few details have been given and it would appear that the only publicly available information is contained in the full text of Tau’s response to Chance’s question.
This has led to headlines screaming that the government plans to “expropriate 3% of private company profit” for the fund.
And, as News 24 has explained, it appears the money would go to the National Empowerment Fund, which is planning to increase the amount of money it pays out to black companies by more than 4,000% in the next two years.
However, as so often with BEE, the real story may be slightly obscured by all of the shouting.
First, companies would not be contributing any more money to BEE than they are now.
As SA Chamber of Commerce and Industry CEO Alan Mukoki put it on The Money Show this week, the law “already has that requirement. It’s the money that is already legislated for, that companies have been using to drive supplier development, to drive the issues around the introduction of black suppliers into businesses.”
Crucially, he says “It’s not a new fund, it’s not a new cost. It’s a redirection of something that was happening in any event”.
Of course, that is not the end of the story.
Scope for corruption
Because, as Chance and others have pointed out, this would be money that companies are currently giving to black suppliers that would now be given to the government. The government would then decide who receives the money.
The scope for corruption here is obvious.
The government has shown many, many times, unfortunately, that it cannot be trusted with money.
While the State Capture era provides the most obvious examples of this (remember the PIC and Iqbal Surve), more recent history demonstrates what can happen when officials make such decisions.
For example, the Unemployment Insurance Fund found itself with too much money and decided to invest R5-billion in a company that until then, existed in paper form only.
Eventually, to his credit, the Minister of Labour and Employment at the time, Thulas Nxesi, went to court to get a judicial review to stop the deal.
While the director-general of his department resigned, UIF Commissioner Teboho Maruping has only been placed on suspension and could still return to his office.
It would appear obvious that the real risk would be that people with political connections would receive this money rather than companies that really deserve it.
Of course, one can both believe in BEE and oppose this plan, simply on that basis. But now it is likely that various groups will oppose this strongly for various reasons.
Organised business, including Business Unity SA, has already publicly said it opposes this plan. CEO Khulekani Mathe has made the important point to News 24 that this scheme would end up operating more like a tax on businesses than a contribution to BEE.
This is a strong argument. It would mean the government has to justify a new tax rather than a new BEE requirement. This could well lead to technical legal arguments being used against it.
In the meantime, various politicians will use it for their own ends, even though many will be in the same national coalition.
The DA has always opposed BEE and this could be a golden opportunity for the DA to show its voters it has not changed. Because the party might win in court, this could show it as being able to “beat” the ANC.
But this works for the ANC too. Tau and others might well seize on this opposition to claim it shows the DA is really opposed to BEE. This might be useful with local elections not that far off.
The EFF and MK party might well try to use this moment to lambast business, claiming it is simply entrenching apartheid-era privilege.
While this will lead to important arguments, it may not lead to much change.
Business-government relationship
But what could change is the relationship between business and government.
Already, since the end of the pandemic, there has been a process in which government and business leaders have moved much closer to each other. Currently, the President, several ministers and business leaders are in Davos working together to sell South Africa to international investors.
Investec SA CEO Cumesh Moodliar told the Money Show on Tuesday evening how important this partnership was. And, crucially, he predicted that more would flow from this partnership in the form of solutions to long-running logistical problems.
Trust is crucial to this relationship.
While it is entirely justified to be concerned about a very close relationship between business leaders and government leaders (those who worry about Elon Musk’s proximity to President Donald Trump might well also be concerned about President Cyril Ramaphosa’s brother-in-law, Patrice Motsepe), for the moment business and government working together might well be the only option to solve many of our problems.
This means that Tau may well have to provide a much stronger justification for his plan. This may have to include an explanation of why the current system is not working and why the government administering such a large amount of money would be better.
He would also have to explain where the wonderfully round figure of R100-billion actually came from. It seems too magical to be true.
Tau, and others in the ANC, may come to find this is the wrong moment to try to convince cynical voters that this scheme is the right approach. The results of last year’s elections suggest voters believe the ANC should control less money, not more.
Thus, while there are many possible outcomes to this, one of the more likely is that this scheme simply dies a slow, and probably quiet, death. DM