Europe calls for relaxation of BEE laws for new and current investors

Europe calls for relaxation of BEE laws for new and current investors

- President Ramophosa claims that European has “ nothing to fear” with regards to land expropriation

- More then two-thirds of European companies in South Africa are either not BEE or did not disclose their ratings, report finds

- Europe calls for relaxed BEE policies for new and existing companies in the country

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Europe is eager to trade with South Africa, but has requested some concessions to be made before investing in the country, including relaxation of BEE rules.

President Cyril Ramaphosa’s trip to Brussels for a summit with South Africa’s largest trading partner, the EU, was characterised by goodwill and a willingness to negotiate.

However, last week’s summit, the first in five years the Europeans had demands of their own including numerous concessions to facilitate an increase in investment for SA. At the top of their list was ownership rules under the Broad-Based BEE codes of good practice.

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These, the EU said in its discussion paper, were onerous and disregarded the employment these companies created, which it put at more than 500 000 direct jobs.

The paper was compiled following a Black Management Forum ( BMF) research report that covered the impact of EU investment on inclusive growth and transformation. Other negative factors included localisation requirements, land expropriation and policy uncertainties.

President Ramaphosa, along with Finance Minister Tito Mboweni and Trade and Industry Minister Rob Davies had their hands full relieving the investors fears regarding land expropriation, claiming that they had “ nothing to fear”.

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“The EU is South Africa’s largest trading partner and it has been so for a very long time. The value of trade between South Africa and the EU has increased four-fold since 2000. More than 2 000 European-based companies operate in South Africa,” the president said.

“We had a good sense that we are well supported as we make all attempts to grow our economy to address the issues of inequality, unemployment and poverty in South Africa. We know that Europe is our ally in this and they will want to support us every inch of the way as we embark on a number of initiatives.”

City Press reported that Trade and Industry Minister Davies told the Europeans “we want to look more closely at what your concerns are because all of these are areas where we need to be able to exercise our policy”.

He further elaborated that “Localisation is not something we will be able to renounce. Nor are we going to be able to renounce BEE. At the same time, it doesn’t mean that we’re on a popularity show and bend over for every kind of requirement and hope that this is going to lead to a big surge in investment. I don’t think that’s what happens in other places.”

The BMF report found that there were 1611 majority-owned European companies operating in South Africa. Of which 673 were British, 262 were German, 212 were Dutch and 116 were French. The report also discovered that two-thirds of the companies were either not BEE rated of did not disclose their rating. Black ownership of these European companies was virtually non-existent.

The report disclosed that “ almost half” of senior management positions were held by white men, 16% were foreign male nationals and 15% white women. African men occupied 30% of skilled technical and academically qualified jobs. African men and women made up most of the semi-skilled and unskilled employees.

Participants spoke of a difficulty filling top jobs with black talent and retaining the people in these positions.

“In terms of employment as a measure of economic inclusion and inclusive growth, EU companies appeared to make a meaningful impact on the South African economy,” the report found.

Acknowledging the need for transformation, the report further stated that although BEE compliance was not compulsory for private companies the policy increasingly prevented European companies from doing business with government and state-owned institutions.

“It is also increasingly mandatory where a government licence is required,” the paper said. “This has compromised prospective and existing investors’ ability to continue and/or expand their operations in South Africa. It has been particularly difficult for greenfield investors, for family-owned European companies and multinationals, who are often reluctant to dilute their control of assets.”

The EU proposed a job creation pillar be introduced in exchange for reduced BEE codes. Calling for the black ownership requirements be temporarily relaxed for new foreign investors as well as for companies already operating in the country.

“It should be highlighted that when certain state-owned enterprises applied a requirement of the 51% black ownership in their tenders without the pre-approval from the department of trade and industry back in 2016 and 2017, a number of EU investments were put on hold or even downscaled,” the paper said.

Trade and Industry Minister Davies responded by saying “All of our investment incentives are for job creation. You create more jobs, you get more incentives. Empowerment is not just about black people working for these companies – it’s moving away from the model of having a minor shareholding in somebody else’s company to moving into supply chains,”

He also encouraged investors to approach the department directly for designing a BEE programme.

“You come into our country, we give you incentives; we have to ask for something in return. I don’t think we are asking for inordinate things. We want a balance.”

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