And so spake the Independent yesterday
One of the losing consortiums in Vodacom's R7.5 billion black economic empowerment (BEE) transaction claims that the cellphone company lied about its decision to award the stake to Thebe Investment and Royal Bafokeng Holdings. Tiger Consortium Telecommunications is demanding R100 million from Vodacom for damages it says were a result of Vodacom's misrepresentation.
It says Vodacom "failed to mention a fractional BEE allocation in or during the bidding process of the BEE stake". This, it says, is in breach of the spirit of the Broad-Based Black Economic Empowerment Act of 2003 and Trade and Industry's 2007 BEE code of good practice.
Before I get into the underlined section it must be said that this whole action wreaks of litigious extortion. One of the characters in the Tiger Consortium has a chequered past (read the article). I suppose the word "entitlement" looms large in this sordid affair.
But let's look at this term "spirit of BEE" as it comes up quite often. The spirit of anything is incredibly subjective. In a South African context we'd start off with the Constitution's preamble, most significantly
We therefore, through our freely elected representatives, adopt this Constitution as the supreme law of the Republic so as to
- Heal the divisions of the past and establish a society based on democratic values, social justice and fundamental human rights;
- Lay the foundations for a democratic and open society in which government is based on the will of the people and every citizen is equally protected by law;
- Improve the quality of life of all citizens and free the potential of each person; and
- Build a united and democratic South Africa able to take its rightful place as a sovereign state in the family of nations.
The BEE Act is a direct result of the first and third bullet points. The preamble of the Act itself states its intention as being to
"promote the achievement of the constitutional right to equality, increase broad-based and effective participation of black people in the economy and promote a higher growth rate, increased employment and more equitable income distribution.";
And the next clue as to what the spirit can be found in the current codes (paragraph 2 of statement 000)
2.1 The fundamental principle for measuring B-BBEE compliance is that substance takes precedence over legal form.
2.2 In interpreting the provisions of the Codes any reasonable interpretation consistent with the objectives of the Act and the B-BBEE Strategy must take precedence.
The B-BBEE Strategy document deliberates the definition of black economic empowerment and concludes that the best description is (paragraph 3.2.2)
an integrated and coherent socioeconomic process that directly contributes to the economic transformation of South Africa and brings about significant increases in the numbers of black people that manage, own and control the country's economy, as well as significant decreases in income inequalities.
The spirit of BEE must therefore lie within all these documents and pieces of legislation. The spirit is not a process per se, it has to be how the process contributes to the ultimate result which must be to increase broad-based and effective participation of black people in the economy and promote a higher growth rate, increased employment and more equitable income distribution. I believe that the operational words here are
- Broad-based
- Effective participation
- Promote a higher growth rate
- Increased employment
- More equitable income distribution
It is incumbent on those alleging any act that is against the spirit of BEE to prove that any of these five requirements were not met. When a deal is concluded with a major ANC player like Baleka Mbete (yes I know this is a mining deal – this is for illustration), Cyril, Patrice or Khanyi for that matter the it is not hard to prove that the spirit is somewhat lacking. These types of deals don't really meet a few of the criteria and hence are not in keeping with the spirit. I can't see that meeting three out of the five is good enough, it's all or nothing.
When you view this Vodacom thing you can clearly see that you're dealing with a very unpleasant bunch of people that make a tiger look tame. However if Rob actually paid attention to what goes on around him he'd notice the black economic empowerment is in fact black economic entitlement. He could change things and add in an entitlement requirement, the Tiger consortium would then be in with a very good chance of getting that R100 million from Vodacom.
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