Excerpt from Speech Delivered By KwaZulu-Natal MEC for Finance and Economic Development Dr Zweli Mkhize at Umyezane Black Economic Empowerment (BEE) Awards Gala Dinner, Durban Exhibition Centre 7 December 2007
This is one of the several engagements this year in which I am witnessing yet another maturing of the Broad-Based Black Economic Empowerment initiative.
You have disappointed many pessimists who have long forecasted the failure of BEE. A profound question for them: for how long are they going to be spectators and armchair critics? I have a simple message for them: "Where there is hope, there is life, where there is life, there is possibility, and where there is possibility, change can occur."
I am delighted to be part of the generation that is witnessing this change. I thank all role-players who participated in today's discussions. I am pleased to learn that today's negotiations were characterised by the desire to convert the province's resources into sustainable growth. I appreciate that all role-players are here. Because we believe that it is important for different companies to accept that discussion on BEE involves everybody in the private sector.
I have no doubt that in the next few years we will see an increasing number of companies complying with BEE Act. By doing this, they stand to benefit from the Codes of Practice for BEE as it was clearly pointed out today.
We are pleased to see the presence of many women emerging entrepreneurs. For the provincial government our primary responsibility is to work and ensure an ongoing mentorship of women as well as encouraging banking institutions to make finances available to women. I am saying this because a research commissioned by the Black Business Executive Circle last year found that there were 96 women directors in the top 200 list of the Johannesburg Stock Exchange, a mere four percent of the total. Now, this should not be allowed.
One of the major driving forces behind BEE, the preferential procurement section in the scorecard, is the rewarding of companies who buy from small, medium and micro enterprises sector. SMMEs are responsible for an estimated 50% to 60% of all new jobs created.
There are several challenges associated with the implementation of BEE strategy. One of them is the practice that I have discouraged in public whereby some consortiums dump their BEE partners once the contract has been signed and paying them off. I am happy that this matter received attention during deliberations today. In the near future, such companies will incur the wrath of the Ombudsman, a structure we will form as part of the Implementation of the BEE strategy.
In support of the SMMEs and co-operatives, we have encouraged that there be percentage set asides reserved for these sectors. However we have found that there are limitations in the implementation of the Preferential Procurement Facilitation Act where the awards are challenged in court. This is an area that requires government to tighten up. The limitation to awarding contracts to BEE companies because of the weighting of the 80 to 20 formula means that many large companies will always undercut emerging companies on price because of their capacity to cut prices and survive on relatively lower margins.
We have found it still a serious challenge that it is still difficult to reverse the challenge whereby 80% of government procurement spent goes to about five percent of suppliers and they happen to be established companies that have traditionally done business with government. We still reiterate the warning that we are tightening our operations to ensure that in future government does not continue to do business with those companies that refuse to comply with such fundamental transformation policies.
We have set up a section that monitors and receives complaints from small businesses that have experienced undue delays in payment from government after they have rendered the services. Many small companies have been compromised by this practice yet had very little capacity to survive the lack of revenues for much longer.
It was good to have participation from the banking institutions since that issue of lack of access to financial institutions is one of the serious limiting factors in the sustainable growth of the small business sector. Even access to small amounts of finance for street vendors to take advantage of bargains, is a challenge. We want to reactivate the formation of Financial Services Co-operatives, to support these vendors instead of leaving them prey to loan sharks.
The scope for the development of the small business sector has not been as positive as it is now. As a developmental state, the pursuit for development and prosperity should be characterised by partnerships and collaboration between all spheres of government, civil society, co-operatives and SMMEs. All of us here have a lot to learn from the recipients of uMyezane BEE Awards. They have proved that job creation and economic prosperity is not a far-fetched dream. Their achievement is an indication that they fully understand that working in partnership means lots of different organisations and individuals contributing towards improving the quality of life. As with most teamwork, the end results are often greater than what could have been achieved in isolation.