Exploring mixed reactions to the Freedom From Poverty Bill: A new approach to replacing BEE and employment equity

IOL News

5 hours ago

The Institute of Race Relations has introduced a new Bill that seeks to replace the Black Economic Empowerment and Employment Equity. Pictured is Minister of Employment and Labour, Nomakhosazana Meth.
Image: GCIS
The Freedom From Poverty Bill, introduced by the Institution of Race Relations (IRR) as a replacement for the Black Economic Empowerment (BEE) and the Employment Equity Act (EEA), has been met with mixed views.
Under the bill, there is Economic Empowerment for the Disadvantaged (EED), which is codified as an alternative to BEE and a proposal for true transformation, as it will be based on need, not race.
It was launched this week as part of the #WhatSACanBe campaign in a webinar discussion between IRR Head of Policy, Dr Anthea Jeffery, and IRR Strategic Engagements Manager, Makone Maja.
The BEE aims to correct past inequalities and is governed by the Broad-Based Black Economic Empowerment Act. Its application is limited to people who are black, of mixed race, and Indian, and excludes white people, including those with disabilities.
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Explaining the difference between the two policies, Jeffery said the BEE uses race as a proxy for disadvantage, EED targets the poor, and identifies disadvantage based on a means test.
'This would enable poor whites to benefit too, but 99% of its benefits would in practice go to poor black people. Its non-racial focus would reduce racial divisions, put an end to race classification, and comply with the Constitution's founding value of non-racialism.
'The EED is voluntary, which means companies would no longer be required to keep the current BEE scorecard to aid them in state procurement contracts, or race-based ownership deals, management posts, and procurement contracts. EED's scorecard incentivises companies for their key contributions to the economy by rewarding them with EED points for these actions. With EED, the points cannot be redeemed to gain from preferential procurement,' Jeffery said.
She added that EED introduces education and health voucher-based support for poor people to be used at schools or health facilities of their choice. This, she said, will redirect much of the revenue now spent on dysfunctional schools, hospitals, and housing developments into tax-funded vouchers for low-income families.
The bill states that a system of tax-funded vouchers must be created and administered by provincial administrations, with the help of public-private partnerships where necessary, and it will go hand in hand with social grants.
An emphasis was made that this will not take away social grants.
'In the instance of schools, the voucher will go with the child to the school of the family's choice. The vouchers will fund teachers' salaries, study materials, maintaining the school grounds, and more. Parents can remove their children from poor-performing schools and take the vouchers with them. This will engender competition and incentivise excellence at all levels of the supply-side of education and raise due diligence on the demand-side. The health vouchers will operate the same way,' Jeffery said.
Maja said ending fake transformation, which only enriches those at the very top, is critical to truly changing South Africa's economy.
'True transformation would move the needle on the numbers of unemployment, economic growth, and the rates of poverty and decline of state services and infrastructure. All of which have either stagnated or, in some instances, worsened since the advent of fake transformation,' said Maja.
Dr Rowena Bernard, a senior lecturer at the University of KwaZulu-Natal's School of Law, said the proposed EED excludes racial criteria and any form of racial classification as a basis for empowerment.
She added that it emphasises merit, skills, objective criteria, and measurable socio-economic disadvantage, and no EED measure may rely on demographic representativity, racial criteria, racial targets or quotas, or any form of classification by race.
The focus of the BEE is on redistribution instead of growth. It is based on racial classification and preference, which goes against the founding principles of the Constitution.
The BEE tends to benefit only a small elite of South Africans; unfortunately, the vast majority of black South Africans still receive limited benefits from the policy. South Africa's progress in reducing poverty and inequality, and improving socio-economic rights has been relatively slow, Bernard said.
'The BEE overlooks contributions made by the private sector in terms of upward mobility by investing, employing, innovating, and paying taxes. According to the BEE policy, businesses are to be measured according to a scorecard to determine their compliance level. The elements in the generic scorecard relate to ownership, which measures the economic interest, voting rights, and net value of shares held by black people.
'Management control assesses the number of executive boards, senior, middle, and junior management positions held by black members in a business. Skills development focuses on skills development initiatives and training for black employees.'
Under the EED, existing race-based contracts or empowerment schemes will be reviewed within 18 months and may also be terminated by a court or tribunal if they are tainted by inflated pricing, corruption, undue influence, or other damaging or unlawful conduct.
She added that the EED proposes the introduction of a voucher system in the three critical areas of education, housing, and health, affecting the lives of the vast majority of South Africans.
'This proposed voucher system will be available to all South Africans and will not be based on any racial criteria. A means test will be used to determine an individual's eligibility for the voucher.
'This means that people earning below the threshold would be granted education vouchers, up to a certain amount; this voucher would then be used at the school of their choice. This would be done by redirecting the education budget. This system would give children from lower-income families the right to make their own educational choice. This would also have an effect on failing state schools, which many children have to attend because they have little other choice. This allows for better choices and better education opportunities,' she said.
Bernard added that the vouchers would work similarly for housing and healthcare, as people would no longer have to solely rely on government services.
'Access to the vouchers would enable people to improve their living conditions, not rely on the inferior, low-cost houses built and provided by the South African government. They will be able to use the voucher to either build better quality homes or rent proper homes. It is envisioned that it will reduce homelessness, housing instability, and overcrowding. Health vouchers will increase access to healthcare. People will no longer have to rely on free public health care treatment, which will increase access to better quality health care,' she said.
The EED, she said, brings in a new perspective to address the real challenges all South Africans experience regardless of their race. It provides realistic options to empower and uplift those who are disadvantaged.
Bernard said the bill may have serious consequences for employment laws.
'Affirmative action measures and policies will also be affected as employers will not be able to introduce preferential policies that result in racial preferencing. All employees will have equal opportunities in relation to promotions and fair labour practices. All employees will have equal opportunities to receive training and skills development,' she said.
She added that it may result in financial strain and capacity issues as employers will be expected to review and change existing employment policies and practices. There may be an increase in employee grievances concerning unfair discrimination claims, which will lead to a strain on the resources of the employer and the court system.
'The EED Bill will certainly benefit the majority of black employees, but the proposed non-racial approach would reaffirm the Constitution's founding values of equality and human dignity,' she said.
However, Professor Ntsikelelo Breakfast said the IRR is using non-racialism to block transformation.
'The issue of transformation is not debatable, because it comes from the Constitution. The preamble of the Constitution talks about the transformation, which is a historical appreciation. So, we can't have nation-building and social cohesion without transformation.
'We can't be united when the rugby national team is playing, but when it comes to other issues, we don't want to talk about them. It looks like some people want to preserve their privileges. In my opinion, people are not being honest, because if you look at poverty and unemployment, those social cleavages have a colour,' Breakfast said.
He added that the BEE has not achieved its intended objective, but that doesn't mean that transformation must take a back seat.
'We need to call out people who are pushing back from transformation, while at the same time talking about social cohesion and nation-building. Unemployment, inequality, and poverty still indicate that race is an issue. How do you transcend racial categorisation but still have these issues along racial lines? If this bill goes to Parliament, it won't be adopted by the majority. I don't think this policy is proposed in good faith. I find it very suspicious,' he said.
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