BEE Partner, South Africa Economy Watch

What are the qualities that a business needs to look for in a BEE partner? The answer lies in both parties’ ability to identify the qualities inherent in themselves. There is little value in a partnership where skills and abilities are replicated. To form a mutually beneficial BEE deal, both parties must know themselves and their proposed partner before a decision can be taken. Standard management principles must be applied to BEE deals. Flamboyant creativity should be balanced with practical conservatism.

Consortiums

This probably sounds silly in the context of a QSE, but the reality is that many QSEs, particularly the larger ones, will engage in empowerment deals with consortiums. It is likely in the smaller centres that specialist consortiums will originate with the specific purpose of providing empowerment deals to QSE business.

A consortium originates when a group of people or businesses come together for a specific venture. Most consortiums disband thereafter. The difference to a joint venture is that a consortium does not have joint control, which is limited to their voting rights. Consortiums are usually effected through a Special Purpose Vehicle (SPV) that holds the shares in the company. The consortium members then hold shares in the SPV.

Companies engaging in empowerment deals with consortiums should only do so where there is a clear underlying business reason. A consortium brings a variety of partners together introducing the Complication of group dynamics. Clashes in personalities result in variations between members’ views, missions and objectives. The result is ineffective empowerment through the dilution of voting rights. A consortium also presents the business owner with little operational Participation by the BEE party. Participation is normally limited to board level or shareholders meetings.

Black investment companies

A large Black investment company is unlikely to invest in the QSE market. If it did, it would be in the expectation that the QSE will not stay a QSE for very long. A Black investment company normally consists of a group of individuals who have pooled their resources and are looking for opportunities to invest in white-owned companies. They would normally appoint one of their staff to represent them on the board of the investment.

Operational companies and individuals

Operational companies are usually driven by entrepreneurial individuals.

Arguably, one of the most important words in BEE is “creation”. For BEE to make a robust contribution to the economy the creation of operational companies must be an objective.

The direct transfer of wealth will never be acceptable to white people, who are an important component in our economy. Apart from this, a transfer of wealth will not result in the sustainable economic transformation of Black people.

An empowerment deal that incorporates a Black and white party merging with operational interest has the capability of creating new markets, new efficiencies and new products. Creation adds value to the economy, which will drive sustainable transformation through growth as opposed to redistribution.

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