The application of the broad-based black economic empowerment (BBBEE) will concentrate minds, especially as the proposed black business council to oversee BEE takes shape and the debate sharpens over whether or not it should have regulating powers or purely advisory ones.

On the front pages of the newspapers carrying this drama will be Labour Minister Membathisi Mdladlana, perceived by many as an inefficient leader, but charged with the other legs of BEE, employment equity and the sector education and training authorities (Setas). Jimmy Manyi, chairman of the Commission for Employment Equity and president of a vocal proponent of BEE, the Black Management Forum, gets even more of the spotlight with threats of Zimbabwe ‘looking like a picnic’ for whites in South Africa if a dramatic acceleration of visible BEE does not rapidly ensue. Thus one man’s rent-seeking crony capitalism becomes another man’s champion of black economic revolution.

Weighing in with the money is Brian Molefe, head of the Public Investment Corporation, caretaker of the R720-billion state pension fund, using its shareholdings to stymie the business freedoms of major ‘white’ corporations if they do not transform at the highest levels of executive power – whether the Barlows or the Altrons of this world. Moreover, as the recent Alexander Forbes saga showed, the Molefes, Manyis and Mdladlanas will not be satisfied with non-executive black directors. They are demanding control, not just ownership.

The irony is that the more government tries to regulate black advancement in the mainstream economy in South Africa, the more complex things become. Initially the concern was that BEE was only benefiting the ‘usual suspects’, the black elite close to the ANC leadership (and sometimes part of it). BBBEE was a commendable effort to balance things.

In terms of the BBBEE scorecard, companies are supposed to score on all seven elements, not just ownership. These seven elements comprise of three basic types of empowerment. The first is direct empowerment, meaning black ownership and control. The second is human resource empowerment through investment in employment equity, skills and training. And the third is ‘indirect’ empowerment through preferential procurement, employee share ownership programmes (ESOPs), SME development and corporate social responsibility investment. In return, empowered companies get a 10-20% leeway in pricing for tenders from government, so that BEE credentials become an important requirement for success – not just price.

Now activists are inverting this empowerment, saying that BBBEE has had unintended consequences, whereby black ownership is so diluted amongst thousands of shareholders that black people in business cannot exert influence in the companies in which they have invested. The assumption, as yet untested, is that black control, not just ownership, will force the social change required for the South African business community to reflect the demographics of the country.

Adding to the difficulty are the various sector charters (financial, mining, etc.). These set levels of empowerment separately from the BBBEE Codes, but shaped according to the specific nature of the sector. They too are coming under fire as not being radical enough.

The problem is also that, ironically, staff shortages in the Department of Labour have made it a byword for inefficiency and very poor quality statistics. Matters will come to a head when, unusually for a normally ‘non-political’ business entity, Comair takes the Department of Labour head on in the courts in 2008, to challenge its competence. Similarly, doubts have been cast over the figures that Manyi issues, leading to allegations of innumeracy on his part.

Clearly the heat is on. Given the leadership disputes within the dominant ANC, none of those in the running will be likely to attempt to take sides on the BEE debate and risk a loss in voter support. The Comair case will be eagerly awaited, as will corporate responses to the PIC’s attempt to muscle things its way at stakeholder meetings.

At the same time problems of ‘joined-up government’ are also aggravating rather than helping matters. In the face of a real and quantifiable skill shortage crisis in South Africa (and indeed, worldwide) matters are not being helped by well-funded but incompetent state schooling and further education systems. The conspicuous embarrassments around many (although not all) of the Setas, and the government’s real concern at the failure of the education system to produce graduates equipped to meet the needs of the South African economy, means that supply is not keeping up with demand. When that happens, the dangers of tokenism and fronting become more acute.

Furthermore, the BBBEE Codes themselves have already had the anticipated consequences of making corporate BEE an audit-driven and compliance-orientated burden on business in South Africa, with all sorts of negative consequences, from decreased global competitiveness to investor unease and racial resentment.

Pressure to separate the BBBEE scorecard from the issue of black ownership and control will be intensified in 2008. Political leadership on the issue will not be forthcoming. But, below the radar, a fundamentally market-sympathetic pragmatism reigns. It was reflected most recently in government’s agreeing to allow foreign-owned Hewlett-Packard to substitute a large investment in black skills development in the ICT industry instead of having to sell 30% of its business to BEE investors. It is this sort of pragmatism that will be required to reconcile domestic processes with an unsentimentally competitive world economy in which South Africa is not a ‘special case’. This is a first for a multinational in South Africa. It will not be the last. But it will not be popular, which is why, in the end, leadership matters!