BEE Codes of Good Practice To Be Simplified

C O N F I D E N T I A L PRETORIA 003071

SIPDIS

USDOC FOR 4510/ITA/IEP/ANESA/OA/JDIEMOND
TREASURY FOR BCUSHMAN
DEPT PASS USTR FOR PCOLEMAN

SIPDIS

E.O. 12958: DECL: 6/26/16
TAGS: EINV ETRD EFIN ECON USTR SF
SUBJECT: BEE Codes of Good Practice To Be Simplified

REF: A) PRETORIA 2860 B) PRETORIA 2781

Classified by Charge' d'Affaires; Reason: 1.5 (b/d).


1. (C) Summary. The Department (DTI) will simplify the draft BEE
Codes of Good Practice before they are submitted to Cabinet. The
Trade and Industry Minister told business representatives that skills
development was the top priority. There would be flexibility in
areas such as equity equivalents and supply requirements. U.S.
company officials are hopeful that revisions to the codes will
address their key concerns. End Summary.


2. (U) Following 180 written submissions and a meeting with business
representatives, Minister of Trade and Industry Mandisi Mpahlwa
stated on July 11 that his department (DTI) would simplify its final
Black Economic Empowerment (BEE) Codes of Good Practice before their
planned presentation to Cabinet. In particular, Mpahlwa declared
that DTI will reduce the number and complexity of constituent BEE
indicators, drop many restrictive measures for small- to medium-sized
businesses, not require foreign firms to sell equity if they meet
other benchmarks, and craft regulations to avoid exacerbating the
economy's skill shortage.


3. (C) According to an Amcham (American Chamber of Commerce in South
Africa) official who attended the Minister's meeting with business
representatives, Mpahlwa said that skills development was the SAG's
top priority in the codes. Mpahlwa added that he was committed to
flexibility in the codes, particularly on equity equivalent and
procurement requirements. On the former, he noted that South African
firms argue that they will be disadvantaged if foreign multinationals
receive more favorable treatment than local firms on this
requirements. The Minister reportedly said that he did not accept
this argument. Mpahlwa also acknowledged that the codes were complex
and said that the number of criteria in the codes would be reduced.
DTI and Business Unity South Africa, an association of business
organizations, will do empirical analysis of the codes costs and
benefits.


4. (C) The Amcham official noted that DTI had agreed to establish
accreditation criteria for BEE empowerment rating agencies, provide
guidelines for rating agencies' fee structure and develop criteria to
authorize major accounting firms to certify BEE ratings. The latter
is a high priority for U.S. firms due to the confidentiality of
information involved.


5. (C) The Minister told business representatives that the revised
Codes of Good Practice would to go to cabinet by the end of July and
that he expected approval in mid-August. According to the Amcham
official, the Minister said the revised codes would not be released
publicly before going to cabinet.


6. (C) Ford South Africa officials (please protect) are guardedly
optimistic that the revisions will address many of their concerns.
DTI officials told Ford in a July 18 meeting that equity equivalent
requirement would be relaxed and that procurement requirements would
be modified to recognize the global supply chain operations of
multinationals. According to Ford, DTI officials also said the
percentage figure for corporate social responsibility spending would
be reduced by one-half.
TEITELBAUM