Trade and Industry (dti) Minister Rob Davis has praised construction and mining equipment giant Caterpillar for a new R1.3 bn BEE initiative, which will not involve new black shareholders.
Caterpillar SA, which is part of the Barloworld cluster, has been given an exemption from the equity ownership aspect of BEE, by undertaking to make an equivalent empowerment move in other areas.
“BEE until now has often involved share deals, and we look diligently at fronting,” said the minister.
“We recognise there are multinational companies who don’t trade shares in the SA market, whose ownership is in another stock exchange. We expect you to do equity equivalence in other areas of the BEE scorecard.
“Caterpillar applied for this equity equivalence. We have had a number of US companies who have done this and say they have come out with something which is not just compliance, but a value proposition. Another example was IBM.”
Davies said that Caterpillar’s Equity Equivalence amounts to the equivalent of a quarter of their local business.
“Some imported material will be partially manufactured, with value addition here in SA,” said Davies. “In phase 2 you will move into more value-added activities. Those suppliers will themselves be black-owned.
“I look forward (in time) to meeting a Black Industrialist (BI) who has become a supplier to Caterpillar. We support BIs and have a target of at least 100 by March next year. Last figures told us we had already approved 62.”
Davies noted that Caterpillar is a global player, and one of more than 600 US companies involved in the SA market.
“Why will you (a company) want to achieve some level of empowerment,” he questioned? “Following BEE legislation (amendments) in 2013, all public entities awarding a licence, a facility, or an incentive will be obliged to deal with firms with a certain level of BEE compliance
“The BEE codes have been amended to give a bigger emphasis to those parts of the codes which are more meaningful – supplier development, skills development. Ownership is important, but if you don’t meet sub-minimum in these areas, we will take you down a level.
“Even if you don’t directly deal with government, you will probably deal with people who deal with government. The mining industry is going to be interested in achieving BEE compliance.”
Many auto giants have subsidiaries operating in SA, and Davies said they face a similar challenge to those of Caterpillar in meeting BEE requirements.
“In the case of the auto sector, we have indicated we require ‘level four’ BEE for them to enjoy the benefits of our auto (incentives) programme,” the minister confirmed.
“It (Caterpillar) is a similar model. A number of them are involved in supplier development operations. BMW has been developing a supplier park, Toyota has a supplier park. No one is exempt.
“There is a perception a lot of people are escaping from ownership through equity equivalence. This is not so. It is not the preferred option.
“You have to demonstrate to us that you are not in a position to do an ownership deal. If you do not follow it through in practice, we will not hesitate to act.”