In 2008 City Lodge did a BBBEE deal to sell 15% of its equity to a consortium including Vuwa a company set up by former NDPP Bulelani Ngcuka, spouse of the then Deputy President. The value of the deal was R485 million, all of it debt financed.

By 2017 the debt had risen to R750 million and had to be refinanced, Standard Bank stepped in with a loan for that amount on condition that City Lodge would guarantee payment if dividend flows were inadequate.

The BBBEE deal ends in 2021 by which time the debt must be paid off. Then came Corona and now the debt has ballooned to R1.2 billion. City Lodge has therefore issued a rights offer, which means shareholders are required to stump up for the debt.

The BEE shareholders are not acquired to stump up for the debt but have very kindly offered to trade their shares back to the company and use that money to buy back shares to that value for a much reduced holding. The share price has dropped by 70%.

An established and successful business is now in deep trouble and save for the top executives the other BEE shareholders that include employees and the UJ hotel school have derived no meaningful benefits. Empowerment much?

There are hundreds such stories to be told. Companies undertake these schemes because they have to because if they don’t they are punished by government through the withholding of licenses and permits and denied access to government business.

The economic costs of our BBBEE laws are obscenely high, the benefits are paltry and to the extent that there are any, they accrue largely to a small elite. What’s the point of BBBEE if it only adds to poverty, decline, unemployment and misery?