[UPDATE – 03 July 2020]
In the decades before South Africa achieved democracy in 1994, the apartheid government systematically excluded African, Indian and coloured people from meaningful participation in the country’s economy.
South Africa’s policy of black economic empowerment (BEE) is not simply a moral initiative to redress the wrongs of the past. It is a pragmatic growth strategy that aims to realise the country’s full economic potential, while helping to bring the black majority into the economic mainstream.
Black economic empowerment – or broad-based black economic empowerment, as it is technically known – is not affirmative action, although employment equity forms part of it. Nor does it aim to take wealth from one group and give it to another.
It is essentially a growth strategy, targeting the South African economy’s weakest point: inequality. No economy can grow by excluding any part of its people, and an economy that is not growing cannot integrate all of its citizens in a meaningful way.
As such, this strategy stresses a BEE process that is associated with growth, development and enterprise development, and not merely the redistribution of existing wealth.
“Black economic empowerment is an important policy instrument aimed at broadening the economic base of the country – and through this, at stimulating further economic growth and creating employment. The strategy is broad-based so it reflects the government’s approach, which is to “situate black economic empowerment within the context of a broader national empowerment strategy.”
The difference in these policies is while BEE sought to right the wrongs of the past, B-BBEE aims at distributing the wealth of nation across all races and genders.
Through its BEE policy, the government aims to achieve the following objectives:
The Broad-Based Black Economic Empowerment (B-BBEE) Codes of Good Practice emerged in 2007 to provide a standard framework for the measurement of BEE across all sectors of the economy.
The codes require that all entities operating in the South African economy make a contribution towards the objectives of BEE. The first phase of the codes encourages all entities, public and private, to implement proper BEE initiatives through the issuing of licences, concessions, sale of assets and preferential procurement.
The second phase of the codes covers the seven components of the B-BBEE scorecard, namely: ownership; management control; employment equity; skills development; preferential procurement; enterprise development; and socioeconomic development (including industry-specific and corporate social investment initiatives).
The Strategy on B-BBEE, released in 2003, assigns points values to the seven elements of the B-BBEE scorecard as follows:
|Residual (sector determined)||10|
|Source: Strategy on B- BBEE|
The B-BBEE Act of 2003 makes the codes binding on all state bodies and public companies, and the government is required to apply them when making economic decisions on:
Private companies must apply the codes if they want to do business with any government enterprise or organ of state – that is, to tender for business, apply for licences and concessions, enter into public-private partnerships, or buy state-owned assets.
Companies are also encouraged to apply the codes in their interactions with one another, since preferential procurement will affect most private companies throughout the supply chain.
Download: The Broad Based Black Economic Empowerment Act of 2003 and the Amendment Bill of 2011.
Read more: Black economic empowerment [SouthAfrica.Info]