BBBEE (Broad Based Black Economic Empowerment) is the term used to define the South African post-apartheid government’s policy approach to business ownership and management in order to address historical disadvantage of black people as a result of Apartheid. BEE (Black Economic Empowerment) is the broad idea of the policy and BBBEE is the implementation and strategy of the BEE policy idea.
It’s formal definition, as outlined in the BBBEE Act, states that it aims to ‘’redress imbalances of the past…by seeking to substantially and equitably transfer and confer the ownership, management and control of South Africa’s financial and economic resources to the majority of its citizens.’’
It focuses specifically on empowering and facilitating participation of black people in the economy and in the corporate world of business – black referring to African, Coloured, Indian and Chinese in South Africa (we unpack this further on).
The Act was made official on the 7th of January 2004, with the passing of the Broad Based Black Economic Empowerment Act 53 of 2003, also known as the BBBEE act. The BBBEE act of Parliament was amended later on and became operational from October 24th, 2014.
These are some of the pivotal aims of the act:
● Empower more black people to own and manage enterprises. Enterprises are regarded as black-owned if 51% of the enterprise is owned by black people, and black people have substantial management control of the business.
● Achieve a substantial change in the racial composition of ownership and management structures, and in the skilled occupations of existing and new enterprises.
● Promote access to finance for black economic empowerment.
● Empower rural and local communities by enabling their access to economic activities, land, infrastructure, ownership, and skills.
● Promote human resource development of black people through, for example, mentorships, learnerships and internships.
● Increase the extent to which communities, workers, co-operatives, and other collective enterprises own and manage existing and new enterprises, and increase their access to economic activities, infrastructure, and skills.
● Ensure that black-owned enterprises benefit from the government’s preferential procurement policies.
● Assist in the development of the operational and financial capacity of BEE enterprises, especially small, medium, and micro enterprises (SMMEs) and black- owned enterprises.
● Increase the extent to which black women own and manage existing and new enterprises, and facilitate their access to economic activities, infrastructure and skills training.
As part of its implementation, the BBBEE ‘’codes’’ emerged in 2007 to standardise the measurement and process of the implementation of the Act across all sectors of the economy.
BEE scoring criteria is divided into five categories.
1. Equity Ownership: Accounts for 25% of the weighting. This concerns the voting rights and shareholding. When calculating the score, black ownership is generally considered, as well as the ownership by black women specifically. The acts also allow for the calculation of ownership and voting rights among certain groups, with a good example being between those aged below 35 years and above the age of 65.
2. Management Control: Takes up to 15% of the weighting with a 4% bonus for certain criteria. It accounts for the extent to which voting rights on the board is held by black members, the control of the executive board, and what percentage of senior management is held by blacks.
3. Skills development: This accounts for 20% weighting with a 5% bonus for certain criteria. Here, the extent to which a company invests in its workers and works towards the improvement of their skills and competencies with a bias to its black workforce.
4. Enterprise Development: Takes up 40% weighting with a 4% bonus for certain criteria. This focuses on the extent to which small, black-owned companies receive support and are helped to develop.
5. Socio-economic Development: Accounts for 5% of the weighting. This one focuses on the extent to which a company carries out social investment initiatives.
The sizes of the enterprise/company are important, and the criteria will differ according to the company, with it biasing smaller companies (able to get BEE accredited easier) than bigger companies. The size of the enterprise/company is defined in terms of their annual turnover.
There are three groups into which the enterprise/company can fit:
– Exempted Micro Enterprises (EMEs): This category refers to a business of whose annual turnover is below R10 million. These companies are exempted from the scoring and are awarded an automatic 100% compliance without factoring any other elements. It could increase to 135% if there is black ownership.
– Qualifying Small Enterprises (QSEs): Before, these companies whose annual turnover was between R10 to R50 million only had to comply with some of the elements. However, with the new revised BBBEE, they must meet all 5 elements on the scorecard and points.
– Medium to large enterprises (M&Ls): Just like the businesses in QSEs, the Medium to large enterprises must also meet all the 5 elements on the scorecard to be rated. The category of businesses here turns over R50 million every year.
Criticisms and the issue of “blackness’.
As with any policy, there will be criticisms of the main idea of the policy itself, as with its implementation. One of the more fair and balanced criticisms come from Denise Coetsee in her article “Who qualifies as “black” in terms of the B-BBEE act.
She argues that the classification of race is not something for which there is a fixed set of rules. Currently, ‘’black’’ in terms of BBBEE policy refers to Africans, Coloureds, Indians and Chinese people. The current classification is largely based on the verbal confirmation of the person claiming to form part of a specific racial group.
Should a dispute arise, the Courts will need to consider the individual facts to decide about the self-identified race of the person.
A person’s “right” to classify themselves, may lead to abuse and could undermine the objectives of the B-BBEE Act. The test for the classification of “black people” in accordance with the B-BBEE Act should rather aim to exclude those persons who were not disadvantaged by apartheid.
She brings up a case where the high court ruled to include Chinese people under the “black” classification, when the Chinese Association of South Africa approached them with a request to recognise Chinese people as black as well.
Another criticism of the implementation of BEE is who actually benefits, especially when examining which sections of the “black” population has benefitted the most from BEE policies. According to (please provide full name of the organisation) NWW’s South Africa 2015 wealth report, the number of Indian millionaires in South Africa has increased by over 400 percent since 2000, while and the number of black African millionaires have only gone up by about 280%.
In top and senior management positions, it seems that there hasn’t been much progress made, with there being a decrease in the percentage of black people in top management positions while the percentage of white people have remained the same, over the last decade., and the percentage of listed companies which have a level 1 BEE certificate only sits at 3.3 percent.
There is still much work to be done regarding the noble goal of addressing the effects of Apartheid in this country. Whether BEE is working or not is up for debate, and whether these numbers are indicative of the success of the policies themselves is not clear. What we do know is that BEE is needed to correct the injustices of the past, but perhaps a relook at implementation and policy won’t hurt.