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 realize the country's full economic potential while helping to bring the black majority into the economic mainstream.
- Realizing the country's full potential
- Towards broad-based growth
- BEE objectives
- 2nd Wave of B-BBEE
*3rd Wave of B-BBEE
- Equity Equivalent Investment Programme for multinationals
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.
Realizing the country's full potential "Our country requires an economy that can meet the needs of all our economic citizens – our people and their enterprises – in a sustainable manner," the Department of Trade and Industry (DTI) says in its BEE strategy document.
"This will only be possible if our economy builds on the full potential of all persons and communities across the length and breadth of this country."
Despite the many economic gains made in the country since 1994, the racial divide between rich and poor remains. As the DTI points out, such inequalities can have a profound effect on political stability: "Societies characterized by entrenched gender inequality or racially or ethnically defined wealth disparities are not likely to be socially and politically stable, particularly as economic growth can easily exacerbate these inequalities."
Towards broad-based growth 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," the DTI says."
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, as shown in the name of the legislation: the Broad Based Black Economic Empowerment Act of 2003.
This reflects the government's approach, which is to "situate black economic empowerment within the context of a broader national empowerment strategy … focused on historically disadvantaged people, and particularly black people, women, youth, the disabled, and rural communities".
As the DTI notes, discrimination "is at its most severe when race coincides with gender and/or disability".
The 2nd Wave of B-BBEE 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.
FOCUS ON EQUALITY IN SOUTH AFRICA
The Codes of Good Practice on BEE:
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:
Socio-economic development (including industry - specific and corporate social investment initiatives
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:
- Licensing and concessions
- Public-private partnerships
- The sale of state-owned assets or businesses
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 licenses 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.
BEE objectives Through its BEE policy, the government aims to achieve the following objectives:
- 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.