It has been 13 years since the Broad-Based Black Economic Empowerment (BBBEE) Act came into effect in South Africa, but many business owners – and their employees – remain unclear on what exactly the legislation is for, and unaware of the transformative potential it has when effectively applied. In this article, we focus on the intent and effect of the BBBEE Act to promote a more comprehensive understanding of what it is actually about.
The BBBEE Act, No.53 of 2003 is fleshed out by the Codes of Good Practice – the latest revisions of which became effective in 2015. To understand what these laws are about, let us look at the legislation itself as a starting point. The introductory text which defines its primary purpose as follows:
“To establish a legislative framework for the promotion of black economic empowerment …”
What then does black economic empowerment mean? This is where a lot of the misunderstanding and misconceptions arise. Many people interpret it very narrowly, to mean government-sanctioned negative discrimination against people of other colour groups in the realm of work.
When the law, which – it should be noted, is applied voluntarily, was first promulgated, there was a good deal of fear expressed that white employees would be made redundant, and that they would never be able to get a job in South Africa again. Discussions were – and even today, continue to be – heated. However, this is neither the intention nor, in reality, the effect of the Act. Opportunities exist for all even as businesses shift to better reflect the demographics of the nation.
BBBEE was legislated to redress some of the inequality and injustices wrought by apartheid. Through promoting the economic upliftment of black citizens, the policy works to uplift broader society – bringing about much-needed socio-economic transformation. It encourages the hiring of black employees and the conducting of business with companies that are black-owned and or making efforts to promote real equality (which necessitates the implementation of equity measures).
We are all painfully aware that under apartheid, race was used to, as the Act explains, control access to the country’s productive resources and skills, and unfortunately the economy still excludes the majority of people from them. This has negative ramifications on the performance of the South African economy – broader, meaningful participation is needed from a greater number of citizens to strengthen our markets. BBBEE aims to facilitate this.
To this end, the BBBEE Act encourages increases in the participation of black people (defined broadly to include Africans, Indians and Coloureds) across all levels in businesses, as well as the empowerment of suppliers. The BBBEE scorecard calculates the rating of a business by looking at the efforts it is making in the areas of ownership, management control (including Employment Equity), skills development, enterprise and supplier development, and socio-economic development. A high score rewards a business with access to government tenders and the lucrative chain of preferential procurement.
BBBEE is a necessary element in the positive socio-economic transformation of the country; it is important to remember that it is not about the empowerment of one group of people at the expense of another. It is about increasing the economic participation of previously disadvantaged groups to benefit all.
For more information, contact one of Cenfed’s BBBEE consultants.
Photo: Olivier Le Moal