Why BBBEE is working

2013-11-03 14:00

Millions of people have benefited, not just an elite few

There is an ill-informed emerging consensus in South Africa that seeks to suggest that BBBEE has benefited only a few.

Nothing could be further from the truth. The BBBEE Act is a policy instrument that was introduced to deal with the outdated and narrow BEE, which only relied on the percentage of ownership to determine the level of empowerment.

The BBBEE Act, in its attempt to be broader based, lists no less than seven elements to be complied with in order for the measured entity to be deemed compliant.

Those seven elements, listed and explained below, were carefully chosen to cover a broad spectrum of beneficiaries.

1. Ownership

The beneficiaries of this element are those who can wait 10 years for a return and have the bandwidth to deal with market fluctuations. It’s therefore unsurprising that players in this space are not too many.

Notwithstanding the challenges in this element, Finance Minister Pravin Gordhan in his medium-term budget policy statement last month quoted a massive figure of R600 billion of BEE transactions since 1995.

The ownership element is not the alpha and omega of BBBEE, it is just one out of seven.

2. Management control

This element rewards a company that reflects a critical mass of black top executives who have a say in the control of a company, both in

economic interest and strategic direction. According to the latest employment equity report, this layer is still dominated by white people to the tune of about 70%. But to say there is no appreciable number of black executives would be disingenuous.

There are indeed hundreds of black executives in the private sector and more so in government and state-owned enterprises who, if they are honest, would admit that the empowerment legislation played a major role in their appointments.

Although there was no shortage of more qualified and experienced whites, the black appointees were not done any favours. They met or even exceeded in varying degrees the legislative requirements of being suitably qualified.

Without detracting from the

main theme, this is very different from the affirmative action of the apartheid era, which was driven by laws on job reservation, where one was preferred purely on the basis of being white.

3. Employment equity

In the BBBEE context, this element deals with representation of black people just below the executive level. This element is responsible forthe rapid growth of the black middle class.

The tens of thousands of black beneficiaries, sometimes referred to as “black diamonds”, are a product of this element.

In fact, the University of Cape Town’s Unilever Institute of Strategic Marketing has recently reported that the black middle class has more than doubled over the past eight years, growing 250% from 1.7 million in 2004 to 4.2 million last year.

These beneficiaries can’t be dismissed as if they don’t exist, because they do and are in the main responsible for the thrust of my argument that BBBEE has benefited many.

I must add that the beneficiaries of this element are largely your risk averse types who by choice prefer a guaranteed salary, fixed working hours, sick leave, company paid-for travel, share options, and so on.

4. Skills development

Although some companies continue to pay lip service to this element, it has undoubtedly benefited many black people who would otherwise have been overlooked.

All the BBBEE beneficiaries benefited immensely from skills development.

So once again, this element is another piece of evidence that black people were not appointed purely on the basis of their blackness. I have not come across a black executive who hasn’t been to a business school either in South Africa or abroad.

5. Enterprise development

This element has helped thousands of black entrepreneurs where companies in cash or in kind provided some form of assistance that provided invaluable support. This is where the black industrialists come from.

At no stage should the focus on this element substitute the focus on the ownership element.

6. Procurement

This element causes a lot of pain, especially in the private sector where companies had to procure from new black suppliers.

Without forgetting some of the fronting challenges in this area, it will be untrue to say black companies have not in their thousands benefited from this element.

7. Socioeconomic development

This element addresses the millions of the poorest of the poor. This is where corporate social responsibility projects of many companies have done a lot.

Again, the challenges in this category are still enormous, but factually, there are millions of people who, as a result of the efforts by companies and indeed government grants, can at least put some meal on the table.

According to Trialogue, a specialist research house and consultancy, the total corporate social investment expenditure in South Africa, excluding the 15 million government grant beneficiaries, has grown in nominal terms from R2 billion in 2001 to nearly R7 billion last year.

The growth rate before the inception of the BBBEE codes was 3% per annum in real terms, but between 2007 and last year, the growth rate has been a staggering 10% per annum.

BBBEE means adherence to all seven elements, not just the number of people owning a particular percentage of a stake in a company.

» Manyi is the president of the Progressive Professionals Forum

» Talk to us: Where do you think BBBEE falls short?

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