Black Economic Empowerment
Encyclopedia
Black Economic Empowerment (BEE) is a programme launched by the South African government
to redress the inequalities of Apartheid by giving previously disadvantaged groups (black Africans, Coloureds, Indians
and some Chinese--who are SA citizens) economic opportunities previously not available to them. It includes measures such as Employment Equity, skills development, ownership, management, socioeconomic development and preferential procurement.
that direct intervention in the distribution of assets and opportunities was needed to resolve the economic disparities created by Apartheid policies which had favoured white business owners. BEE intended to transform the economy to be representative of the demographics
, specifically race demographics of the country. BEE was defined in the 2001 Commission Report as follows,
Successful implementers of BEE also see it as a means to create economic growth in South Africa, and as vital to their corporate strategy.
This included the following Codes:
The following sector scorecards have also been gazetted (in terms of section 12):
Also gazetted were general guidelines and definitions, among which, the definition of the beneficiaries of BEE. The definition is the same as that of the Black Economic Empowerment Act of 2003 which states that "black people" is a generic term which means Africans, Coloureds and Indians and included provisions to ensure that they must have been South African citizens prior to 1994. The fact that Chinese individuals (some of whom were classified as Coloureds under Apartheid, others as honorary white), who were also submitted to legal discrimination prior to 1990 (but exempt from the Group Areas Act as of 1984 when the Group Areas Amendment Act was promulgated), have been excluded as beneficiaries of black empowerment, has led to a renewed media debate regarding the definition of “black” in current legislation. As of 2008, Chinese people have been reclassified as "black" after The Chinese Association of South Africa took the South African government to court and won.
The BEE legislation is supported and functions in conjunction with various other forms of Legislation, including the Employment Equity Act, Skills Development Act, Preferential Procurement Framework and others.
The legislation was developed through numerous task teams and have taken more than 3 years to be gazetted since the first Act (December 2003) and the first Codes of Good Practice released in November 2005 which addressed Statement 100 and 200. Subsequent Codes were released in December 2006 addressing Codes 300 to 700. Based on public and stakeholder comments, the final codes were adjusted and gazetted.
The last two - Financial Sector scorecard and Construction Sector scorecard have not been passed into law. They were gazetted under section 12 of the act, which is for comment only. They will need to be gazetted in terms of section 9 of the act to become an official sector code. Until that happens all enterprises falling in these two industries are required to use the codes of good practice in producing a scorecard.
Significant leniency for Small Enterprises has been built into the gazetted codes. Based on the Qualifying Small Enterprises Codes, all companies with a turnover under R5 million p.a. is completely exempt from BEE and automatically qualifies as a level 4 contributor or achieves 100% BEE Contribution Recognition.
The generic broad based scorecard. All seven pillars must be addressed totalling 100 points
Qualifying Small Enterprises
(those with an annual turnover from R5 - 35 million) are rated on the following scorecard and may choose any four of the pillars to address, totalling 100 points
and do not need to be measured against the BEE scorecards as stated above.
Instead of using this type of policy, it has been suggested by critics that a policy of qualification equality should be used. This would allow businesses to focus on employing the person with the highest qualifications, the most experience and the best recommendations. To allow previously disadvantaged individuals to achieve these qualifications and experience, critics of BEE say that the government should place more emphasis on secondary and tertiary education, as well as subsidise companies wishing to employ entry level applicants.
In response to criticism, the South African Government launched Broad Based Black Economic Empowerment
which is the current gazetted framework for addressing Black Empowerment beyond enriching a few.
BEE has also been criticized for creating a brain drain
, where the qualified white expertise is leaving for areas where they would not be discriminated against. Inkatha Freedom Party
leader Mangosuthu Buthelezi
is a strong critic of BEE and supports this view. He has stated that "the government's reckless implementation of the affirmative action policy is forcing many white people to leave the country, creating a skills shortage crisis".
Archbishop Desmond Tutu has warned that South Africa is sitting on a "powder keg" because millions are living in "dehumanising poverty" stating that Black Economic Empowerment only serves an elite few.
Government of South Africa
The Republic of South Africa is a constitutional democracy with a three-tier system of government and an independent judiciary, operating in a nearly unique system that combines aspects of parliamentary and presidential systems. Legislative authority is held by the Parliament of South Africa...
to redress the inequalities of Apartheid by giving previously disadvantaged groups (black Africans, Coloureds, Indians
Indian South Africans
Indian South Africans are people of Indian descent living in South Africa and mostly live in and around the city of Durban, making it 'the largest 'Indian' city outside India'. Most Indians in South Africa are descendents of migrants from colonial India during late 19th-century through early...
and some Chinese--who are SA citizens) economic opportunities previously not available to them. It includes measures such as Employment Equity, skills development, ownership, management, socioeconomic development and preferential procurement.
Rationale
After the transition of Apartheid in 1994, it was decided by the government of the African National CongressAfrican National Congress
The African National Congress is South Africa's governing Africanist political party, supported by its tripartite alliance with the Congress of South African Trade Unions and the South African Communist Party , since the establishment of non-racial democracy in April 1994. It defines itself as a...
that direct intervention in the distribution of assets and opportunities was needed to resolve the economic disparities created by Apartheid policies which had favoured white business owners. BEE intended to transform the economy to be representative of the demographics
Demographics
Demographics are the most recent statistical characteristics of a population. These types of data are used widely in sociology , public policy, and marketing. Commonly examined demographics include gender, race, age, disabilities, mobility, home ownership, employment status, and even location...
, specifically race demographics of the country. BEE was defined in the 2001 Commission Report as follows,
Successful implementers of BEE also see it as a means to create economic growth in South Africa, and as vital to their corporate strategy.
Legislation
On 9 February, 2007, the first BEE Codes of Good Practice was gazetted by the South-African Government. This newest release of the Codes is also known as Broad-Based Black Economic Empowerment or B-BBEEThis included the following Codes:
- Code 100 – OwnershipOwnershipOwnership is the state or fact of exclusive rights and control over property, which may be an object, land/real estate or intellectual property. Ownership involves multiple rights, collectively referred to as title, which may be separated and held by different parties. The concept of ownership has...
- Code 200 – Management & Control
- Code 300 – Employment Equity
- Code 400 – Skills Development
- Code 500 – Preferential Procurement
- Code 600 – Enterprise Development
- Code 700 – Socioeconomic developmentSocioeconomic developmentSocio-economic development is the process of social and economic development in a society.Socio-economic development is measured with indicators, such as GDP, life expectancy, literacy and levels of employment...
- Codes 800 - 807 - Qualifying Small Enterprises
The following sector scorecards have also been gazetted (in terms of section 12):
- Financial Sector Scorecard
- Construction Sector Scorecard
- Tourism Sector Code
Also gazetted were general guidelines and definitions, among which, the definition of the beneficiaries of BEE. The definition is the same as that of the Black Economic Empowerment Act of 2003 which states that "black people" is a generic term which means Africans, Coloureds and Indians and included provisions to ensure that they must have been South African citizens prior to 1994. The fact that Chinese individuals (some of whom were classified as Coloureds under Apartheid, others as honorary white), who were also submitted to legal discrimination prior to 1990 (but exempt from the Group Areas Act as of 1984 when the Group Areas Amendment Act was promulgated), have been excluded as beneficiaries of black empowerment, has led to a renewed media debate regarding the definition of “black” in current legislation. As of 2008, Chinese people have been reclassified as "black" after The Chinese Association of South Africa took the South African government to court and won.
The BEE legislation is supported and functions in conjunction with various other forms of Legislation, including the Employment Equity Act, Skills Development Act, Preferential Procurement Framework and others.
The legislation was developed through numerous task teams and have taken more than 3 years to be gazetted since the first Act (December 2003) and the first Codes of Good Practice released in November 2005 which addressed Statement 100 and 200. Subsequent Codes were released in December 2006 addressing Codes 300 to 700. Based on public and stakeholder comments, the final codes were adjusted and gazetted.
Scorecards
Enterprises may be rated based on various scorecards, however only the following have been gazetted as of February 2007:- Generic Broad Based Scorecard
- Generic Narrow Based Scorecard
- Qualifying Small EnterprisesQualifying Small EnterprisesA Qualifying Small Enterprise is one of the categories of South African businesses as per the Broad Based Black Economic Empowerment Act. "The Broad-Based Black Economic Empowerment Act : Codes of Good Practice on Black Economic Empowerment" was gazetted on 9 February 2007...
Narrow Based Scorecard - Qualifying Small EnterprisesQualifying Small EnterprisesA Qualifying Small Enterprise is one of the categories of South African businesses as per the Broad Based Black Economic Empowerment Act. "The Broad-Based Black Economic Empowerment Act : Codes of Good Practice on Black Economic Empowerment" was gazetted on 9 February 2007...
Broad Based Scorecard - Financial Sector Scorecard
- Construction Sector Scorecard
The last two - Financial Sector scorecard and Construction Sector scorecard have not been passed into law. They were gazetted under section 12 of the act, which is for comment only. They will need to be gazetted in terms of section 9 of the act to become an official sector code. Until that happens all enterprises falling in these two industries are required to use the codes of good practice in producing a scorecard.
Significant leniency for Small Enterprises has been built into the gazetted codes. Based on the Qualifying Small Enterprises Codes, all companies with a turnover under R5 million p.a. is completely exempt from BEE and automatically qualifies as a level 4 contributor or achieves 100% BEE Contribution Recognition.
The generic broad based scorecard. All seven pillars must be addressed totalling 100 points
| Element | Weighting | Compliance Targets |
|---|---|---|
| Ownership | 20 points | 25%+1 |
| Management Control | 10 points | (40% to 50%) |
| Employment Equity | 15 points | (43% to 80%) |
| Skills Development | 15 points | 3% of payroll |
| Preferential Procurement | 20 points | 70% |
| Enterprise Development | 15 points | 3% (NPAT) |
| Socio- Economic Development | 5 points | 1% (NPAT) |
Qualifying Small Enterprises
Qualifying Small Enterprises
A Qualifying Small Enterprise is one of the categories of South African businesses as per the Broad Based Black Economic Empowerment Act. "The Broad-Based Black Economic Empowerment Act : Codes of Good Practice on Black Economic Empowerment" was gazetted on 9 February 2007...
(those with an annual turnover from R5 - 35 million) are rated on the following scorecard and may choose any four of the pillars to address, totalling 100 points
| Element | Weighting | Compliance Targets |
|---|---|---|
| Ownership | 25 points | 25%+1 |
| Management | 25 points | 50.1% |
| Employment Equity | 25 points | (40% to 70%) |
| Skills Development | 25 points | 2% of payroll |
| Preferential Procurement | 25 points | 50% |
| Enterprise Development | 25 points | 2% (NPAT) |
| Socio- Economic Development | 25 points | 1% (NPAT) |
Exemption
Small businesses, generally with a turnover of less than R5m, are considered to be Exempted Micro EnterprisesExempted Micro Enterprises
Exempted Micro Enterprises are businesses that are exempt from measurement in terms of the DTI's codes of Good Practice for BEE. They automatically qualify as 100% contributors towards BEE, this offers small South African businesses the opportunity to grow as a result of BEE irrespective of the...
and do not need to be measured against the BEE scorecards as stated above.
Criticism
Critics argue that BEE's aim was to attempt to create equality of the workforce of South Africa as a whole by enforcing the advantaging of the previously disadvantaged and the disadvantaging the previously advantaged. This results in businesses having to consider the social background of any potential applicant instead of making decisions purely based on qualifications and experience (News Daily, May 24, 2004).Instead of using this type of policy, it has been suggested by critics that a policy of qualification equality should be used. This would allow businesses to focus on employing the person with the highest qualifications, the most experience and the best recommendations. To allow previously disadvantaged individuals to achieve these qualifications and experience, critics of BEE say that the government should place more emphasis on secondary and tertiary education, as well as subsidise companies wishing to employ entry level applicants.
In response to criticism, the South African Government launched Broad Based Black Economic Empowerment
Broad Based Black Economic Empowerment
Broad-Based Black Economic Empowerment is a form of Economic Empowerment initiated by the South African government in response to criticism against Narrow Based Empowerment instituted in the country during 2003/2004...
which is the current gazetted framework for addressing Black Empowerment beyond enriching a few.
BEE has also been criticized for creating a brain drain
Brain drain
Human capital flight, more commonly referred to as "brain drain", is the large-scale emigration of a large group of individuals with technical skills or knowledge. The reasons usually include two aspects which respectively come from countries and individuals...
, where the qualified white expertise is leaving for areas where they would not be discriminated against. Inkatha Freedom Party
Inkatha Freedom Party
The Inkatha Freedom Party is a political party in South Africa. Since its founding, it has been led by Mangosuthu Buthelezi. It is currently the fourth largest party in the National Assembly of South Africa.-History:...
leader Mangosuthu Buthelezi
Mangosuthu Buthelezi
Inkosi Mangosuthu Buthelezi is a South African Zulu politician who founded the Inkatha Freedom Party in 1975 and continues to lead the party today.His praise name is Shenge.-Early life:...
is a strong critic of BEE and supports this view. He has stated that "the government's reckless implementation of the affirmative action policy is forcing many white people to leave the country, creating a skills shortage crisis".
Archbishop Desmond Tutu has warned that South Africa is sitting on a "powder keg" because millions are living in "dehumanising poverty" stating that Black Economic Empowerment only serves an elite few.
External links
- Broad-Based Black Economic Empowerment Act, 2003
- http://www.thedti.gov.za/bee/complete.pdf Department of Trade and Industry BEE Strategy
- SANAS South African National Accreditation System