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Why BEE?

Black Economic Empowerment (BEE)

Black Economic Empowerment (BEE) is a program launched by the South African government to redress the inequalities of Apartheid by giving previously disadvantaged groups (black Africans, Coloureds and Indians) economic opportunuties previously not available to them. It includes measures such as Employment Equity, skills development, targets for ownership, management and preferential procurement.

After the end of Apartheid in 1994 and with the advent of majority rule, control of big business in both the public and private sectors still rested primarily in the hands of white individuals. According to Statistics South Africa, Whites comprise just under 10% of the population, meaning that most of the country's economy was controlled by a very small minority. BEE is intended to transform the economy to be representative of the demographic make-up of the country.

This policy has seen the development and acquisition of businesses by persons who were marginalised under apartheid. Typically, this would be done by guarantees (by quota) of black employment at certain levels of a company. BEE reaches much further than the affirmative action programmes in other countries. It sets quotas for black ownership of companies across various significant economic sectors in South Africa, including but not limited to mining, financial services, IT, tourism and agriculture.

Criticism

There have been allegations that black economic empowerment is being used to enrich a small, politically-connected elite, while leaving the majority of poor black South Africans unaffected. These allegations of crony capitalism have arisen because many beneficiaries of BEE are close to the ruling party, the African National Congress.

Critics also 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 (Black, Coloured and Indian) and the disadvantaging the previously advantaged (White). This results in businesses having to consider the social background of any potential applicant instead of making decisions purely based on qualifications and experience.

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.

Inkatha Freedom Party learder Mangosuthu Buthelezi is a strong critic against BEE and has made statesments suchs as "the government's reckless implementation of the affirmative-action policy is forcing many white people to leave the country, creating a skills shortage crisis".

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 realise the country's full economic potential.

In the decades before South Africa achieved democracy in 1994, the apartheid government systematically excluded African, Indian and coloured people - collectively known as "black people" - from meaningful participation in the country's economy.

This inevitably caused much poverty and suffering - and a profoundly sick economy.

The distortions in the economy eventually led to a crisis, started in the 1970s, when gross domestic product growth fell to zero, and then hovered at about 3.4% in the 1980s. At a time when other developing economies with similar resources were growing, South Africa was stagnating.

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's 12 years of democracy - growth hit 4.9% in 2005 - the racial divide between rich and poor remains. The DTI points out that such inequalities can have a profound effect on political stability:

"Societies characterised 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."

Broad-based growth

Black economic empowerment is not affirmative action, although employment equity forms part of it. Nor does it aim to merely take wealth from white people and give it to blacks. It is simply 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."

There is a danger, recognised by the government, that BEE will simply replace the old elite with a new black one, leaving fundamental inequalities intact. For this reason the strategy is broad-based, as shown in the name of the legislation enacted in 2004: the Broad Based Black Economic Empowerment Act.

"Government’s approach [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," the DTI says.

"Discrimination is at its most severe when race coincides with gender and/or disability."

How to achieve BEE?

Black economic empowerment is driven by legislation and regulation. An integral part of the BEE Act of 2004 is the balanced scorecard, which measures companies' empowerment progress in four areas:

• Direct empowerment through ownership and control of enterprises and assets.
• Management at senior level.
• Human resource development and employment equity.

Indirect empowerment through:

• preferential procurement,
• enterprise development, and
• corporate social investment - a residual and open-ended category.

This scorecard is defined and elaborated in the recently released BEE codes of good practice, which will soon be passed into law.

The codes will be binding on all state bodies and public companies, and the government will be required to apply them when making economic decisions on:

• procurement,
• licensing and concessions,
• public-private partnerships, and
• 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 licences 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.

Different industries have also been encouraged to draw up their own charters on BEE, so that all sectors can adopt a uniform approach to empowerment and how it is measured.

The DTI has all the relevant documents and information on black economic empowerment (in English) available online, visit www.dit.gov.za. and find:

• BEE strategy document
• BEE codes of good practice
• BEE sectoral charters
• BEE companies in ICT and electronics
• BEE Act of 2004