The Broad-Based Black Economic Empowerment Act No. 53 of 2003 (“ The B-BBEE Act”) is a socio-economic program geared towards the promotion of economic change in South Africa whilst enforcing equality within the business arena; establishing a legislative framework for the promotion of black economic empowerment; empowering the Minister to issue codes of good practice and publishing transformation charters; establishing the Black Economic Empowerment Advisory Council; and providing for matters connected therewith.
Black Economic Empowerment (BEE) is a broad strategy that aims to de-racialise South Africa's economy and to accelerate the entry of Historically Disadvantaged Individuals (HDIs) into the business arena. BEE needs the input of all sectors of the economy to be successful. However, this task is not proving to be easy as many companies are trying to apply the ‘fronting’ method; whereby BEE is emulated but is not genuine.
South Africa's BEE policy is not a mere moral initiative to redress past harms; it is a pragmatic economic development strategy geared towards the realisation of the country's full economic potential whilst simultaneously helping to bring the black majority into the economic platform.
Each industry sector is in charge of a Charter which describes the environment as it presently is and the environment required in order to fulfil B-BBEE. The Mining, Finance and Oil Industries have finalised their BEE Charters. Other industries, such as the Wine, Tourism and Information, Communication and Technology sectors have produced Draft Charters.
BEE is associated with good governance and forms part of an overall growth strategy for all these sectors as well as aiming to create equitable market activity.
Although the Act promotes companies’ implementation of BEE; presently, it holds no specific penalties nor deadlines with regards to the implementation of BEE. Nonetheless, many companies have adopted BEE, but government still perceives the pace of change to be too longwinded.
In order to aid the implementation of BEE, the BEE sub-directorate offers assistance to white businesses to accommodate their BEE profile in line with the Act's requirements and guidelines and to facilitate the needs of black businesses allowing them to develop and grow.
The Department of Trade and Industry (DTI) has issued a general BEE scoreboard to measure companies’ BEE records. The constituents of the scoreboard include ownership, management, employment equity, skills development, preferential procurement, enterprise development and a residual element and provide a standard framework for the measurement of BEE across all sectors of the economy. The instructions state that all entities that are operating in the South African economy make a contribution towards the objectives of BEE. The B-BBEE Act makes the rules set out in the scoreboard binding on all state bodies and public companies, and the government is required to employ them when making economic decisions on procurement; licensing and concessions; public-private partnerships, and the sale of state-owned assets or businesses. Private companies are also required to be BEE compliant if they intend to do business with any government body or state organ – that is, to tender for business, apply for licences and concessions, enter into public-private partnerships, or buy state-owned assets.
However, the rules of good practice presented in the scoreboard allow some flexibility to foreign multinational companies that do business in South Africa in terms of the manner in which these multinationals structure their empowerment deals.
By means of its BEE policy, the government aims to achieve the following objectives:
- To encourage more black people to own and administer 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.
- To realize an extensive adjustment in the racial composition of ownership and management structures and in the skilled occupations of existing and new enterprises.
- To advance access to finance for black economic empowerment.
- To empower rural and local communities by aiding their access to economic activities, land, infrastructure, ownership and skills.
- To promote human resource development of black people through, mentorships, learnerships and internships.
- To boost 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.
- To safeguard that black-owned enterprises benefit from the government's preferential procurement policies.
- To aid in the growth of the operational and financial capacity of BEE enterprises, especially small, medium and micro enterprises and black- owned enterprises.
- To increase the extent to which black women own and manage existing and new enterprises,
In conclusion, BEE doesn’t aim to take income from one demographic group to give it to another group. BEE is an economic 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.