Black Economic Empowerment

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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 who are SA citizens) economic opportunities previously not available to them. It includes measures such as Employment Equity, skills development, reverse racism, ownership, management, socio-economic development and preferential procurement.

1 Rationale
2 Legislation
3 Scorecards
4 Effects
5 Criticism
6 References
7 External links

[edit] Rationale

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.

[edit] Legislation

On 9 February, 2007, the first BEE Codes of Good Practice was gazetted by the South-African Government. This included the following Codes:

Code 100 – Ownership
Code 200 – Management
Code 300 – Employment Equity
Code 400 – Skills Development
Code 500 – Preferential Procurement
Code 600 – Enterprise Development
Code 700 – Socio-economic Development
Codes 800 - 807 - Qualifying Small Enterprises

The following sector scorecards were also gazetted (in terms of section 12):

Financial Sector Scorecard ^[1]
Construction Sector Scorecard^[2]

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.^[3] The fact that Chinese individuals (classified as Coloureds under Apartheid), who were also submitted to legal discrimination prior to 1990 save for the Group Areas Act, have been excluded as beneficiaries of black empowerment, has led to a renewed media debate regarding the definition of “black” in current legislation.^[4]

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.^[5]

[edit] Scorecards

Enterprises may be rated based on various scorecards, however only the following have been gazetted as of February 2007:^[6]

Generic Broad Based Scorecard
Generic Narrow Based Scorecard
Qualifying Small Enterprises Narrow Based Scorecard
Qualifying Small Enterprises Broad Based Scorecard
Financial Sector Scorecard
Construction Sector Scorecard

It should be noted that 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)

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

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)

[edit] Effects

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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. Together with affirmative action, it has encouraged emigration from South Africa.

[edit] 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 which is the current gazetted framework for addressing Black Empowerment beyond enriching a few.

Inkatha Freedom Party leader Mangosuthu Buthelezi is a strong critic of BEE. 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".^[7]