Black Economic Empowerment: The Road Still Long

Black Economic Empowerment: The Road Still Long President Jacob Zuma addresses the Broad Based Black Economic Empowerment (BBBEE) Summit in 2013. (Photo: GCIS)
South Africa's transition from apartheid to democracy continues to be adored by many around the world.
 
The transition, however, has delivered little for the majority in the country of 55 million people. 
Research suggests that up to 60 percent of the population are still trapped in poverty, even though the ANC led government provides more than 16 million people with monthly social grants.
 
In 1994, with the birth of freedom and democracy in South Africa, the new regime embarked on the journey of finding innovative means in the pursuit of the South Africa's transformation and development.
 
With all that, the Black Economic Empowerment (BEE) Policy, aimed at uplifting historically disadvantaged people (HDP) was born, stemming from the countries national development programme, namely, the Reconstruction and Development Programme (RDP).
 
It is vital to look deeper on this subject and at the very least promote the much needed conversations on how best to create an inclusive economy for all. Note that an inclusive economy is the real economic transformation that all nations must seek to achieve.
 
In the politics of BEE, an interesting element is that of the BEE Commission Report. In defining BEE, the commission states "it is aimed at changing the imbalances of the past by seeking to substantially transfer and confer ownership, management, and control of South Africa's financial and economic resources to the majority of the citizens. It seeks to ensure broader and meaningful participation in the economy by black people to achieve sustainable development and prosperity."
 
It has become imperative for the 22-year-old democracy to speedily find solutions to many of its ills, which threaten to tear the country, and not lose the hope brought to many in the world when Nelson Mandela became the first democratically elected president in 1994.
 
Since white domination forced its way in 1652, the indigenous black inhabitants of the country were to suffer under the oppressive laws of the colonial regimes.
 
It was the struggle for freedom through the centuries that black would finally be in a position to run and manage the affairs of their country.
 
This has proved to be rather tricky for the African National Congress (ANC) led government as the country has experienced waves of violent protests since 2003 for better services and the better life they were promised when the ANC came to power. A high-crime rate does not help matters either.
 
Since last year, the universities have turned higher education upside down and they are now quickly becoming ungovernable. 
 
More than 20 million of the 55 million of South Africans are still not part of the mainstream economy. With the advent of democracy in 1994, South Africa achieved legal equality.
But still, the black majority have yet to see the fruits of the freedom and a better life for all, even though there are notable changes like the monthly social grants.
 
And with the stubborn unemployment at 25 percent, the road to prosperity for the black majority is still a long way ahead. 
 
In order to achieve economic equality of the black population, the post 1994 government devoted itself to the politics of BEE, which in 2003 started to talk of broadening the BEE's policy into Broad-Based Black Economic Empowerment (B-BBEE), in an effort to reach the majority who had not yet been fully incorporated into the economy. The B-BBEE was legislated in 2007.
 
Fundamentally, BEE as an economic development strategy ensures that there will be no area in the economy which will not be affected by B-BBEE, further meaning that blacks will also enjoy the wealth of their country like their white counterparts have for centuries.
 
Research on BEE in South Africa indicates that there is still a lot of resistance from the white community which owns 90% of the economy and 80% of the land.
 
Another agenda of BEE is to integrate black entrepreneurs into the private economy via the transfer of company ownership, management, and control functions. 
And in order to implement this goal and more and to make them measurable,  the legislator introduced Black Empowerment Scorecards.
  
Don Mkhwanazi, a South African business guru and leader of BEE has been consistent in voicing his disappointment, saying “when we talk about Black Economic Empowerment, we talk about full participation for our people in the mainstream of the economy in all sectors, at all levels. Full stop.”
 
Mkhwanazi further notes the private sector mistakenly views BEE as a series of boxes it must tick.
He said that “some of these new black millionaires are gatekeepers, worse than those guarding Fort Knox.”
Speaking at the Black Business Summit attended by industry stalwarts Patrice Motsepe, Sandile Zungu, and Danisa Baloyi late in 2011, Mkhwanazi – forthright as usual – challenged delegates on the lack of cohesion within the sector due to the absence of an agenda. “I often ask myself, what is the black business agenda in our beloved country? I’m sorry to say that as a collective, we do not have such an agenda,” he told the delegates. “As black businesses we need to constantly hammer home the raison d’etre for socioeconomic transformation, with democratization of the economy central, underpinned by employment equity and Broad Based Black Economic Empowerment.” He warned that without such a foundation, the agenda “becomes diffused and muddled, and others tell us what we should or should not do.”
 
This is an indication that BEE, despite revisions that made it more broad-based, is still a long way from achieving its objectives.
 
Also, Mkhwanazi declares that the black business environment has been ensnared in uncertainty and frustration due to a lack of clear direction.
  
Commenting further, he said “when one looks at the BBBEE Act and its guidelines, the missing link is entrepreneurship. Even in the seven pillars of Broad-Based-Black Economic Empowerment – ownership, management control, preferential procurement, skills development, enterprise development, employment equity, corporate social investment and development – entrepreneurship is missing. Yet it’s so critical for the economy.”
 
When coming to office in 1994, the ANC government demanded a coordinated strategy in regards to BEE. And in 1998, the BEE-Commission was established to meet the demand. 
 
The BEE-COMM had to develop a commonly accepted definition of BEE. This included proposals of methods for restructuring. Even though the ANC government had on numerous occasion previously enacted many laws to reduce economic inequality, there still was a lack of a coordinated and holistic approach with regards to BEE.
 
In October 2000, the BEE-COMM had manged to present its final report. This report was the basis for the government’s strategy paper, which was published three years later. The legal foundation regarding BEE was created in January 2004 as the BBBEE Act was coming into being. 
 
According to many BEE stakeholders, this law reformed and coordinated the previously enacted laws and support programs. 
 
"The exact description of the law’s regulations and the relating actual provisions for the implementation in practice took place via conduct guidelines in particular."
 
The SA government defines BEE as, "An integrated and interrelated socio-economically process, which contributes directly to the economic restructuring South Africa’s and to a significant rise of the black proportion who will lead, control or own companies within the South African economy. Furthermore, this process shall lead to a significant decrease of income differentials."
 
It must also be noted, that the term “blacks” according to the prevailing legal framework includes all blacks, coloureds and Indians as well as some Chinese if they were disadvantaged prior to 1990.
 
Moreover, this has changed with the recent amendments of the Codes of Good Practice in 2013 in favour of a more exact definition differentiating between gender and specific ethnic groups that used to be treated the same under the old term definition. People living with disabilities also form part of this definition.
 
The BEE strategy still aims to achieve the following goals: "A significant rise in the proportion of blacks as owners and managers of existing and new companies; a significant rise in the number of blacks in executive positions, a rise of blacks' capital share in companies; the increase in blacks’ share in factors of production, land for example; the expansion of economic activities in underdeveloped areas; expedited economic growth available equally to all segments of the population; and the increase in the level of income for blacks resulting in the reduction in income differentials."
 
Essentially, "the concept of direct empowerment in terms of BEE, comprises the ownership of company shares and voting rights as well as the right of participation in management and therefore in corporate governance."
 
In this context, and "in consideration of direct empowerment, the possibility of participation of black employees needs to be mentioned. Instead of having outsiders participate in businesses it is often  preferred to have the  employees participate in the company."
 
However, according to the BEE legislation this does not take place via the transfer of employee shares but via the creation of a Employee Share Ownership Scheme (ESOS) in form of a BEE Employee Trusts (BETs). 
 
"Companies ought to comply with the guidelines of the Employment Equity Act. This law was enacted in order to employ an amount of blacks in all business areas and in all levels at comparable work and income terms according to the composition of the population within a specified point in time," the BEE Act states.
 
Furthermore, the government has introduced multiple programs for advanced training and support for black employees in order to reach this goal and to improve the rather low level of training. 
 
"A company will be awarded with up to 20 points on the scorecard if it actively promotes advanced training of its employees within the framework of the official skills development programmes."
 
For example, two percent of disabled people ought to be employed in order to collect two of the possible 15 points from this area. The majority of the points is awarded for reaching the target for blacks in various management levels.
 
Other programmes associated with BEE include development of co-operatives and mentorship support programmes by big companies for small businesses and groups.
 
It also seems the time has come for the government to have a fully fledged department of BEE away from the unit it currently runs in the Department of Trade and Industry as their Zimbabwean counterparts do, and with great momentum.
 
As a way forward, all stakeholders must meet regularly in forums to find solutions to the common challenges facing economic transformation in South Africa.
 
Otherwise the "miracle" country the world aspired to emulate back in 1994 will become the country to rather avoid.
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  • text_for_credit_link_1: President Jacob Zuma greets Don Mkhwanazi on arrival. The President met with the BBBEE Advisory Council at the Union Buildings in Pretoria in 2012./Flickr
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Thandisizwe Mgudlwa

Thandisizwe Mgudlwa is an internationally published journalist based in Cape Town South Africa. His recently published Amazon Best Selling children's book, KIDDIES WORLD; and now The Best In You, which are made available by Amazon. As a writer for The Associated Press and a journalist for more than 16 years, he has shaped world opinion, influenced decision and policy makers on a number of subjects that affect us daily. Thandisizwe has been published world-wide notably by the likes of The Washington Post, The New York Times, The Guardian, The Independent, The Globe and Mail,  The New Yorker, USA Today among others. More recently, he has done this with the, The New Age, Uplifting Star, The Southern Times, Herald (The) and the Business Day newspapers. 

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