Black Economic Empowerment

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, Indians and Chinese--declared as Black in June 2008[1]--who are SA citizens) economic opportunities previously not available to them. It includes measures such as Employment Equity, skills development, ownership, management, socio-economic development and preferential procurement.



[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.

Successful implementers of BEE also see it as a means to create economic growth in South Africa, and a vital element of their enterprises' strategy.

[edit] 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-BBEE

This included the following Codes:

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

  • Financial Sector Scorecard [2]
  • Construction Sector Scorecard[3]
  • Tourism Sector Code [4]

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.[5] The fact that Chinese individuals (classified as Coloureds under Apartheid), 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.[6]

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.[7]

[edit] Scorecards

Enterprises may be rated based on various scorecards, however only the following have been gazetted as of February 2007:[8]

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)

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

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] Exemption

Small businesses, generally with a turnover of less than R5m, are considered to be Exempted Micro Enterprises and do not need to be measured against the BEE scorecards as stated above.

[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.

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. Since BEE discriminates based on race, it is inherently a racist policy. 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".[9] 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.[10]


[edit] References

  1. ^ "Chinese are declared to be Black, so are Chinese are Fully Black?". BEE Partner, South Africa Economy Watch. Retrieved 2008-06-30. 
  2. ^ "Codes of Good Practice on Broad-Based Black Economic Empowerment - Financial Sector Charter" (PDF). Department of Trade and Industry. Retrieved 2007-08-23. 
  3. ^ "Codes of Good Practice on Broad-Based Black Economic Empowerment - Construction Sector Charter" (PDF). Department of Trade and Industry. Retrieved 2007-08-23. 
  4. ^ "Codes of Good Practice on Broad-Based Black Economic Empowerment - Tourism Sector Codes" (PDF). Department of Trade and Industry. 
  5. ^ "Codes of Good Practice on Broad-Based Black Economic Empowerment - Schedule 1, Interpretation and Definitions" (PDF). Department of Trade and Industry. Retrieved 2007-08-23. 
  6. ^ Vuyo Jack (2007-04-29). "Chinese people fall in grey area of BEE scorecard". Business Report. Retrieved 2007-08-23. 
  7. ^ "The BEE Codes of Good Practice". Department of Trade and Industry. Retrieved 2007-08-23. 
  8. ^ "BB-BEE Codes of Good Practice" (PDF). Department of Trade and Industry. Retrieved 2007-08-23. 
  9. ^ "Buthelezi slams affirmative action". Mail & Guardian. 2007-02-01. Retrieved 2007-08-23. 
  10. ^ "Tutu warns of poverty 'powder keg'". BBC. 2004-11-23. Retrieved 2009-11-12. 

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