Broad-Based Black Economic Empowerment

The second major piece of legislation to address employment inequities was the Broad-Based Black Economic Empowerment (B-BEE) Act of 2003, created to encourage the voluntary transfer and redistribution of assets dominated by white-minority investors to black investors and the promotion of black participation in business management and operations. An integral part of the legislation was the measurement of a company’s progress in providing black South African’s empowerment in four areas: (1) direct empowerment through ownership and control of an enterprise and its assets, (2) management at the senior level, (3) human resources development and employment equity, and (4) indirect empowerment through preferential procurement, enterprise development, and corporate social investment. The legislation required all government bodies and public companies to abide by and apply these codes of good practice to win government contracts.41 It called for white-owned and managed firms to turn management and ownership over to black businessmen and for the new black capitalists to pay market price for their acquisitions. Many companies believed if they didn’t comply, it would only be a matter of time before the government would nationalize them. The goal of B-BEE was to have 25 percent black ownership of South African companies by 2014.

In the early years ofits implementation, it appeared that B-BEE might even exceed that goal. In 2006, the value of B-BEE deals totaled 56 billion rand, and by 2007, it had jumped to 96 billion. At that rate, some experts predicted that more than half, or 52 percent, of South African privately held businesses would change ownership by 2016.42

Similar advances occurred at the board of director level. In 1992, only 14 (1.2 percent) of the directors of the top 100 Johannesburg Stock Exchange companies were black; that number had increased to 156 black directors (13 percent) by a decade later, in 2002. After the passage ofB-BEE in 2003, 432 black directors served on all 472 companies listed on the Johannesburg Stock Exchange, and the following year, 435 did, representing 16.6 percent of the total.43

In 2015, the officials in charge of B-BEE extended its mandates to include subcontractors and small and medium enterprises (SMEs), as well as increased its oversight and sanctions for noncomplying organizations. In recent years, there has also been a movement toward providing more direct support to black entrepreneurs in the form of assistance with business plans and subsidized access to finance and management training programs—allowing more blacks to create, manage, and control businesses and organizations.44

The jury is still out, however, as to whether the B-BEE has been a success. The government wanted to engineer a more representative role for the black majority under the program. Yet polls have shown that most South Africans have viewed it as benefitting only a small portion of the population: a handful of politically connected black tycoons who have made fortunes at companies who were obliged to conduct “equity sales.”45 The criticism of the program has been—and continues to be—that the only beneficiaries have been the senior members of the ANC.46

The following story provides an example of how many people regard the B-BEE program. In June 2009, First Rand Bank, the nation’s second largest financial services group, announced the appointment of Sizwe Nxasana as the bank’s next chief executive. He is the first black chief executive of the bank. But analysts raised concerns about the appointment, saying the decision to appoint Nxasana was influenced by politics, considering he joined the group less than four years previously and had no hands-on banking experience.47

B-BEE policies were created to reduce inequalities and encourage and support black entrepreneurship, which was restricted during apartheid. The policies were also designed to incentivize organizations, via a point system, to increase and include throughout the operations of an organization—management, leadership, and ownership—people who had been historically disadvantaged. Yet while government leaders created the affirmative action and B-BEE policies to correct gross inequities in employment and business opportunities, people have increasingly criticized those policies, saying that they benefit just a few South Africans—those who are politically well-connected—and create a culture of entitlement. The debate and predictions about the future of such policies will continue, as the impact of the current revisions to the B-BEE legislation, yet unknown, play out over time.

 
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