Broad-based Black Economic Empowerment (BBBEE) was created in response to the limitations of South Africa’s Black Economic Empowerment Act. The South African government implemented the Black Economic Empowerment Act to correct imbalances resulting from the former Apartheid regime. This Act promoted the economic growth of previously disadvantaged groups such as Black, Coloured and Indian South Africans.
The country’s ruling party, The African National Congress (ANC), referred to Black Economic Empowerment as “positive discrimination”. However, its stringent requirements and obvious limitations caused non-black South Africans to feel disempowered, marginalised and penalised for past transgressions. BBBEE has offered a solution to the pitfalls of Narrow-based Black Economic Empowerment.
BBBEE focuses on creating a more equitable and sustainable correction of imbalances. It targets employment equity and skills development, ownership and management control, preferential procurement and enterprise development, as well as socio-economic development. All of these areas were included in the Narrow-based Black Economic Empowerment Act, but offered a disproportionately greater advantage to black South Africans.
BBBEE has been designed to appropriately redistribute opportunities for economic growth across the board, inclusive of all South Africans, while still promoting the development of previously disadvantaged groups. Codes of Good Practice with which South African companies must comply, under the original Black Economic Empowerment Act, focused largely on ownership and management control. BBBEE is measured using seven pillars of which ownership and management control account for only 30% of the whole. This means that when a company’s BBBEE compliance is investigated and their BBEEE score calculated, 30% their ownership and management control must comprise of black South Africans.
BBBEE compliance requirements apply to Generic Enterprises with a turn-over of more than R35 million, and Qualifying Small Enterprises (QSEs) that turn over between R5 million and R35 million. Exempted Micro Enterprises (EMEs) are not required to comply with BBBEE regulations provided that they are able to present sound evidence that they are EMEs.
An increase in black management and professionals from 216,772 to 359,438 between 1995 and 2005 reflects the impact of Narrow-based Black Economic Empowerment. It is difficult to compare this to the impact of BBBEE given the comparative time-frame it has been in place. BBBEE does, however, provide a more inclusive approach to balancing the scales, the advantages of which may prove to be more sustainable.