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Black Economic Empowerment
Category:	Policy/Strategy
Sub Category:	Policy/Strategy (South Africa)
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State/Country:	Republic of South Africa
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Alternative Names:	Broad Based Black Economic Empowerment BEE
Subject Matter:	Economic Development
Summary Information:
The South African Government's policy of Black Economic Empowerment (BEE) is one of a range of measures being used to counteract the economic effects of apartheid in South Africa. The strategy paper South Africa's Economic Transformation notes that the policy was needed not only because the constitution requires the state to promote social equality but also because 'societies characterised by entrenched gender inequality or racially or ethnically defined wealth disparities are not likely to be socially and politically stable, particularly as economic growth can easily exacerbate these inequalities.' (para 1.6). The policy is largely set out in the Broad-Based Black Economic Empowerment Act, 2003 ('the Act'), which, according to its preamble was enacted to: 'increase broad-based and effective participation of black people in the economy and promote a higher growth rate, increased employment and more equitable income distribution; and establish a national policy on broad-based black economic empowerment so as to promote the economic unity of the nation, protect the common market, and promote equal opportunity and equal access to government services'. The Act defines 'black people' as a 'generic term which means Africans, Coloureds and Indians'. The policy also receives support from other legislation, including the Promotion of Equality and Prevention of Unfair Discrimination Act, 2000, the Preferential Procurement Policy Framework Act, 2000 and the Competition Act, 1998. Specifically, the policy focuses on initiatives including: 1. increasing the percentage of black people that manage, own and control enterprises and productive assets; 2. preferential procurement; 3. public investment in enterprises owned or managed by black people; 4. human resources and skills development; 5. aiding the ownership and management of enterprises by communities and other collective enterprises; and 6. achieving equitable representation across all levels in the workforce and in occupations. The policy is to be followed by state bodies, public companies and private companies under certain circumstances.
Detailed Information:
The strategy paper also notes that while R2.2 billion was allocated to BEE activities in 2002/2003, it is envisaged that 'the bulk of funding is likely to come from the private sector with State funds acting as facilitator' (para 2.5.3). The policy has a 'scorecard' system, contained in the BEE codes, that rates businesses on how well they are achieving black economic empowerment. The elements of this 'scorecard', totalling 100 points, are: ownership (20 points); management control (10 points); employment equity (15 points); skills development (15 points); preferential procurement (20 points); enterprise development (15 points); and socio-economic development (5 points). The scorecard of companies is taken into account when awarding licences and concessions; assessing the qualifications for sale of state-owned enterprises; and in developing state-private partnerships (Background to, Intention & Application of the Codes of Good Practice). The Act also established the Black Economic Empowerment Advisory Council, whose functions include to advise the government on policy and progress of the policy, and to facilitate partnerships between the state and the private sector. The policy is overseen by the Department of Trade and Industry, the Minister of which may issue codes of good practice that prescribe legally enforceable targets and time periods in which they should be met. Policy implementation According to Padraig Carmody, early redistribution of assets into black hands was often achieved through 'unbundling', that is 'white dominated conglomerates selling off 'non-core' areas of their business to black economic empowerment companies'. (Padraig Carmody, p.264.) Other implementation problems include the issue of 'fronting' or mispresentation of BEE status, that is where levels of stated black ownership or employment are misleading, and thus in contravention of the spirit of the policy. The South African Government has made legislative moves to counter this problem through the Codes of Good Practice.