Black Economic Empowerment
Black Economic Empowerment is a policy of the South African government which aims to facilitate broader participation in the economy by black people. A form of affirmative action, it is intended especially to redress the inequalities created by apartheid. The policy provides incentives – especially preferential treatment in government procurement processes – to businesses which contribute to black economic empowerment according to several measurable criteria, including through partial or majority black ownership, hiring black employees, and contracting with black-owned suppliers. The preferential procurement aspect of BEE has been viewed as paradigmatic of a sustainable procurement approach, whereby government procurement is used to advance social policy objectives. So-called "BEE deals" – transactions aiming to increase black ownership of large businesses – have been conducted on a large scale, with BEE transactions concluded between 1994 and 2005 valued at between R150 billion and R285 billion.
The government has subscribed to an explicit policy of black economic empowerment since 1994, but BEE was relaunched as the more comprehensive, and less ownership-focused, Broad-Based Black Economic Empowerment programme around the time of the passage of the BBBEE legislation in 2003. However, although earlier initiatives were governed by different legislation and sets of arrangements, the underlying principles and policy are very similar, and BBBEE is often still referred to as "BEE" in common parlance.
In June 2021, President Cyril Ramaphosa announced that South Africa's BEE strategy and legislation would be reviewed, especially to ensure that they are not exploited for corrupt purposes.
History
Early policy
When the African National Congress came to power in 1994, the new government's priorities included redressing apartheid's legacy of economic exclusion. Under apartheid, legislation and practice had restricted the access of non-whites to job opportunities, capital, business and property ownership, and other forms of economic advancement, leaving vast racial inequalities in wealth and income. The new Constitution, finalised in 1996, emphasised protections against unfair discrimination and against disadvantage arising from the same. This was complemented by a 1997 Green Paper on Public Procurement Reform, which called for affirmative action measures in government procurement processes.The central socioeconomic policy framework of Nelson Mandela's government was the Reconstruction and Development Programme, which did not specifically refer to "black economic empowerment". However, the term was used in the earlier ANC RDP policy framework, on which the government policy was based. The ANC document viewed BEE initiatives as a means to "deracialise business ownership and control".
Early stages of BEE focused on promoting black ownership of large businesses. BEE transactions aimed to diversify the demographics of company shareholders. White-owned companies had to voluntarily enter into these transactions. In the absence of organised sources of capital, many of the black participants relied on highly-geared financing structures and special-purpose vehicles. Several BEE deals thus collapsed during the 1997 Asian financial crisis. According to estimates, black control of business had risen to about 10% of shares on the Johannesburg Stock Exchange by 1998, but, following the financial crisis, fell dramatically to between 1% and 3.8% by 2000. Meanwhile, the promotion of black empowerment in areas other than ownership was pursued piecemeal, especially through a series of laws including the Skills Development Act, 1998 and the 1998 Employment Equity Act.
Expansion
Amid dissatisfaction with the progress of existing initiatives, in May 1998 the Black Business Council appointed future President Cyril Ramaphosa to chair a BEE Commission. The Commission proposed a broad definition of BEE:It is an integrated and coherent socio-economic process. It is located within the context of the country's national transformation programme, namely the RDP. It is aimed at redressing the imbalances of the past by seeking to substantially and equitably transfer and confer the ownership, management and control of South Africa's financial and economic resources to the majority of its citizens. It seeks to ensure broader and meaningful participation in the economy by black people to achieve sustainable development and prosperity.The Commission also proposed the passage of focused BEE legislation and the adoption of an integrated national strategy on BEE, comprising a set of simplified and coordinated guidelines and regulations applicable across the economy, to be implemented by an oversight body reporting to the cabinet. On some views, the Commission was influential in bolstering support for the broader approach ultimately taken by the government to BEE. This is what sociologist Roger Southall called the "maximalist" approach to BEE, envisaging a more dramatic transformation of the South African economy, with redistributive objectives going beyond black ownership. According to Southall, a major force behind this shift in strategy was the growing popular perception that BEE had thus far worked to benefit only a tiny black elite, a criticism prominently voiced by the influential Congress of South African Trade Unions.
The stage for the expanded BBBEE strategy was set by the Preferential Procurement Act of 2000, which sanctioned preferential treatment for historically disadvantaged groups in the distribution of state procurement contracts. The regulations accompanying the act, promulgated in 2001, outlined a point system by which preference is allocated in the evaluation of public tenders – in addition to the competitiveness of a bid's price, "points" were given for the bidder's contribution to black economic empowerment. Shortly after the passage of the act, the first industry-specific BEE charters were published – the Petroleum and Liquid Fuels Charter in 2000 and the Mining Charter in 2002, both given regulatory status under the Mineral and Petroleum Resources Development Act. The Mining Charter, in particular, embraced principles later codified under BBBEE, identifying seven "pillars" of BEE and setting out a BEE "scorecard" for businesses. At the 51st National Conference of the ANC in December 2002, President Thabo Mbeki committed the government to drawing up a "Transformation Charter" involving a consolidated and clarified strategy on BEE.
2003 Act
The BBBEE Act passed in 2003, under the custodianship of the Department of Trade and Industry, and commenced in 2004. The Act's stated objectives were to facilitate broad-based black economic empowerment by:During this period, under President Mbeki, the government's approach to BEE became "increasingly focused and assertive," and it became unambiguously committed to maximalist or broad-based BEE, with a broader and deeper scope than mere black ownership of business. BEE was seen as proceeding along three main lines: in addition to "direct empowerment", BEE would also explicitly encompass human resource development and "indirect empowerment". Codes of Good Practice to complement the BBBEE Act were gazetted in two phases in 2005, setting out standardised criteria for measuring compliance with BBBEE indicators on a "scorecard"; the codes have been amended occasionally since then.
- promoting economic transformation in order to enable meaningful participation of black people in the economy;
- achieving a substantial change in the racial composition of ownership and management structures and in the skilled occupations of existing and new enterprises;
- increasing the extent to which communities, workers, cooperatives and other collective enterprises own and manage existing and new enterprises and increasing their access to economic activities, infrastructure and skills training;
- increasing the extent to which black women own and manage existing and new enterprises, and increasing their access to economic activities, infrastructure and skills training;
- promoting investment programmes that lead to broad-based and meaningful participation in the economy by black people in order to achieve sustainable development and general prosperity;
- empowering rural and local communities by enabling access to economic activities, land, infrastructure, ownership and skills; and
- promoting access to finance for black economic empowerment.