What will BE the

Legacy of BEE?

By Eric Ackroyd

With thanks to Yuneal Padayachy

and Sanet Buys for their contribution

to the article.

South Africa’s BEE roll-out has not only challenged businesses to Transform, it has brought about a unique dialect. It incorporates

references and/or phrases such as B-BBEE, HDSAs, Fronting, Tenderpreneur, Sector Charters, EMEs, QSE’s and Priority Elements, to

name but a few, which collectively are recognised as South Africanisms. However, foreign as these may seem, they are part and parcel of

doing business in South Africa today.

The engineers, legislators and implementers of Apartheid believed they were visionary in creating a vastly contrasting society; one

representing privilege and the other abject poverty. However, it is that tunnel vision which has brought about the dire need to equalise that

very disparity which was brought about over a period of 46 years. To conceptualise BEE simply is to recognise that Apartheid was the

symptom and BEE is the remedy.

Following the journey of BEE, understanding how the implementation

of specific Acts led to its birth, and gradual evolution to Broad-Based

Black Economic Empowerment (B-BBEE), may bring about clarity as to

the foundation of the ever changing and complex BEE Act of 2003 and

the BEE Amendment Act of 2013.

Without realising it, those who engineered Segregation actually laid the

framework for the implementation of the BEE Act of 2003, 90 years

prior to its legislation. The following tracks this journey, beginning with

Acts which led to the segregation of the South African population.

• 1913 - Native (Black) Land Act, 27 of 1913 implemented.

• 1923 - Native (Black) Urban Areas Act, 21 of 1923 implemented.

• 1950 - Group Areas Act, 41 of 1950 implemented.

• 1951 - Separate Representation of Voters Act, 46 of 1951

implemented.

• 1953 - Bantu Education Act, 47 of 1953 implemented.

• 1953 - Reservation of Separate Amenities Act, 49 of 1953

implemented.

• 1955 - Congress of the People adopts the Freedom Charter in

June.

The introduction of the Freedom Charter was the beginning of change.

It was a broad statement of core principles, which demanded, and

gave, a commitment to a non-racial South Africa. This charter was

pivotal in the formation of the B-BBEE Act.

The 1990s was the decade of change, as Nelson Mandela was

released on the specific order of F.W. de Klerk. Following the first

democratic elections in 1994, the Reconstruction and Development

Programme (RDP) was implemented. This programme emphasised

the importance of addressing economic inequalities and imbalances,

created through racial discriminatory policies and practices. The RDP

essentially opened the door for the Broad-Based Black Economic

Empowerment Act to be developed.

BEE in its infancy

Between 1994 and 1999, BEE entered its infancy stage. A core

milestone was the implementation of the Constitution of the Republic

of South Africa, 108 of 1996. This provided the legislative framework

which empowered Government to take measures to promote equality.

With this framework firmly in place, legislative policies were introduced,

specifically designed to advance previously disadvantaged people

through procurement.

“The framework for BEE

was laid 90 years prior

to its legislation.”

Section 9 of the Constitution clearly defines Equality as:

”Everyone is equal before the law and has the right to equal protection

and benefit of the law. Equality includes the full and equal enjoyment of

all rights and freedoms.

The state may not unfairly discriminate directly or indirectly against

anyone on one or more grounds including race, gender, sex,

pregnancy, marital status, ethnics and social origin, colour, sexual

orientation, age, disability, belief, language and birth. No person

may unfairly discriminate directly or indirectly against anyone one or

more grounds in terms of subsection (3). National Legislation must be

enacted to prevent or prohibit unfair discrimination. Discrimination on

one or more of the grounds listed in subsection (3) is unfair unless it is

established that the discrimination is fair.”

The Employment Equity Act, 55, was implemented in 1998. The

core aim was to eliminate unfair discrimination, in conjunction with

promoting fair treatment, equal rights and opportunities to all South

Africans. The subsequent implementation of affirmative action policies

was believed to be the solution to even out imbalances and encourage

equitable employment representation in all occupational categories

within a workforce.

The implementation of the Skills Development Act, 97 of 1998, was

the framework to devise and implement national, sector and workplace

strategies on skills development. The aim of this was to develop and

improve the skills set of the South African workforce. In an effort to

achieve this, learnership programmes were encouraged and levies

became payable by employers to support skills development through

the creation of relevant Sector Education and Training Authority

(SETA’s).

Following this was the implementation of the Skills Development Levies

Act, 9 of 1999. The Act became the platform to implement Levies

payable by Employers in South Africa to various SETAs, in order to

oversee training.

BEEing a Toddler

From the turn of the century to 2012, BEE grew in momentum. Simple

Black Economic Empowerment evolved to be known as Broad-Based

Black Economic Empowerment. The milestone events and Acts during

this period added momentum to the growth of BEE.

In line with Section 217 (3) of the Constitution, the Preferential

Procurement Policy Framework Act, 5 of 2000, provided a framework

which allowed for the implementation of the procurement policy

contemplated in section 217(2) of the Constitution. This determined

that an organ of the state working within this framework of a points

system, must take both a tenderee’s price and level of transformation

into account when evaluating a tender.

“The BEE Act was engineered to address

wealth disparities in the shortest

timeframe possible.”

In 2003 the Department of Trade & Industry (DTI) released its BEE

Strategy Document. The core aim of this document, scheduled for

re-evaluation in 2014, was to create an adaptive economy

characterised by growth, employment and equity. Aligning to the

Freedom Charter of 1955, the objective was to create an economy

based on the needs of people in a more equitable manner. The desired

roll-on effect of the strategy was to increase the number of Black

people in relation to management control and ownership, with the

ripple effect of reducing income inequalities, boosting land ownership

and productive assets owned by ‘Black’ people.

BEEing of age

In 2004, the Broad-Based Black Economic Empowerment Act, 53

of 2003 was promulgated. This established a legislative framework

for the promotion of Black Economic Empowerment. It empowered

the Minister to issue Codes of Good Practice, publish Transformation

Charters and establish the Black Economic Empowerment Advisory

Council.

The B-BBEE Codes of Good Practice set out a balanced scorecard measuring seven elements to evaluate B-BBEE compliance.

Direct Empowerment Human Resource Empowerment Indirect Empowerment

Equity Ownership Employment Equity Preferential Procurement

Management Control Skills Development Enterprise Development

Socio-Economic Development

The B-BBEE Act and resulting B-BBEE Codes of Good Practice –

which followed in 2007 – focussed on empowering ‘Black’ people.

These, in essence, gave the ‘green light’ to sustainable access to

the economy, whilst encouraging sustainable change in the racial

composition of ownership and management structures within

companies. They further addressed the motivation of ‘Black’ people

by enhancing scarce skills, empowering rural and local communities,

hence, opening access to economic activities, land, infrastructure and

ownership.

“Our future, like our past, is moulded by

legislation. BEE is an effort to rectify the

wrongs of the past.”

December 2005 saw the establishment of the Association of BEE

Verification Agencies (ABVA). Following this, in 2007, the South

African National Accreditation System (SANAS) was appointed as the

regulatory body of the B-BBEE Industry. On 9 February 2007, the

B-BBEE Codes of Good Practice were gazetted, in accordance with

section 9.1 of the BEE Act.

Evolving BEE

On 8 June 2011, Regulations to the Preferential Procurement Policy

Framework Act were gazetted, becoming fully operational on 7

December 2011. These regulations stipulated that when applying the

preferential point system for procuring goods, services or selling off

assets, a tenderee’s Broad-Based Black Empowerment Status Level

must be taken into account.

On 1 December 2011, Treasury issued an implementation guide

relevant to the Preferential Procurement Policy Framework Act (PPPFA)

and Regulations, which became effective on 7 December 2011.

Following its’ implementation, on 9 December 2011, Minister Rob

Davies released the B-BBEE Amendment Bill for public comment

On 27 January 2014, the B-BBEE Amendment Act was gazetted.

This made provision for the establishment of a B-BBEE Commission,

with the mandate of addressing offences and penalties within the

Revised Codes of Good Practice. The Act further provides for issuing

of Practice Notes defining and clarifying specific areas of uncertainty

within the B-BBEE Codes.

Keeping BEE Alive

South Africa has a truly unique history, whereby legislation excluded

the majority of the population, denying basic human rights. Our future,

like our past, is moulded through legislation; in an effort to rectify the

wrongs of the past.

There are many who still dispute the necessity for B-BBEE. However,

it is quite clear that the ripple effect of many being denied an education

and access to the economy, has created a vast disparity of wealth, one

of the largest globally. The BEE Act was engineered to address this

disparity in the shortest timeframe possible; as without it, would there

have been any significant change?

B-BBEE enters a new era in April 2015, with the implementation of the

Revised Codes of Good Practice. Yes, these are more stringent Codes,

ones with dire consequences, however, necessary to address the vast

disparity of wealth and ultimate equalisation.