BUSINESS LIVE / 03 AUGUST 2020 - 14.17 / NEVA MAKGETLA
A lack of consensus has produced too many internal contradictions and too much complexity
Apart from taxes and possibly electricity, it is likely that broad-based BEE is the government’s most expensive policy for business. Yet it is difficult to tell what it really aims to achieve.
SA suffers from both a lack of diversity in ownership and control, and from extraordinary inequalities in pay, workplace organisation and assets. But it is not clear what BBBEE sees as the desired end-state.
Does it aim primarily to empower black executives; to support more equitable ownership of financial investments; to promote more equal, skilled and harmonious workplaces; to encourage new, dynamic, enterprises; or to support the broader industrial policy aims of economic
diversification and job creation?
In theory, the BBBEE scorecard answers this question by identifying different
dimensions for empowerment and allocating weights to them. The dimensions are
enterprise development, weighted at close to 40%; ownership, at almost 25%;
representivity in management and skilled positions, at under 20%; skills development,
also under 20%; and socioeconomic development (effectively corporate social investment) at 5%.
In practice, the importance of the different dimensions remains at best ambiguous.
For one thing, each dimension includes three or four subtargets. For instance,
training is assessed by skills level. Procurement points are allocated according to the
BBBEE level of suppliers, but also separately by their ownership by black people and
by black women.
Even more confusingly, the scorecard synthesises four separate scoring techniques. It
sets points for each subtarget; minimum thresholds for priority subtargets; percentage scores, which, perplexingly, can exceed 100%; and provides some bonus points.
This complexity means most workers and managers don’t understand the BBBEE
requirements, so they can’t help achieve them. It encourages stakeholders to focus
narrowly on technical requirements rather than monitoring progress towards the
desired socioeconomic outcomes. And of course, the extraordinarily complicated
reporting requirements and calculations add to the administrative burden for
The scorecard’s complexity also makes it hard to foresee the impact of amendments. For instance, in 2019, the government fasttracked new points for university bursaries by reducing the score for employee training.
That amendment effected a radical shift in the skills development element, from seeking to transform power and career mobility within enterprises to promoting business funding for tertiary education for black students.
However, there was little public discussion or analysis of how this trade-off affects
the broad aim of a more equitable and inclusive economy.
Similarly, BBBEE has long been criticised because it does not incentivise local
procurement. A company can improve its score by replacing a local producer with a
low BBBEE rating with a small black-owned importer. That may end up meaning
reduced local employment, and arguably a less equitable and dynamic economy
In 2015/2016, the codes therefore included a requirement that qualifying suppliers
meet a target for local value added. Then the department of trade & industry
suspended the new requirement indefinitely on the basis that it was too hard to
measure or to meet. This is, of course, the best of all possible bureaucratic worlds: it
signals a virtuous adherence to the local procurement policy without actually having
to enforce it.
A further challenge is that the codes were essentially designed around listed
companies. Smaller businesses and other ownership structures such as large
partnerships are accommodated only to a limited degree, mostly by relaxing some
requirements. In particular, the ownership points assume that businesses have a host
of small anonymous investors who are continually in flux. But small businesses and
professional partnerships can’t afford much churn in ownership, and often are not
profitable enough to attract outside investors.
Ultimately, the complexity and internal contradictions in the codes reflect the failure
to reach true consensus around the aims of BBBEE. In this context, the complexities
of the scorecard serve to obscure, rather than clarify, the real trade-offs over who
should benefit from this core economic policy.
• Makgetla is a senior researcher with Trade & Industrial Policy Strategies
Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER