of Broad-Based BEE
How would you spread the benefits of economic
growth to all of your children, if you had over
45 million of them?
This is the question the government of South Africa
is trying to answer with its Black Economic Empowerment
(BEE) policy interventions. Now even called Broad-Based
BEE (BBBEE), the concept continues to conjure up
different images in the minds of South Africans,
depending on which side of the economic divide they
What makes the government persist in its quest
to bring about BBBEE or BEE?
The policy objectives remain the same as they
were published in the Strategy for BBBEE in March 2003
and in the BBBEE Act of 2003. BEE essentially seeks to
achieve the following outcomes:
- A substantial increase in the level black ownership
and control of existing and new enterprises;
- A substantial increase in the black ownership and control
of new and existing enterprises, especially in the priority
sectors, namely – Information & Communications
Technology, Tourism, Agro-processing, Mining, Financial
- A significant increase in new black enterprises,
black-empowered enterprises and black-engendered
- A significant increase in number of black people
in executive and senior management of enterprises.
Black people constitute over 90% of the South African
population (Africans, Coloureds and Indians), with emphasis
on workers, rural communities, youth (18 to 35 years of
age), women and people with disabilities.
The broad base of black people makes sense only if one
thinks of how economies grow and thrive. Considering the
South African demographic reality, economic growth is much
more sustainable if one can sell to more than 90% of the
population, instead of only 10% of it – which was
the case in apartheid South Africa.
Take, for example, housing. A seller of a house in a traditionally
white suburb, in apartheid South Africa, would be selling
to about 9% of South Africans – a much smaller market.
This translates into demand not as high as has been the
case after the annulment of the Group Areas Act – allowing
black people to live anywhere in the country. The prices
of houses in South Africa – what has been called
the property market boom – had a lot to do with black
people coming into the market in areas where they were
initially prohibited. The demand for cars has also led
to repeated record-breaking sales figures due to the same
reason; of course, the lower interest rate regime and friendlier
credit environment played their part, but still with a
lot of help from racial integration and the emergence of
additional black buying power.
The essence of BBBEE is in how it spreads the benefits
of economic growth to the majority, thus making the economy
The majority is not only comprised of people wanting to
own shares in companies. It also includes those merely
interested in getting good jobs (employment equity), improving
their skills (skills development), starting and running
their own businesses (preferential procurement and enterprise
development) and simply living a better life.
Broad-Based BEE is about benefits of economic transformation
and also about empowering black people by means of more
interventions than just selling shares to black investors.
Keep this in mind when structuring your next BEE deal!