Broad Based Black Economic Empowerment

Broad Based Black Economic Empowerment (BBBEE) is a form of Black Economic Empowerment initiated by the South African government in response to criticism against Narrow Based Empowerment instituted in the country during 2003/2004. While Narrow Based Black Economic Empowerment led to the enrichment of a few black (Black African, Coloured or Indian) individuals, the goal of Broad Based Empowerment is to distribute wealth across as broad a spectrum of South African society as possible. In contrast, Narrow Based empowerment measures only equity ownership and management representation.

Measurement

Broad Based Black Economic Empowerment is measured using seven pillars, each with a relative weighting. Unlike Narrow Based Empowerment, Ownership & Management account for only 30% of the total contribution.

* Direct Empowerment:
** Equity Ownership – 20%
** Management – 10%

* Indirect Empowerment:
** Employment Equity – 15%
** Skills Development – 15%
** Preferential Procurement – 20%
** Enterprise Development – 15%
** Socio-economic Development – 5%

It is not mandatory to get a verification agency to audit your BEE Scorecard. It is however a requirement to have suitable documentation/evidence to score any points.

The first Codes of Good Practice, dealing mostly with Ownership and Management, were released 1 November 2004, and the second set, incorporating special codes for SMMEs (small, medium and micro enterprises) and the remaining 5 pillars, were released 20 December 2005. These codes were open to public comment until end March 2006.

The final Codes of Good Practice were gazetted by the South African government on 9 February 2007 and an Interpretive Guide was added in June 2007.

The transitional period between narrow based BEE and broad based B-BBEE originally expired on 9 February 2008 but was extended to 31 August 2008.

Industry Specific Measurement

Companies may choose to be measured using the Generic Scorecard (as described above and created by the government) or their individual sector scorecards. Various Sector scorecards have already been finalised, including construction, finance, ICT, mining, petroleum and others. Industry scorecards are created to address industry specific issues and complications with regard to implementing BBBEE.

All industry specific scorecards must align themselves to the generic scorecard. Companies may not measure their suppliers according to their own sector scorecards. For example, a large banking institution may not measure their ICT service providers according to the financial sector scorecard. The ICT company will present a verification certificate to the financial institution based on the generic scorecard or the ICT sector scorecard.

Development of Legislation

The Broad Based Black Economic Empowerment Bill along with the BEE strategy document of South Africa serves as guideline and driver for developing Codes of Good Practice that describe measurement criteria, targets, audit requirements and definitions for each of the 7 pillars in detail. Additional Codes of Good Practice have also been released with regards to complex structures, broad based ownership schemes, fronting practices and verification agencies.

The codes are developed by the BEE task team set up by the South African Department of Trade and Industry (DTI) and comprises individuals representing various areas: private and public sectors, various industries, research and BEE measurement etc. They are Cyril Ramaphosa, Saki Macozoma, Derek Cooper, Patrice Motsepe, Gloria Serobe, Danisa Baloyi, Buhle Mthethwa, Vuyo Jack, Ronnie Ntuli, Loyiso Mbabane, Imogen Mkhize, Alan Hirsch, Philisiwe Buthelezi and Lionel October.

Companies in South Africa that deal with the government or parastatals must be empowered as required by the Preferential Procurement Act. In return, these companies require their suppliers to be empowered to improve their rating at government. Thus Broad Based Empowerment is driven down the supply chain. Various other legislation supports the BEE effort, including the Skills Development Act and Employment Equity Act.

Impact

The impact of BBBEE is difficult to measure as the Codes of Good Practice were only promulgated in February 2007. According to the Institute for Justice and Reconciliation's Economic Transformation Audit, the number of Black Management and Professionals has increased from 216,772 in 1995 to 359,438 in 2005.

External links

* [http://www.dti.gov.za/bee South African Department of Trade and Industry]
* [http://www.econobee.co.za EconoBEE - BEE Scorecard Information] Black Economic Empowerment information, BEE Scorecard Self Rating, BBBEE Codes, Download latest BBBEE Codes of good practice, FAQ's and Forums
* [http://www.abva.co.za Association of BEE verification agencies]
* [http://www.cliffedekker.co.za/literature/bee/bee_08.htm Resource for BEE documents and interpretations]
* [http://www.transformationaudit.org.za/transformationaudit/taarchive/2005transformationaudit/2005academic/ South Africa Transformation Audit]