The elections in South Africa of 1994 delivered political independence to the black population in the country. They even so had not acquired financial independence and the government of the day presented laws in 2001 to take care of this challenge. Black Economic Empowerment (BBE) was introduced to redress the financial inequalities of Blacks (defined as black Africans, Coloureds, and Indians – some Chinese were later included) under the apartheid regime. This program was designed to bring economic opportunities previously inaccessible to Blacks.
This program was sustained by the seven pillars of BEE, namely: employment equity, skills advancement, ownership, administration, socioeconomic development and preferential procurement. Notwithstanding some initial opposition, this system was typically seen to be of value, but the bad implementation of the plan triggered few blacks acquiring huge wealth, fundamentally through stock market deals, without addressing the broader Black population as intended. This caused a public outcry and the plan was adjusted during 2003/4 to turn into the Broad based Black Economic Empowerment (B- BBEE) program with the purpose of distributing wealth across as broad a range of the South African population as is possible.
Narrow based (BEE) empowerment on the flip side only measured equity ownership and management representation. It was those two criteria that evoked such an outcry of individuals. Clever Black entrepreneurs accrued enormous wealth over a short time span by the purchase of shares on the JSE, while others were literally grabbed up by White companies to act as board associates and senior professionals, in order to reach government business and tenders. This certainly was not the intention of government hence the introduction of B-BBEE as we know it today. In contrast to Narrow Based Empowerment BEE), Ownership and Management, as scorecard items, account for only 30% of the total participation in the model implemented for B-BBEE, in a stark contrast to BEE.
The B-BBEE plan is based on a scorecard that differentiates between 3 forms of enterprise namely: Generic Enterprises (turnover higher than 35 M per annum), Qualifying Small Enterprises (Turn over between R5M and R35M) and Exempted Micro Enterprises. (Turnover less than R5M). Exempted Micro Enterprises are viewed to be free and do not have to be measured against any B-BBEE scorecard. In the case of generic enterprises all 7 of the pillars must be addressed totaling 100%, unlike qualifying small establishments that can choose any 4 pillars to be complied with. The seven pillars are: Ownership (25% =1), Management Control (40-50%), Employment Equity (43-80%), Skills Development (3% of payroll), Preferential Procurement (70%), and Enterprise Development (3% of Net Profit After Tax) as well as Socio-Economic Development (1% of NPAT). This means there are objectives to be accomplished in each of the 7 pillars so that you can conform to B-BBEE.
A few of the…