Black
Economic Empowerment
South
Africa's policy of black economic empowerment (BEE) is not simply
a moral initiative to redress the wrongs of the past. It is a
pragmatic growth strategy that aims to realise the country's full
economic potential.
In
the decades before South Africa achieved democracy in 1994, the
apartheid government systematically excluded African, Indian and
coloured people from meaningful participation in the country's
economy. This inevitably caused much poverty and suffering - and
a profoundly sick economy.
The
distortions in the economy eventually led to a crisis, started
in the 1970s, when gross domestic product (GDP) growth fell to
zero, and then hovered at about 3.4% in the 1980s. At a time when
other developing economies with similar resources were growing,
South Africa was stagnating.
Full
potential
"Our country requires an economy that can meet the needs
of all our economic citizens - our people and their enterprises
- in a sustainable manner," the Department of Trade and Industry
(DTI) says in its BEE strategy document.
"This
will only be possible if our economy builds on the full potential
of all persons and communities across the length and breadth of
this country."
Despite
the many economic gains made in the country since 1994
growth has been 4% or higher in every quarter since 2004
the racial divide between rich and poor remains. As the DTI points
out, such inequalities can have a profound effect on political
stability:
"Societies
characterised by entrenched gender inequality or racially or ethnically
defined wealth disparities are not likely to be socially and politically
stable, particularly as economic growth can easily exacerbate
these inequalities."
Broad-based
growth
Black economic empowerment is not affirmative action, although
employment equity forms part of it. Nor does it aim to take wealth
from white people and give it to blacks. It is essentially a growth
strategy, targeting the South African economy's weakest point:
inequality.
"No
economy can grow by excluding any part of its people, and an economy
that is not growing cannot integrate all of its citizens in a
meaningful way," the DTI says.
"As
such, this strategy stresses a BEE process that is associated
with growth, development and enterprise development, and not merely
the redistribution of existing wealth."
Black
economic empowerment is thus an important policy instrument aimed
at broadening the economic base of the country and through
this, at stimulating further economic growth and creating employment.
The
strategy is broad-based, as shown in the name of the legislation:
the Broad Based Black Economic Empowerment Act of 2003.
This
reflects the government's approach, which is to "situate
black economic empowerment within the context of a broader national
empowerment strategy
focused on historically disadvantaged
people, and particularly black people, women, youth, the disabled,
and rural communities".
As
the DTI notes, discrimination "is at its most severe when
race coincides with gender and/or disability".
How
to achieve BEE?
Black economic empowerment is driven by legislation and regulation.
An integral part of the BEE Act of 2003 is a sector-wide generic
scorecard, which measures companies' empowerment progress in four
areas:
Direct
empowerment through ownership and control of enterprises and assets.
Management at senior level.
Human resource development and employment equity.
Indirect empowerment through:
preferential procurement,
enterprise development, and
corporate social investment (a residual and open-ended category).
This scorecard, as well as a scorecard for multinational companies,
is defined and elaborated in the BEE codes of good practice.
The
codes of good practice, which govern how companies do business
in South Africa, allow global and multinational companies some
flexibility in how they structure their empowerment deals. For
example, representation does not only have to be at ownership
level.
The
codes are binding on all state bodies and public companies, and
the government is required to apply them when making economic
decisions on: