Broad-Based Black Economic Empowerment Act Flashcards
BBBEE
-Established to significantly accelerate economic growth and provide opportunities for previously disadvantaged groups
-The implementation of BBBEE has increased the number of black people that manage the South African economy
Purpose
-Aims at targeting inequality in the South African economy
-Allows for the development of Codes of Good Practice
-Enables wealth to be spread more broadly across all population groups
-Increases the number of black people that manage South African businesses
Differences between BBBEE and BEE
-BBBEE
An act enforced by businesses
Aims to distribute the country’s wealth across a broader spectrum of society
Encourages a wider group of previously disadvantaged people to participate in the economy
-BEE
A government policy that may not always be enforced
Resulted in a few previously disadvantaged individuals sharing in the wealth of the economy
Benefitted only a few previously disadvantaged people in the economy
BBBEE pillars
-Management control
-Ownership
-ESD
-Skills development
-Social responsibility
Application and Implication of management control
Businesses must :
-Ensure that information is implemented at all levels
-Appoint black people to management
-Involve black employees in decision-making processes
Limitations:
Due to a shortage of skilled black managers, some businesses find it difficult to make appointments. This limits the growth opportunities for the business
Ownership
-Businesses should:
-Include black people in shareholding, partnerships, and franchises
-Create more opportunities for black people to become owners and entrepreneurs
-Encourage small black investors to invest in big companies and share ownership
Limitations:
Businesses find it difficult to find suitable black business partners that can afford shares
ESD
-Businesses must:
-Be encouraged to invest in and support black-owned SMMEs
-Create jobs as ESD promotes and supports local manufacturers
-Make monetary contributions to BBBEE-compliant businesses and SMMEs such as loans or donations
Limitations:
-ESD promotes preferential procurement and businesses often don’t have a choice but to transact with BBBEE approved vendors that aren’t necessarily their first choice
ESD
-Businesses must:
-Be encouraged to invest in and support black-owned SMMEs
-Create jobs as ESD promotes and supports local manufacturers
-Make monetary contributions to BBBEE-compliant businesses and SMMEs such as loans or donations
Limitations:
-ESD promotes preferential procurement and businesses often don’t have a choice but to transact with BBBEE-approved vendors that aren’t necessarily their first choice
Skills development
Businesses should:
-Engage black employees in various skills development training programmes and initiatives
-Benefit from the increased pool of skilled employees, which increases overall productivity in the workplace
-Provide learnerships and learning programmes to black employees
Limitations:
Businesses often compromise productivity as mentors have to use work hours to participate in learnerships or training
Social responsibility
-Businesses must:
-Contribute towards social investment projects and community development
-Focus on critical areas of CSI such as development which increases overall productivity in the workplace
-Distribute scarce CSI resources to selected beneficiaries in the community
-Limitations:
Businesses often are not knowledgable or experts at societal issues and social responsibility and may result in a wastage of financial resources of not investigated correctly
Impact of the BBBEE on businesses
-Encourage businesses to address the demand for equity directly in the workplace
-Improves the image of the business because a good BBBEE rating attracts more investors to the business
-Costs increase as businesses have to spend money on the correct compliance with the five BBBEE pillars to obtain a good BBBBEE rating
-Some processes associated with BBBEE- if not monitored properly- may lead to corruption
Non-compliance
-Employers who incorrectly implement the means to achieve the requirements of the five BBBEE pillars
-Employers who fail to correctly implement affirmative action in the context of employment equity to meet BBBEE responsibilities
-Refusing to award government tenders to BBBEE-complaint vendors
-Employers who are deliberatly involved in fronting and corruption and because of this certain individuals benefit at the expense of other individuals
fronting
businesses that pretend to be BBBEE complaint by falsifying information related to BBBEE
Penalties
-Businesses that don’t comply with the BBBEE may receive a compliance order
-Businesses that neglect to comply with BBBEE may receive large fines for fronting practices and may even be given imprisonment
-The state may decide not to renew business licenses, revoke the license or refuse to grant authorizations to conduct business activities
-Businesses may be fined with a penalty of up to 10% of the annual turnover of the business
Ways to comply
-Sell shares to more black individuals within and outside the organisation
-Appoint and promote more black employees into managerial positions
-Conduct regular skills development training with black employees
-Conduct business activities with BBBEE-complaint vendors
