Chapter 1 - BBBEE

Question 1

Outline/Describe/Explain/Discuss the purpose of BBBEE

Answer 1

• To establish a national policy on broad-based black economic empowerment to distribute the country’s wealth across as broad a spectrum of South Africans, as far as possible
• To promote the achievement of the constitutional right to equality
• To increase the effective participation of the majority of South Africans in the economy
• To promote equal opportunity and equal access to government services

Question 2

Discuss/Explain/Evaluate the impact of BBBEE (advantages and/or disadvantages/negatives) on businesses

Answer 2

Advantages

Disadvantages

• The share prices of companies are likely to increase
• Businesses that support small, medium and micro enterprises can increase their own credit ratings
• Businesses can secure regular contracts with big companies, allowing small enterprises to transform to medium enterprises
• Complying with BBBEE requirements allows small to medium enterprises to receive experience and exposure, and provide employment, training and development to its staff
• Promotes employment equity
• Promotes enterprise development
• It provides for preferential procurement
• Not all businesses take the codes seriously
• Processes can lead to corruption and jobs for friends
• Investment and ownership issues can cause animosity between shareholders

Question 3

Suggest/Recommend ways in which businesses can comply with BBBEE

Answer 3

• Businesses must appoint black people in managerial positions
• Businesses must sell shares to black employees/people.
• Send black people for black for skill development training.
• Outsource their services to BEE compliant suppliers.
• Implement affirmative action when making appointments.
• Develop small business /SMME’s through ESD.
• Develop the standard of living of the communities in which they operate.

Question 4

Outline/Discuss penalties/consequences for non-compliance with BBBEE.

Answer 4

• White businesses that use black representatives’ names to win contracts will receive penalties
• Businesses that do not promote BBBEE could find their businesses shrinking as fewer suppliers and customers will be willing to do business with them
• Sectors that require a licence to operate (like mining industry) could have difficulty getting their licences renewed

Question 5

Explain/Discuss the implications of BBBEE pillars on businesses

Question 6

Outline/Explain actions regarded as discriminatory by the various Acts

Answer 6

• Failing to implement affirmative action to meet BBBEE responsibilities.
• Promoting unsuitable people into a management positions at the expense of qualified PDP’s.
• Refusing to award tenders to black suppliers who are BEE compliant

Question 7

Recommend/Suggest ways in which businesses may apply pillars of BBBEE

Question 8

Distinguish/Explain the differences between Black Empowerment and the BBBEE Act

Question 9

Justify the introduction of the BBBEE Act in relation to BEE.

Question 10

The pillars of BBBEE

Answer 10

Enterprise and supplier development

• Business must create jobs as ESD promotes local manufacturing.
• Businesses are encouraged to invest/support black owned SMMEs.
• Contribution can be monetary, e.g. loans/investments/donations.
• Contribution can be non-monetary, e.g. consulting services/advice/ entrepreneurial programmes, etc.
• Outsource services to suppliers that are BBBEE compliant.
• Identify black owned suppliers that are able to supply goods and services.
• Develop the business skills of small/black owned suppliers, e.g. sales techniques, legal advice, etc.
• Support the cash flow of small suppliers by offering them preferential terms of payment.

Management control

• Business must ensure that transformation is implemented at all levels.
• Appoint black people in senior executive positions/to management.
• Involve black people in the decision making processes.
• Ensure that black females are represented in management.
• Black people should be represented in positions that are key to the functioning of companies

Skills development

• Develop staff members by conducting training session.
• Offer learnerships/scholarships/internships to unemployed citizens.
• Make provision for the utilisation of unemployed black people in training programmes.
• Utilise the services of black people with disabilities and provide them with training.
• Set out a timetable for training and measure progress on a monthly basis.

Ownership

• Business should include black people in shareholding/partnerships/franchises.
• Exempted Micro Enterprises (EMEs) with an ownership of 50% or more of black people are promoted to level 3 of the BEE scorecard.
• More opportunities are created for black people to become owners/ entrepreneurs.
• Encourage small black investors to invest in big companies and share ownership.
• Large businesses should form joint ventures with small black owned businesses and share business risks.

1. Management control
2. Skills development
3. Ownership
4. Enterprise and supplier development (ESD)
6. Socio-economic development/social responsibility