By Livhuhani Mukhithi, Director: B-BBEE Policy, Advocacy & Institutional Management, dtic
As South Africa enters the 23rd year of legislated B-BBEE implementation, the architects of the B-BBEE institutional and legislative blueprint understood that it is not a silver bullet to remedy all socio-economic challenges bedeviling the fledgling post-apartheid democratic order, but an instrument for economic redistribution and inclusion. This noble undertaking gave us the legislative and institutional frameworks that anchor South Africa’s efforts to ensure economic inclusion that are explicitly backed by the equality principle (as contained in Section 9(2) of the Constitution of the Republic of South Africa).
The evolution of B-BBEE policy, legislative framework and institutional mechanisms has largely been triggered by the continuous test of its efficacy in the face of unrelenting scrutiny and opposition to its implementation. With the early iteration of BEE in the 1990s and early 2000s premised largely on ownership acquisition, was this focus not narrow and limited to the ideal of economic redistribution and inclusion. The gravitation towards Broad-Based BEE proved that fundamental transformation of the patterns of ownership of the mainstream of the country’s economy was necessary.
This change of approach appreciated the power of elements such as Management Control, Skills Development and Enterprise and Supplier Development (ESD). Also contained in these changes was the codification of these elements to enable measurement of contribution by mainstream economic actors to the noble idea of economic transformation. The Amended Broad-Based Black Economic Empowerment (B-BBEE) Codes of Good Practice of 2013, which became effective in 2015, introduced a new scorecard that had five elements: ownership, management control, skills development, enterprise and supplier development (ESD) and socio-economic development.
As B-BBEE advanced, other instruments of B-BBEE implementation were introduced, and that includes the Equity Equivalent Investment Programme (EEIP). EEIP has given practical impetus to ensuring that there is a tangible interface between B-BBEE and the country’s reindustrialisation efforts (with emphasis on emboldening elements such as skills development, ESD, research and innovation).
To this effect, R10-billion worth of investment has been made, with the major investment contributed by the automotive sector, a joint EEIP by vehicle manufacturers BMW, Ford, Isuzu, Mercedes-Benz, Nissan, Toyota and Volkswagen. This investment aims to facilitate transformation across the sector’s value chain through the provision of access to funding, markets and capacity development for qualifying black owned entities.
This undertaking has given birth to the Automotive Industry Transformation (AITF), From its commencement in 2020 until the end of 2024, the AITF had invested R600 million in 67 companies in the automotive value chain. There are other large EEIPs by Caterpillar (R1.3-billion), Microsoft (R708-million) and IBM (R700-million) and most are focused on ESD, the development of critical skills and research and development.
These B-BBEE initiatives have taken from global best practices (learning from developmental states such as South Korea) to give applied stimulus to the significance of B-BBEE partnerships for inclusive growth and support to the country’s industrial development. This is consistent with the path traversed by other developmental states in South East Asia. In this context, countries such as South Korea have anchored their reindustrialisation drive on the close partnership between policymakers and sectoral participants to ensure that industrial development support considers innovation, research and development, ESD, and skills development to help drive the country’s economic growth.
According to Klinger- Vidra et al (2019: 7) these partnerships with policymakers value efforts to promote alternative forms of employment and economic output. At the same time, the support for high-technology entrepreneurship; policymakers should be compelled to adopt new tools (accelerators, funds of funds, building clusters and promoting risk-taking cultures) to encourage support for small firms.
In the South African context, the conception and development of the Transformation Fund intends to cover the support and finance gaps that are undermining the intensified uptake of black-owned enterprises in the mainstream economic sectors through availing of cheap low interest capital, support in the building of capabilities and access to markets. These B-BBEE driven investments solidifies the agility of this economically redistributive tool for economic inclusion as the country continues to massify its efforts to support industrial development and reindustrialisation.
The evolution of B-BBEE implementation is also anchored by an institutional setting whose sole mandate is to ensure its compliance and enforcement, Sectoral Transformation, B-BBEE accreditation and verification, B-BBEE advisory and B-BBEE financial support. These institutional mechanisms have given substance, content and form, and legislative control to our economic transformation interventions.
These statutory creations are critical to B-BBEE implementation, especially in these times where everyone can easily claim to be an expert (mostly churning out misleading commentary on B-BBEE and its implementation). Unfortunately, these tendencies fail to appreciate that B-BBEE has advanced substantially in terms of technical nature and it is now a niche area that has given birth to technically competent practitioners and policy custodians that are strewn across the country’s economic mainstream and the organs of state.
B-BBEE at a crossroads. Over the last few years, it has been compounded by a plethora of implementation challenges. These challenges are diverse and they undermine its implementation in different ways. A logical development to this implementation dilemma, will address the fundamental architecture of B-BBEE that is moored on its voluntary character in participation and contribution.
It is also important to update and strengthen the B-BBEE Codes of Good Practice to affirm its power in the realm of enforcement and compliance. The consideration of the legislative review should also affirm the current institutional mechanisms such as the B-BBEE Commission to sanction and impose penalties to those who are subverting its practice.
Through the legislative review, the strengthening of the B-BBEE institutional setting should consider the practical challenges affecting existing B-BBEE institutions and create an ecosystem that will empower and ensure complementarities, and interdependencies amongst institutions of B-BBEE implementation and support.
The optimisation of economic inclusion remains sacrosanct as we traverse the path of unleashing the country’s economic potential. Partnerships between the country’s mainstream economic actors and policymakers stand to unlock the economic opportunities and drive inclusive growth as we continue to support our reindustrialisation efforts. As the mulling on the future of B-BBEE enters the national discourse, it should not be burdened to carry additional socio-economic imperatives as the current architecture is adequate in its support to economic redistribution and contributing to our industrial policy.
