Thank Heavens for BBBEE – Broad-Based Black Economic Empowerment – South Africa’s Economic Miracle

By Dr Ivor Blumenthal

Whereas the release of Nelson Mandela and the inauguration of a new Government in 1994 was the political miracle saving this country from bloodletting and decent into civil war, it can truly be said that BBBEE is having a lasting and irreversible effect on our economic landscape in so many positive ways. This is despite the controversy and negativity it draws to itself on a daily basis.


There are so many myths, untruths and half-truths surrounding the framework of BBBEE, just as there is about the Labour Relations and the Basic Conditions of Employment Acts, that one has to ask where this antagonism springs from? In whose best interests is it to cause fear and panic amongst employers and racial disharmony amongst the workforce when it comes to initiatives of Broad-Based, Black Economic Advancement?


Let me mark at the outset two groups responsible for the chaos around BBBEE. The first has to be the absolutely unprepared, under-capacitated and totally inept internal HR Professionals. These are the people targeted with driving BBBEE in a strategic and coordinated fashion within every workplace, but who have shown a lack of backbone vicissitude and conviction. A lack of awareness of why BBBEE is indicated, necessary and quite frankly unavoidable if a company is to survive and thrive.


It is the HR Professionals supposedly who must champion the Skills, Equity and BBBEE planning, tracking and reporting processes as one seamless Transformation System, of participative and integrative management so that everyone, both those in one camp representing the founders and employers, the shareholders and management, and in the other, the workforce, represented by informal and formal leaders, shop stewards and ultimately Trade Unions.


The second group purposefully and consciously responsible for sowing the seeds of chaos and destruction within the workplace are BBBEE Consultants. Many of these self-declared experts, some of whom are glorified Training Providers and others  proven professional Scam Artists, are absolutely intent on devising mechanisms for their clients, the business founders, owners and shareholders, designed to avoid the compliance requirements of BBBEE, rather than embracing BBBEE Elements as a true and rare opportunity to change this country for the better, forever from the ground up, and in the process to ensure sustainability and the opportunity to prosper.


If Business Founders and Shareholders were to truly see and understand the wonderful opportunities, those of dignity, capacity, productivity, participative strength to sustain, and mutual appreciation respect and teamwork built into, inherently part of the fabric of BBBEE, not only would they not continuously be trying to avoid fully embracing BBBEE but it would begin to be the single and unitary philosophy defining why and in what way they run their businesses.  


Every aspect of BBBEE is about choice, self-assertiveness and personalised strategy. There is no single factor, inherent in any of the five generic elements which are forced on a CEO or Board of Directors or substantively which interfere in the way a business is owned, managed or strategically positioned. Indeed, if a company is forced by the Department of Trade and Industries to do anything, it is to govern its own affairs consciously and with direction and purpose, where when it is measured and assessed, such reflection takes place against what the company itself has asserted in its plans and strategic intent.


If BBBEE signals CAPTURE, there has indeed in some Industries been such capture. However, it has not been by the Government or even Organised Labour. Some Industries, characterised by the introduction of “Charters” have been captured by the collusive practices amongst elements of Big Business colluding with Trade and Employer Associations and so-called “expert” BBBEE facilitators and fixers, all of whom have vested interests and the intent to dominate and direct, essentially to monopolise. The result is Charters which vary the BBBEE Elements in favour of a few Employers at the expense of the many, and introduce new compliance criteria favouring one Association and in instances even one Training Provider or Consultant.


If anything is indicated here, it is the hands-off approach and the intent not to interfere, on the part of the DTI that has allowed and continues to allow such fragmentation and partisanship to set in.


What is true is that the majority of noise around BBBEE relates to Ownership where the illusion has purposefully been created, that the Founder or Shareholders in a business have to voluntarily giveaway control in their company to their Black Employee’s, if they wish to remain in business. This is simply a lie.


The truth is that BBBEE has the intent of those who own businesses having to share, to a limited extent, the profitable proceeds of their business with their employee’s at best. At worst, in the case where, for whatever reason the company takes the view that their employees who have helped them be that profitable, should not be entitled to share in the wealth which they have helped to create for the Founder and Shareholders, then that sharing has to happen with the broader-based Black Community.


How this happens, however, is absolutely to the advantage of the Founder and Shareholders of that business. BBBEE provides an absolutely legal and equitable mechanism for the extraction by those who own the shares, of a minimum of 26% of the Asset Value of that business, Tax and Capital Gains Tax-free. In other words, in exchange for the beneficiaries having access to 26% of the Net Profit of that business, those who control the balance sheet have the privilege of paying themselves first, before sharing what is left of the profit, with their employee’s or other Black Beneficiaries.


Strategically and reflected as the investment miracle of BBBEE, a savvy Founder or Shareholder has the opportunity of leveraging that 26% of shareholding, initially split and placed in trust, to massively increase the value of the retained 74% of shares, ultimately having the option of buying the split 26% back at any time.