To B-BBEE or Not to B-BBEE?
Are the Broad Based Black Economic Empowerment (B-BBEE) Codes still relevant in this “new world” we live in? A loaded question but surely, removing a piece of legislation that according to many has only enriched a few privileged people at the expense of the many underprivileged it was designed for, should be done away with. Maybe? Or maybe not.
In order to arrive at the answer, we need to understand the real state of our economy – so let’s paint a picture. The South African economy was in trouble before the Covid-19 pandemic reached our shores, but the SARS corona virus dealt an even more serious blow to our already ailing economy and infrastructure. The most recent collection of research has emphasized the quantum and magnitude of the crater sized holes left in the wake of Covid –
- South Africa now unenviably tops the global charts for both aggregate rates for unemployment as well as youth unemployment in the world. Furthermore, semi-skilled unemployment is nearly 19% lower compared to stats pre Covid.
- Nearly half of South African SMMEs (one of the largest job creators in SA) closed as a result of multiple lockdowns and restrictions.re the Broad Based Black Economic Empowerment (B-BBEE) Codes still relevant in this “new world” we live in? A loaded question but surely, removing a piece of legislation that according to many has only enriched a few privileged people at the expense of the many underprivileged it was designed for, should be done away with. Maybe…. maybe not.
- According to the Global Entrepreneurship & Development Index (GEDI 2020), a report which measures the health of entrepreneurship ecosystems, SA ranks 57th out of 137 countries.
- From a macroeconomic point of view, we have a projected long term low growth GDP that’s often below the population growth rate, further limiting market growth potential for new businesses.
- Only 56% of South Africans have access to the internet, and in a world where globalization and 4IR are growing rapidly, a big portion of our population still do not have access to the traditional economy. Global workforces continue to evolve their respective skillset while the lack of access impedes ours.
Despite this state of economy, all levels of business including SMEs still need to establish some level of sustainability to transact and create growth within it. Why then would these very same businesses ascribe to a legislation thought to enrich only the privileged? Why would they not see it as yet another landmine to navigate?
Well, what if I told you the very things that our country’s economy is struggling with i.e., unemployment and growth etc. is what the B-BBEE codes in part is designed to help solve.
To explain this, I invoke the immortal words of Michael Jackson “I’m not going to spend my life being a color’’ and ask that we remove the color of skin from this equation for a moment. Yes, I am aware that it’s quite literally called the Broad Based Black Economic codes, nevertheless, I ask that you indulge me and look at this from a purely economic sustainability perspective.
In 1994, we celebrated our first democratic elections. What we had won as a rainbow nation was every human being, regardless of color or creed, having the right to vote. In essence, we won “political freedom”, yet economic freedom for the masses was still absent. Furthermore, we were still a developing economy that was in its democratic infancy with a disproportionate ownership of the economy. We needed policies and legislation that would help create fair participation and distribution of wealth, freedom and opportunity, resulting in a vibrant thriving economy.
But what does a sustainable, healthy, and growing economy look like?
Full disclaimer, I am not an economist, but this basic principle helps explain what good looks like, even if it may be oversimplified. In layman’s terms, research shows that strong, healthy economies have a specific shape, the shape of a diamond. At the top there are some rich & wealthy people and at the bottom the poor with the middle of the diamond taking up a large proportion of the population termed the “middle class’’. This class consists of a range of subclasses from the working class to the upper middle class but essentially is the true engine of any healthy economy.
Now if a diamond represents a growing sustainable economy, what shape do you think best represents South Africa’s economy? It was and still is the shape of a triangle. A small proportion of the rich and wealthy at the top, a diminishing middle class, and an over bloated bottom filled with poor people.
Diagram 1: Overly simplified view of a Healthy Economy
Diagram 2: Overly simplified view of a South African Economy
If we are to become a thriving diamond shaped economy, we would need to move more of our population from the bottom of the triangle to the center. Doing this would require us to achieve three things:
- Capacitate and upskill the bottom of the triangle to add value to the economy
- Provide access and active participation in the economy
- Enable more equitably redistribution of the economy
When you take color out of it, these 3 foundational actions are the core objectives the B-BBEE codes seeks to meet. Both the spirit and the letter of the Codes are designed to move our economy and our country forward from surviving to thriving through Access to Skills, Access to Market, Access to Funding and Ownership.
Some of you may ask, “Has the B-BBEE codes achieved its envisaged objectives?” Off course not. Others may argue that it has numerous shortcomings, to which I agree, 100%. Nevertheless, when it comes to the question of “Are the B-BBEE codes still relevant in a post Covid world?” I certainly believe so, and for the sake of our economy and the generations to come I hope you do too.
Your views on the B-BBEE codes may remain as they were before reading this article, however, I trust at the very least your perspective on the matter has been broadened beyond the view of Black vs. White and one of a nation’s economy, our nation, the Rainbow Nation.
Written by Trevor Naidoo, founding director of ProcureSense