The purpose of Broad-Based Black Economic Empowerment (B-BBEE)

In 2003 a strategy for Broad-Based Black Economic Empowerment (B-BBEE) was released which defines B-BBEE as

• an integrated and coherent socio-economic process that directly contributes to the economic transformation of South Africa and brings about significant increases in the numbers of black people that manage, own and control the country’s economy, as well as significant decreases in income inequalities.
• Thus the BEE process will include elements of human resource development, employment equity, enterprise development, preferential procurement, as well as investment, ownership and control of enterprises and economic assets.

SOURCENOTE: Codes of Good Practice for B-BBEE; The DTI

The difference between Black Economic Empowerment (BEE) and Broad-Based Black Economic Empowerment (B-BBEE)

The first set of Codes of Good Practice instituted during 2003/2004 was referred to as Black Economic Empowerment (BEE). In response to criticism against this "Narrow Based" Black Economic Empowerment that led to the enrichment of a few black (Black African, Coloured or Indian) individuals, the South African government initiated Broad Based Black Economic Empowerment (BBBEE). The goal of Broad Based Black Economic Empowerment is to distribute wealth across as broad a spectrum of South African society as possible.

In contrast to the elements referred to in the purpose of B-BBEE above, "Narrow Based" black economic empowerment measures only equity ownership and management representation.

The crux of the Broad-Based BEE Act No. 53 of 2003 (BEE Act)

The Strategy was followed by the Broad-Based BEE Act No. 53 of 2003 (BEE Act), which was promulgated in January of 2004. In section 10, the Act outlines government’s leverages for the implementation of broad-based BEE, meaning that organs of state and public entities must take an entity’s BEE status into account when:

• determining qualification criteria for the granting of licences and concessions
• developing and implementing a preferential procurement policy
• determining qualification criteria for the sale of state-owned enterprises
• developing criteria for entering into partnerships with the private sector

The BEE Act (abbreviated in the Codes and defined as “the Act”) is an enabling framework that allows for the development of the Codes of Good Practice. The Codes provide a standard framework for the measurement of broad-based BEE across all sectors of the economy. This means that no industry will be disadvantaged over another when presenting their BEE credentials. This can occur when a very stringent transformation charter is applied to one entity, whilst a transformation charter with far more lenient measurement criteria, is applied to another. Statement 010, which provides guidelines for the alignment of transformation charters to be gazetted as Codes of Good Practice, will ensure that even when different gazetted charters are applied to different entities presenting their BEE credentials, neither of the entities will be unfairly disadvantaged over the other because of the application of a more stringent industry charter. The intention of the Codes of Good Practice is therefore to level the playing field for all entities operating within the South African economy by providing clear and comprehensive criteria for the measurement of broad-based BEE.

In short, the act determines that whenever Black Economic Empowerment of a company is measured, by themselves or by another company, it must be in accordance with the B-BBEE Codes of Good Practice.

SOURCENOTE: Codes of Good Practice: Phase One - A Guide to Interpreting the Codes; www.bee-scorecard.co.za

IIB Services

The IIB has experts from any type of business imaginable, many of whom are experienced BBBEE. We can help you

• Develop a BBBEE strategy that not only support the true purpose of the BBBEE Codes of Good Practice, but at the same time makes good business sense in respect of the reasons for the Merger of Acquisition. In other words, not to implement BEE solely for the sake of a rating that will help you retain or get new customers, but because the new business will be a stronger and better player in the market;
• Find a suitable BEE partner that will impact your business positively to result in 1+1=3.;
• Do your BBBEE Audit and supply with a certificate stating your Level of Contribution to BBBEE.

Contact Geordie van der Nest & Associates to discuss how we can help you implement an effective BBBEE strategy and provide you with a certificate of compliance.