As time goes on the perspicacity that characterises Government’s Broad-based Black Economic Empowerment (BBBEE) policy and strategy becomes clearer as companies clamour to achieve the desired BEE status. This involves a kind of orchestrated self-regulation which relies on the power of cascade to sustain momentum. There are no legal penalties for those that do not comply. Indeed, it is a matter of choice. Compliance is essential if a company wishes to enjoy the fruits of government business. Private companies may do business with any other company they choose, and may also impose whatever preconditions they like, unless these offend natural justice and the country’s laws against unfair discrimination. But - this is the astute heart of the system – any company wishing to raise its BEE status, either to have access to government contracts or to improve its public image, must insist on compliance on the part of its suppliers as well. This trend of value chain interdependence and control is not peculiar to this country and its unique racial difficulties; it has been a notable feature in developed countries in order to improve compliance with acceptable labour and environmental practices. A plan which employs a very juicy carrot and a somewhat-subliminal stick has to be admired. One wonders why similar tactics were not employed in some other spheres, such as skills development, for example, where the advantages of a company’s commitment to training are made too remote to be convincing.

It was too much to expect that the BBBEE would be rolled out without bureaucratic obstacles, however. The audit process is not yet finalised and this has caused companies to be confused and bewildered. As is so often the case in South Africa, there are too many loopholes to be closed in order to prevent fraud and abuse. Typically, this requires a cumulative aggregation of procedural demands, for as each loophole is addressed, several others reveal their potential vulnerability. The agency responsible for accrediting the BBBEE auditors, called verification agencies, is the South African National Accreditation System (SANAS) which has not yet managed to accredit any agency. Indeed, it is debatable whether it has now finalised its requirements for accreditation. It was only a very short time ago that a second phase was introduced into the process. Apparently there are fifty-five agencies engaged at some point or other in the accreditation process which, incidentally, may cost in excess of R50 000.

Yet, the objective of the overall strategy is being achieved at a gathering pace. Within the private sector, companies’ procurement policies have brought suppliers into the system, whether willingly or not. Certificates of BEE status, even though these are ‘unofficial’ at present, together with questionnaires seeking answers to the suppliers’ commitment to BEE are being used. The public sector (at least many departments and levels) in comparison, is yet to address its procurement policies and, consequently, is to blame for some of the confusion which surrounds tenders.

What differentiates the broad-based approach to BEE from the former narrow vision of it is the reduced significance of ownership. Because only wealthier people could hope to own, BEE did not really extend to anyone outside of this group. Some tried - some succeeded, indeed – to obtain ownership as a free handout, but this became discredited quite quickly. Now, the company striving to improve its BEE status in order to be an acceptable vendor, may focus on other areas through which a wider range of disadvantaged people may benefit. In practice, I don’t think this has encouraged companies to ignore ownership as an important element of BEE, but it has made the achievement of a better status more palatable for those, individuals of families, for example, for whom ownership is a very sensitive issue.

The areas in which we have seen particular development are procurement, enterprise development, skills development and socio-economic participation (corporate social investment, if you like). Some companies have creatively set about identifying black suppliers which they have consciously mentored in order to improve their business practices and, in particular, their quality controls. They qualify for scorecards points for both procurement and enterprise development. It may also be possible to contribute to enterprise development within the context of corporate social investment. A difficulty which companies quite often face is that of identifying an appropriate recipient so that its contribution has optimal practical as well as ‘theoretical’ value. The PCB, and its members, both companies and NGOs, will assist in this way if requested. In particular, the Business Support Centre, which has given support in a variety of ways to emergent entrepreneurs since the mid-nineties, is in a good position to broker enterprise development arrangements. Indeed, even a contribution to the BSC itself constitutes a scoring opportunity.

Andrew Layman: PCB CEO

This article appeared in The Witness on the 11 July 2008