Black Economic Empowerment (BEE) - Yokogawa South Africa

Introduction
The domination of business activities by white business and the exclusion of black people and women from the mainstream of economic activity are causes for great concern for the reconstruction and development process. A central objective of the RDP is to deracialise business ownership and control completely through focused policies of black economic empowerment. These policies must aim to make it easier for black people to gain access to capital for business development. The democratic Government must ensure that no discrimination occurs in financial institutions. State and parastatal institutions will also provide capital for the attainment of BEE objectives. The democratic Government must also introduce tendering out procedures, which facilitate BEE. Special emphasis must also be placed on training, upgrading and real participation in ownership. (RDP 4.4.6.3)

The idea of a Black Economic Empowerment Commission (BEECom) arose out of a resolution taken at the Black Management Forum (BMF) National Conference, held from 14 to 15 November 1997, in Stellenbosch. The prevailing view was that black people should direct and take charge of a new vision for Black Economic Empowerment (BEE) a process that, until then, had been conceptualised, controlled and driven by the private sector.

The BEECom was formally established in May 1998 under the auspices of the Black Business Council (BBC), an umbrella body representing 11 black business organisations. The Commission conducted extensive research and embarked on wide ranging consultations. A consultative conference was held on 30 September 2000. The views of these and subsequent discussions with stakeholders were incorporated into the report.

The following definition of BEE was adopted by the Commission:

It is an integrated and coherent socio-economic process.
It is located within the context of the country’s national transformation programme, namely the RDP.
It is aimed at redressing the imbalances of the past by seeking to substantially and equitably transfer and confer the ownership, management and control of South Africa’s financial and economic resources to the majority of its citizens.
It seeks to ensure broader and meaningful participation in the economy by black people in order to achieve sustainable development and prosperity.

The definition has been tested both in debate and in the media, and has been broadly accepted by the represented constituency. According to this definition, BEE should be viewed within the broad scope of empowerment processes including job creation, rural development, urban renewal, poverty alleviation, specific measures to empower black women, skills and management development, education, meaningful ownership, and access to finance for households and for the purpose of conducting business.

Meeting the Challenge of Disempowerment
The report presents an opportunity for South Africa to break the cycle of underdevelopment and continued marginalisation of the majority of people within the mainstream economy, thereby launching the country onto a course of sustained, even spectacular, rates of economic growth. The BEECom believes that the legacies of Colonialism and Apartheid and deliberate disempowerment provide a sufficient moral and political basis on which to justify an Intergrated National BEE Strategy.

South Africa’s present Government inherited a mismanaged economy, designed to serve the needs of a minority of the population and condeming the black majority to a vicious cycle of extreme poverty, unemployment and underdevelopment. These policies resulted in significant structural distortions in the economy and finally, a crisis in the Apartheid economy, the consequences of which are still with us today.

Seven years ago, a transformation programme was implemented which fundamentally changed the country’s political, economic and social landscape. It firmly entrenched the values of equality and freedom, laying the foundations for the country to chart a new path to economic development, which other developing nations could follow.

Despite the implementation of this programme, South Africa’s economic growth performance remains disappointing. Continued high levels of unemployment and ever-increasing poverty threaten to undermine the stability of our new democracy. The country still has one of the most unequal distributions of income in the world. This is a reflection of the extremely low levels of black participation in the economy.

The report concludes that the reason for this is that the country has not yet overcome the Apartheid crisis. If a fundamental cause of the crisis was the marginalisation of the black majority, it follows that insufficient measures were taken to significantly increase black participation in the mainstream economy, hence the continued low economic growth rate.

Furthermore, racism remains ingrained across all sectors of South African society. This structural impediment negatively affects the efficient functioning of markets in South Africa, reinforcing marginalisation and preventing the black majority from participating in the economy.

The BEECom concludes that South Africa cannot attain sustained high levels of economic growth in the absence of deliberate measures by the State to include black people in the economy on a massive scale and increase black incomes. The Strategy must emphasise access to productive assets and targeted measures to improve the productivity of those assets.

The challenge facing South Africa dictates a fundamental change in approach within all sectors of society, particularly established business. There should be sustained effort to mobilise all South Africans to arrive at a national consensus on the priorities of economic transformation and the roles and obligations of all stakeholders in helping achieve these objectives. The BEECom believes that an Integrated National BEE Strategy is integral to transformation and growth.

This, by definition, has to be a State-driven programme. Markets tend to reinforce an existing distribution of incomes and assets. This is unacceptable in a country such as South Africa, where the market mechanism was deliberately distorted to allocate incomes and assets on non-price criteria such as race.

The private sector needs to recognise its collective responsibility to invest in the country and assist Government in achieving development goals. The private sector should be encouraged to take into account private and social returns and factor longer term and strategic considerations when making investment decisions. This is an inclusive process and its outcomes are for the benefit of the whole nation and future generations.

Government is responsible for increasing the efficiency of the public sector, State-owned enterprises included. This will result in higher levels of fixed investment and an improvement in the delivery of services. Prerequisites are a strong political will, commitment and leadership skills to enable institutions to implement goals effectively.

All stakeholders need an easily comprehensible, uniform and consistent approach, along with clear guidelines and targets. A regulatory framework outlining incentives and disincentives is needed to steer the economy in strategic directions that create additional employment opportunities and increase in the level of black incomes.

The national strategy should therefore create a co-ordinated, simplified and streamlined set of guidelines and regulations that provide targets and demarcate roles and obligations of the private sector, the public sector and civil society over a period of 10 years.

The key components of the Integrated National BEE Strategy include:

An Investment for Growth Accord between business, labour and Government aimed at reaching agreement on a concrete strategy to lift the country’s levels of fixed investment and economic growth.
The design and implementation of an Integrated Human Resources Development (HRD) Strategy.
The implementation of the Integrated Sustainable Rural Development Strategy and the creation of an agency which streamlines and co-ordinates funding initiatives in rural areas.
A National Procurement Agency located within the Department of Trade and Industry aimed at transforming the public and private sector procurement environment.
An Enabling Legislative Framework creating uniformity in policy and establishing the necessary institutional support and instruments with which to drive the BEE strategy. The commission is proposing a National Black Economic Empowerment Act that defines BEE and sets uniform guidelines which will ultimately facilitate deracialisation of business ownership in the private sector.
An Empowerment Framework for Public Sector Restructuring that outlines principles to be followed in the restructuring process.
An affordable and appropriate framework aimed at improving access to finance for households and businesses through the creation of new institutions, disclosure and reporting requirements in the banking sector as well as targets encouraging service delivery.
Recommendations on the streamlining and co-ordination of public sector funding initiatives through a National Empowerment Funding Agency.
Recommendations on building the capacity of black business structures.
The strategy should also incorporate national targets to be met by stakeholders. The BEECom proposes that the following targets, to be achieved within a period of ten years, should guide the Integrated National BEE Strategy (with black women accounting for 35% of all the targets below and disabled persons accounting for 5%).

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