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Transformation: A reflection on the intent in the revised codes…

Dr Robin Woolley

The original objectives of B-BBEE were formed from the late 1990's to 2003, while the country, at a socio-political level, was driven by a Neoliberal model. There was an understanding that B-BBEE was predominantly focused on building and strengthening a middle class, rather than being a grass-roots poverty alleviation and access mechanism. This can be seen for example from the relatively low weighting given to socio-economic development.

It was tacitly understood that business would focus on the barriers to entry for those economic actors that were about to become active so stimulating quick growth and increasing the tax base, which the government could then use to enable those participants that were further away (in time and capacity) from becoming economically active. Times and circumstances change and the Codes of Good Practice (CoGP) have a built-in process for updating best practice every five years to ensure a good fit with the emergent current reality... and have resulted in the Revised CoGP (2013)

Reviewing the original intent

While we have seen some development of a black middle class, the country has faced new challenges over the years since 2003. These can be best understood and seen through the lens of the nine critical success factors detailed in the National Development Plan (2011).

1. Too few people work,

2. Poor education,

3. Infrastructure is under maintained and insufficient,

4. Spatial patterns drive inequality,

5. Economy is overly resource intensive,

6. Failing public health system,

7. Corruption,

8. Poor public services, and

9. Divided society.

After reviewing behaviour against the first five-year round of the CoGP, as well as taking global best practice into account, such as Malaysia's experiences in the 1980's it was felt that the following principle changes were needed in the CoGP. The figure below shows a high level view of the re-orientation of B-BBEE under the Revised Code of Good Practice.

Figure 1

The figure above is analogues to a Maslow's Hierarchy of Needs view to resolve transformation interrelationships between issues.

The diagram refers to five key principle changes reflected in the revised CoGP that need to be resolved in the right sequence as follows:

1) We need to re-channel the focus on SED out of education (the informal elements of which will be captured in skills development) and into other barriers to economic access, such as heath, poverty alleviation and basic service delivery. Note environmental and infrastructure projects are now explicitly part of SED contributions

2) We need to refocus our skills efforts to include non-employees (unemployed people), such that our future skills pool is developed and equipped to become employed. We need to ensure that our learnership and artisianship processes are effectively used as work preparation and employee courtship processes, so that there is effective retention of our unemployed learners.

3) We need to be recruiting and training employees in proportion to the Economically Active Population (E.A.P).

4) We need to ensure that access to economic opportunity for small black-owned businesses is enhanced through supplier development. This will benefit both entrepreneurs and the jobs that are stimulated through this process. Malaysia utilised this to overcome the "twin economies" behaviour evident in their economy at the time. In South Africa the same concept could apply, namely: bringing established business and small informal business into supply partnerships to stimulate growth and competitiveness and mutual benefit. This manifests as a black ownership, small business focus in this pillar, as 95% of businesses in the country are small enterprises with the bulk of these being black-owned.

5) We need to ensure, as far as is economically viable, that our supply chains are localised, to enhance value added supply and job creation.

6) We need to ensure that ownership (through broad-based, employee ownership or strategic partners) exceeds the unencumbered subminimum of 10% (which is 40% of the Net value points).

In an environment where we have a worsening state of inequality, it is vital for the country to revise its efforts and focus wholeheartedly on promoting social inclusivity, in an attempt to deal effectively with varying expectations in South Africa.

However, it is when we translate this national compact into a business context that difficulties emerge. We need to simultaneously promote and stimulate economic growth and at the same time promote inclusivity if we are to emerge as a country that effectively serves all its citizens. The RCoGP require a fundamental strategic review in order to align itself with both national and business objectives. Invasive surgery is never easy, but it is sometimes necessary.

Robin is the executive director of Transcend Corporate Advisors. He completed his PhD in empowerment and is a specialist in corporate strategy development, black economic empowerment implementation and scorecard development. He is a visiting lecturer at the Gordon Institute of Business Science in strategy development.