The Morality of Broad-Based Black Economic Empowerment (B-BBEE) Practices
B-BBEE has become a political football being booted about the playing field of our collective political and moral conscience.
Is B-BBEE legislative intent about narrow scorecard compliance or is there some deeper moral obligation incumbent on all of society to build a more just, equitable and balanced society where economic participation is a commonly exercised right?
Some political protagonists argue that the racialised nature of the legislation makes it immoral but even they accept that transformation of our society is paramount. Other political protagonists point to our race-based history to justify B-BBEE as being restorative in addressing the imbalances.
The fact is that the majority of the economically disenfranchised are black and directly reflect the legacy of our history. The structure of our economy even though more racially representative than 1994 is still very reflective of our historic imbalances.
Is B-BBEE Empowerment or Redistribution?
B-BBEE is about empowerment and not redistribution. Empowerment is about bringing the majority of our population into the mainstream economy where the quality and dignity of their lives is addressed in a sustainable way.
Simple redistribution is taking from the rich and giving to the poor which is not sustainable or transformative.
The prevailing pockets of economic resources in the country must be the catalysing sources of empowerment, redress and transformation.
A more economically equitable society has lower levels of social challenges such as crime and violence which impact the entire society. More economically stable societies develop more rapidly in the science, arts and overall well-being of all its members. Therefore, empowerment is for the benefit of the benefactor and the beneficiary whereas redistribution only addresses the beneficiary in an unsustainable way.
Where points the moral compass of B-BBEE Champions?
B-BBEE champions are the consultants, the verifiers and the employees within corporates appointed to guide and administer B-BBEE.
I would argue that it is an obligation of all the B-BBEE champions to uphold the legislative intent being one of transformation which holds that B-BBEE is about a vision of a future society where all its members stand a fair chance of participating on equal terms in economic activity.
If B-BBEE champions don’t advocate for transformation, then B-BBEE is doomed to a soulless compliance mentality without the desired transformational impact on our society. This provides ammunition to the detractors of B-BBEE who fire salvos of the failure narrative taking aim at the equality and the just economic development of our entire society.
If any B-BBEE champion does not believe or support transformation, then these champions must recuse themselves from its ranks. It is unacceptable, unethical and hypocritical for a B-BBEE champion to provide technical advice on B-BBEE to corporates without embracing transformation or worse still, opposing it.
It is imperative that the B-BBEE champions are its strongest advocates whose primary role is aligning the hearts and minds of boards and executives in the corporate world with transformation, with technical advice being secondary.
Is Transformation and Corporate Profitability Mutually Exclusive?
The first point is that participating in economic transformation is not a luxury but an absolute necessity as it is in the best interest of corporates to develop their market so that domestic consumption of their products and services also increases over time and hence profitability is positively impacted.
The growing market is likely to reward brands who contributed to their growth and development.
This is building social value into your brand and therefore B-BBEE champions must ensure that corporate brands are firmly associated with their B-BBEE transformational projects from the perspective of the market and beneficiaries. These B-BBEE transformational projects therefore require well managed involvement and oversight from the B-BBEE corporate donor where beneficiaries receive sustainable value toward their economic development.
A narrow compliance that only mentality focussing solely on B-BBEE points can work against the brand if beneficiaries and the market perceive it as disinterested and solely compliance driven.
Secondly, there may be a natural tendency for B-BBEE consultants to advise their clients to spend the least in achieving the most amount of credit on the B-BBEE scorecard.
This is not necessarily a negative practice as long as the funds being spent is implemented to obtain maximum value for the beneficiary while achieving maximum B-BBEE credit for the corporate.
Spending more funds does necessarily equate to more value for the beneficiary. Beneficiary value is a function of the transformational intent of the corporate donor.
How does B-BBEE Compliance and Transformation align?
The B-BBEE consultant, be it internal or external to corporates must advocate for B-BBEE to be placed high on the agenda at board and executive level within corporates and integrated into core strategy and culture.
B-BBEE transformation needs the support of the highest-level decision makers for it to be a success in terms of transformation. Many corporate cultures have slowly embraced B-BBEE transformation but there are those that adopt B-BBEE begrudgingly only because they need to be considered in both private and public sector procurement.
Much of the B-BBEE scorecard points to the corporate financial year end to finalise calculations for spend and other important factors. This leads to an unfortunate practice where many businesses wait for the period just prior to financial year end before they implement hurriedly constructed plans to achieve narrow compliance.
In Corporates this narrow compliance practice must be replaced through the development and approval of B-BBEE transformation policy with high level responsibility and accountability in achieving its outcomes. If B-BBEE transformation is given the appropriate high-level support, then it should be an ongoing year-round practice which removes the urgency at financial year end.
The beneficiaries tend to be placed in a position that is more advantageous than if this initiative was hurriedly implemented for a compliance only outcome.
Why do B-BBEE consultants need organised self-regulation?
As B-BBEE has become more pervasive in business relationships, with each other, and with government, more companies are investing in building internal resource capacity to guide B-BBEE policy. However, there are still many companies choosing the services of external B-BBEE consultants.
It does not matter whether companies choose internal or external consulting services to guide B-BBEE implementation, only that the relationship must be guided by a charter whose ideals must address the interest of the corporate client and the beneficiary in equal measure. In any event both the Corporate benefactor and their beneficiaries are complimentary and not mutually exclusive in terms of benefit.
I believe that both internal and external B-BBEE consultant should be anchored by a self-regulatory ethical framework whose principles guide their profession and allows for a uniform application of the legislation.
Standardisation of consulting practices also guides corporates in their B-BBEE policy development and the expectation of service from their consultant be it, internal or external. In this way B-BBEE consultants fall back on their charter to guide the relationship with corporate decision makers empowering them to be bolder in pushing the transformation agenda.
B-BBEE consultants that undermine the charter should be removed by their peers so as to maintain the ethical transformational standard The B-BBEE charter can also go as far as defining the guideline for choosing quality partners that may be recommended to corporates to choose when implementing B-BBEE projects.
The quality partners could be vetted databases of NGO’s, Skills development providers, Enterprise development candidates, candidates from vulnerable group i.e. small developing companies run by woman, youth and people with disabilities.
This structured approach increases the value and sustainability of B-BBEE projects funded by corporate donors. The charter could contribute to research that collectively tracks the success of B-BBEE funded development projects and this may guide the amendment of legislation over time.
I do realise that this is asking a great deal of this profession but B-BBEE is more than just legislation, it is the continuation of the project of economic freedom that commenced in 1994 with political freedom. B-BBEE Consultants are veritable transformation activists that should be important drivers for South Africa’s project of economic freedom.
Authored by Sivarajan Naidoo
Sivarajan is Managing Director of Edupower Skills development academy, a level 2 BEE contributor. Edupower’s aim is to address the socio-economic issues of young South Africans by providing fully hosted learnerships and innovative solutions to absorption, enterprise & supplier development. Edupower is trusted by companies such as Unilever and Safair to address their corporate legacy in South Africa.