B-BBEE through the backdoor, is this the end of transformation ‘work-arounds’

The changing face of B-BBEE practices

Black Economic Empowerment legislation has been with us since 2003 but initially it was narrow in its transformation focus with a few black people, particularly the politically connected, taking advantage and becoming very wealthy, but the majority of black people did not benefit at all.

Is Broad- Based Black Economic Empowerment effective in its transformation agenda?

There was always a focus of trying to include ownership in business by black people as a method of empowerment. Unfortunately, fronting became a pernicious practice, as many historically privileged business elites tried to circumvent the legislation by trying to place figure heads into “fake” positions as window dressing, but this was neither empowerment nor transformation.

This failure to embrace true empowerment and transformation was because many with historic privilege were not willing to admit or acknowledge this fact and felt victimised by the legislation and they had willing co-conspirators in desperate black people looking for their place in the sun.

Did Black Business ownership improve as a result of Broad-Based Black Economic Empowerment (B-BBEE)?

The BEE legislation was then amended in 2013 to include a broader base to try and positively impact a larger number of people disadvantaged by our history and there were also attempts at addressing fronting through punitive measures. 

Arguably this change, though more onerous, on corporates is more beneficial to a broader base. Fronting is now less pervasive, but it is indeed an indictment on our society that it took legislative amendments and punitive measures rather voluntary social change to achieve this result. However, we remain hopeful because the abolition of slavery, colonialism and apartheid was a long and difficult struggle for human rights and dignity before its perpetrators either found their moral compass or were forced by those who had. 

More black people own or are in legitimate ownership of business and B-BBEE had a role in this growth. However, when one considers our population demographic and the prevailing structure of our economy there is a lot more work that needs to be done to level the playing field.

B-BBEE and Black Management in Corporate South Africa

B-BBEE included empowerment of black people across management positions in large corporates. This implies that corporates must not only have black ownership but black representation across all levels in management. 

The amendment on management went further in that it specified demographically aligned ratios of African, Indian and Coloured people as well as people with disabilities and woman. However, many businesses are finding it difficult to meet the demographic management ratios often falling back on tired worn out excuses of lack of skills or experience.

 The actual problem is recruitment practices within corporates as a function of total corporate culture. While many large corporates have consciously embraced a deracialised culture where through natural processes, demographically based racial realignment in business management will occur organically, others have not. 

A practice in some businesses is to appoint people into key positions from within a private network or closed circle and if this network or circle is monochromatic or lacks diversity we tend to perpetuate the imbalances of our past by repeating its mistakes. The implication being that if the corporate culture allows for natural processes to occur unimpeded by personal biased agendas, racial demographic alignment at all levels in the organogram will occur more naturally and there will not have to be contrived efforts to force transformation. 

Ironically, many B-BBEE detractors argue for merit-based appointments but in their minds, this means people from a specific racial background, which is the antitheses of merit.

Demographic ratios can be organically and naturally achieved when pure merit is applied without contrivance or bias.

The longer B-BBEE detractors hold onto bias in their appointments the more the need for contrived demographic ratios to force redress. More often than not the bias is unconscious or subtle, but pervasive, nonetheless. Corporate, strategy and policy without cultural reinforcement is empty. Broadly across business, social and corporate culture, need conscious re-alignment. 

How does B-BBEE Skills Development aid in Transformation?

The B-BBEE legislation focuses heavily of Skills development as being an agent of transformation and empowerment. Intuitively everyone would agree with this notion as human development and civilisation has benefited by standing on the shoulders of giants of collective knowledge and wisdom from our past.  

However, the implementation of Skills development is extremely important in reconciling with the B-BBEE Skills Development legislative intent and our collective intuition.

B-BBEE addresses funding of post school education which include all levels of education on the National Qualification Framework. This is encouraging because it is broadly focussed.  

However, I do believe that the funding must be more conditional so that it addresses critically needed skills in our economy so that we do not output more unemployed graduates with qualifications that are irrelevant to our prevailing job market. There needs to be more advocacy and promotion around demand in the job market and the skills required. 

Government, institutions of higher learning and organised business and labour should be at the vanguard of this communication and provision of career information. We also need social dialogue to realign societies notion of prestige when it comes to choosing the pathways of higher learning. 

Society in South Africa have come to view a University qualification as being of greater prestige as compared to TVET colleges, yet the latter may be more in demand by the job market. TVET and similar institutions should not be the institution of last resort, chosen only if University access is not possible.

People with relevant qualification and skills in a developing and growing economy are harder to marginalise or exclude and in fact aid in the very same growth and development of the economy and by extension transformation and empowerment.

IS B-BBEE Skills Development promoting Employability and Employment?

Many young people having completed grade 12 choose not to enter higher education but rather attempt to enter the job market. Unfortunately, basic education does little to prepare young people to access job opportunities that may be available.

Learnership for the unemployed and vulnerable groups such a people with disabilities, youth and women are a brilliant way of bridging the gap between basic education and the job market and this is a strong focus of B-BBEE. 

Ironically, many graduates from Universities and other institutions of higher learning also find learnerships a very useful way to obtain job experience and skills to access the job market. Learnerships have occupied a huge part of the B-BBEE skills development strategy and offer learners a wide-ranging list of choices and opportunities, and well run learnerships improve employability threefold. 

At least 70% of a learnership is about valuable job experience which convert education into skills provided the learner is exposed to proper work experience opportunities during the learnership. In some instances, some B-BBEE corporate benefactors will provide the work experience for unemployed learners or outsource it to a skills development partner. 

Both options can be extremely valid forms of work experience. However, B-BBEE benefactors that choose to outsource the work experience opportunity must ensure that their funding is having the desired job experience impact on the learner by ensuring their choice of skills development partners is employability and employment oriented. 

Some poorly run learnerships with low quality, irrelevant or worst of all, non-existent work experience is conducted for the sake of compliance as opposed to employability, which is fundamental. Potential employers offering job opportunities focus hugely on work experience, references and work history during their recruitment process so a learnership qualification obtained with questionable work experience renders the learners inadequate to take up employment opportunities. 

B-BBEE learnership benefactors should also seek out skills development partners that go beyond just education and work experience but also partners that actively assist learners to become employed or economically active post the learnership.

Is Prevailing business adequate to provide the required job opportunities?

The unemployment crisis in South Africa has proven intractable and endemic over the last two decades and the lockdown has poured fuel onto a raging fire of unemployment, inequality and poverty. Statistics South Africa has confirmed a further 2.2 million jobs were lost between April and June 2020. 

I am of the firm conviction like many other South Africans that prevailing business or government cannot solve the unemployment crisis alone. Prevailing business would have to embark on a rapid growth trajectory through huge local investment to create the jobs required to ameliorate the unemployment conundrum. 

This is only possible in the private sector through massive local and foreign investment in our economy but for various reasons this level of investment has been slow in materialising despite government led investment summits. 

We know that government cannot bloat its workforce any further because it is unaffordable, especially that its revenue collection has fallen quite dramatically. Public works programmes which is very essential to improve infrastructure will provide some short-term jobs, but not enough long-term jobs required by our economy.

This leaves small business growth and development as the only major viable solution for South Africa’s jobs and economic crisis. B-BBEE has recognised this fact by incentivising Enterprise and Supplier development under its procurement element and declaring it a priority. 

To significantly grow, small business development requires a triumvirate of entrepreneurship, capital and technical support. Even though the B-BBEE Supplier and Enterprise development element provides for mentoring, skills transfer and capital support, the former two tend to be less available in practical terms. 

Some large corporates do embrace the transformative need for capital but rely on the small business owner to find their own technical support and skills to operate their own business. Learned experience ably informs us that without skills and mentoring many small businesses fail due to inexperience or imprudent business practice, even after securing the precious capital. 

There are ways for large corporate to improve survival and sustainability chances of their B-BBEE Enterprise and Supplier development small business beneficiaries. The key is to package the capital, Skills transfer and mentorship into a single solution of conditional support. 

Corporate benefactors can sponsor business mentorship or consultants to guide the fledgling entrepreneur or alternatively they can fund learnerships in, for example “New Venture Creation” which comes with skills and mentoring for a prolonged period to ensure the new enterprise is sustainable. In addition, the corporate benefactor must also try for an outcome where the learnership establishes an actual sustainable business that may eventually become part of their supply chain which improves sustainability. 

In this way B-BBEE corporate benefactor can combine their skills development, enterprise and supplier development investment into a complete, coordinated packaged solution that leads to sustainable employment and growth.

Parting Words on B-BBEE

The B-BBEE legislation is not ideal in any democracy which aims to de-emphasize race or any other bias but in South Africa our history and continued economic structure forces us to seek empowerment redress and balance. B-BBEE legislation will have a sunset sooner rather than later if we spend less time and energy trying to oppose it or cleverly circumvent the intent of the legislation.

Circumvention and opposition to B-BBEE will only further entrench our historic imbalances and keep B-BBEE perpetually as a sunrise legislation with ever more demanding provisions. Embrace B-BBEE wholeheartedly through moral rather than legal compulsion and our society will be better for all.

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.

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