Black economic empowerment in South Africa: Is transformation of the management structures of enterprises as essential as it should be?

Abstract

Black Economic Empowerment (BEE) was launched as an integrated policy initiative to empower black people and redistribute wealth across the spectrum of South Africa's population. The Broad-Based Black Economic Empowerment Act 53 of 2003, as amended in 2013, was enacted to correct the imbalances of apartheid and promote transformation of the economy. The Codes of Good Practice adopted in terms of the Act were promulgated to provide a standard by which the BEE rating of enterprises can be calculated. BEE ratings are important to enterprises since enterprises use them to attract and retain clients: the higher an enterprise's BEE rating, the more it is likely to benefit financially. It is for this reason that it is in most enterprises' interests to have a good BEE rating. The BEE rating of an enterprise is calculated by using the rules and formulae in the Codes of Good Practice. However, despite the objectives of the Act, enterprises are able to obtain good BEE ratings even where a low percentage of black people form part of their management structures. It is important to determine how this is possible. This article exposes shortcomings in the existing BEE legal framework that make it possible for enterprises to obtain good BEE ratings under such circumstances.