BEE in South Africa: What is Black Economic Empowerment and where has the “Rainbow Nation” gone?

Among the atrocities of the apartheid government, there were a series of legislation and policies segregating the workplace. For instance, The Mines and Works Act (1991) reserved certain skilled work in the mines to whites, The Mines and Works Amendment Act (1926) excluded Africans and Indians from skilled work, and the Civilized Labour Policy (1924) established that whites would be paid a much higher wage for doing the same work as Africans.

Thus, apartheid policies excluded the majority of South Africans from each and every financial aspect of their country which, soon after the first democratic election, undertook a long path to economic transformation.
This is where Black Economic Empowerment came into play. Its main objective was to “redress the inequities of the past in every sphere: political, social and economic” in order to develop a consistent economic growth for the country and to give the previously disadvantaged groups (i.e. black Africans, Indians, and Coloureds) economic opportunities. “The premise of Black Economic Empowerment in its first incarnation was simple: white business would be encouraged to transfer stakes to new black business entities.

The pressure was part moral and part financial”. Nevertheless, criticism grew over the fact that only a limited part of the black community, more precisely the small, politicallyconnected elite, had benefited from BEE; as a consequence, the government decided to change its name to Broad-Based Black Economic Empowerment, emphasizing the fact that “economic empowerment was addressed to a large scale of historically disadvantaged people (HDP), all black people including women, workers, youth, people with disabilities, and people living in rural areas”.

BEE policy objectives can be listed as follows:
- A substantial increase in the number of black people who have ownership and control of existing and new enterprises,
- A substantial increase in the number of black people who have ownership and control of existing and new enterprises in the priority sectors of the economy that government has identified in its microeconomic reform strategy
- A significant increase in the number of new black enterprises, black-empowered enterprises and black-engendered enterprises,
- A significant increase in the number of black people in executive and senior management of enterprises,
- An increasing proportion of the ownership and management of economic activities vested in community and broad-based enterprises (such as trade unions, employee trusts, and other collective enterprises) and co-operatives
- Increased ownership of land and other productive assets, improved access to infrastructure, increased acquisition of skills, and increased participation in productive economic activities in under-developed areas including the 13 nodal areas identified in the Urban Renewal Programme and the Integrated Sustainable Rural Development Programme,
- Accelerated and shared economic growth,
- Increased income levels of black persons and a reduction of income inequalities between and within race groups.

At first glance, BEE's objectives seem to favor black Africans over the white population in the workplace by discriminating the latter just for being white.

The Constitution of The Republic of South Africa, chapter 2, section 9 states that “(1)Everyone is equal before the law (…); (2)to promote the achievement of equality, legislative and other measures designed to protect or advance persons, or categories of persons, disadvantaged by unfair discrimination may be taken; (3)The state may not unfairly discriminate directly or indirectly against anyone on one or more grounds, including race, gender, sex, pregnancy, marital status, ethnic or social origin, colour, sexual orientation, age, disability, religion, conscience, belief, culture, language and birth; (4)No person may unfairly discriminate directly or indirectly against anyone on one or more grounds in terms of subsection(3).”

It appears that BEE's objectives are actually in contrast with the Constitution, as there must not be any kind of direct or indirect discrimination. But, the point rests on the word “unfairly”. In fact, the Constitution continues outlining that “National legislation must be enacted to prevent or prohibit unfair discrimination; (5) Discrimination on one or more of the grounds listed in subsection (3) is unfair unless it is established that the discrimination is fair.

Clearly, in order not to be misled, it is essential to understand the substantial and peculiar distinction between “fair discrimination” and “unfair discrimination” declared by the government of South Africa. Whereas in any dictionary we find that discrimination is “the unfair or prejudicial treatment of different categories of people”, according to the SA government fair discrimination is possible when taking measures designed to protect or advance persons, or categories of persons, disadvantaged by unfair discrimination; in such perspective, discrimination can be based on affirmative action (fairness in favor of the designated groups – blacks, women and disabled persons – in order to promote employment equity and equality at work), on inherent requirements of a particular job, on compulsory discrimination by law (e.g. employers are not allowed to employ children under the age of 15), and also based on productivity. Whereas, unfair discrimination is described as “any employer’s policy or practice showing favor, prejudice or bias against employees in terms of the above-mentioned grounds which is not fair can be deemed to be unfair discrimination (…) for example an employer follows a policy of remunerating a female employee on a lower scale simply because she is a woman, whereas a male employee is remunerated at a much higher scale for doing the same work.”

Along with the Promotion of Equality and Prevention of Unfair Discrimination Act, other acts are at the base of Broad Based Black Economic Empowerment. Amongst the many we can cite: “the Employment Equity Act, with its purpose of achieving equity in the workplace by promoting equal opportunity and fair treatment in employment through the elimination of unfair discrimination, together with the purpose of implementing affirmative action measures to redress the disadvantages in employment experienced by designated groups, to ensure their equitable representation in all occupational categories and levels in the workforce”; furthermore, “the Competition Act increases the numbers of HDP with an ownership stake in the economy; the National Small Business Act established several institutions to provide financial and other support to entrepreneurs; the National Empowerment fund provides HDP with the opportunity to acquire shares, it promotes savings, and it supports business ventures pioneered and run by HDP”.

In 1997 a Green Paper was issued to “support the government’s economic policy objectives of broad-based black economic empowerment, and establishing that the tendering process was made more accessible to black people through the introduction of a point system which allowed the award of tenders on the basis of the combination of price and preference for targeted groups.”

With such background, Black Economic Empowerment had all the tools to enforce and impose itself.
Companies were then given the duty to pursue a “balanced scorecard” that allowed the government to measure progress made in achieving BEE.