Effect of Black Economic Empowerment on profit and competitiveness of firms in South Africa

Ewert P.J Kleynhans,Melinda C Kruger

doi:10.4102/ac.v14i1.200

Abstract

Orientation: The key obstacle hindering optimal profitability levels and competitiveness in firms in South Africa is the application of labour legislation policies and tools aimed at narrowing the income gap between different racial groups and resolving inequality amongst a diverse workforce.Research purpose: This article determined whether the implementation of a Black Economic Empowerment (BEE) policy by companies has a positive effect on their growth in terms of profits and competitiveness.Motivation for the study: This study determined whether the implementation of BEE could be profitable for companies.Research design, approach and method: A quantitative study was undertaken in order to find empirical evidence supporting the relation between high BEE Scores, profitability and competitiveness. The empirical investigation utilised regression analysis, correlations and other methods, based on data between January 2009 and December 2011. The BEE Scorecard was used to obtain BEE scores of the top 50 BEE companies. Thereafter, the top 50 companies’ financial information was gathered from the Johannesburg Securities Exchange.Main findings: The implementation of BEE within companies has a positive effect on profitability, turnover and investment. Numerous factors have, however, been hindering,while other factors enhanced the success of BEE.Practical/managerial implications: The findings encourage mangers to engage in BEE as it may facilitate higher profits and indicates where labour legislation could be improved.Contribution/value-add: Value was added through new research determining the effects of BEE and labour legislation on profitability and competitiveness of firms on a micro-level.

Highlights

This study investigates the effect that labour legislation instruments, in particular Black Economic Empowerment (BEE), have on the economic competitiveness and profitability of firms operating on a micro-level in South Africa
South Africa’s colourful political past has ensured that South Africa is quite different from the rest of the world and that labour legislation has taken a step in a new direction
South African firms operating at a micro-level are currently facing some legislative as well as socio-political obstacles (Antonites 2003:1)

Summary

Introduction

This study investigates the effect that labour legislation instruments, in particular Black Economic Empowerment (BEE), have on the economic competitiveness and profitability of firms operating on a micro-level in South Africa. Businesses in the private sector operate in accordance with strategic plans and must adhere to codes of conduct that are set up by different state entities. This holds true for South Africa, as it does anywhere else in the world. Porter (1998:184) states that governments, on the one hand, should act as catalysts and challengers in order for firms to boost their aspirations and achieve higher levels of competitiveness and profitability. The Employment Equity Act 55 of 1998 (South Africa 1998, s. 2) expects transformation to be fuelled by the reversal of historical errors and the removal of fundamental labour inequalities in the workforce

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Results

Conclusion