Black Economic Empowerment Policies Research Articles

How Has South Africa’s Membership of BRICS Intensified Uneven and Combined Development in the Country and Beyond?

The recent African scramble has resulted in uneven and combined development (UCD) in Sub-Saharan Africa (SSA) throughout the 21st century due to unequal exchange. South Africa plays a sub-imperial role in this scramble in SSA. It both exploits and is exploited. The mining industry in South Africa has attracted interest from colonial powers, English-speaking businesses, and foreign investors, making it a highly lucrative sector. Furthermore, most black South Africans have been employed in the mining industry since the late 19th century. Over the past 25 years, the African National Congress government has utilised the mining industry to achieve economic transformation through black economic empowerment policies. This study proposes that the mining sector in South Africa is responsible for the ongoing UCD, despite receiving new investments and empowerment policies. South Africa’s inclusion in BRICS has broadened its range of international partners beyond its traditional Western or African counterparts. However, South Africa’s decision to join the BRICS group in 2011 has not yet yielded the expected transformation in the country’s economy and growth. As a result, it is uncertain whether South Africa’s BRICS membership has addressed the country’s persistent problem of UCD. This study argues that South Africa’s BRICS membership has exacerbated UCD in the country. This study proposes that Trotsky’s UCD analytical framework is useful for analysing South Africa’s policy choice to join BRICS, which strengthens its sub-imperial role.

The impact of the Black Economic Empowerment concept in the South African public procurement systems on black construction professionals

South Africa's government in 2003 introduced Black Economic Empowerment (BEE) legislation aimed to uplift the blacks into mainstream economic activities. This study assessed the impact of the BEE policy on black construction professionals since its introduction. Due to COVID-19 restrictions and the participants' dispersed location, the telephone interview method was adopted to solicit information from 21 black construction professionals. The findings indicate that the BEE policy in the public procurement system, has improved black construction professionals' economic status, developed their skills, and increased access to public contracts, indicating an immense benefit from the BEE policy. However, issues such as nepotism, corruption, and exploitation by policy implementers with political acquaintances in the public procurement system prevent the policy from fully achieving its objectives. South Africa's government must institute measures to ensure all the hindrances adversely affecting the policy's successful implementation are eradicated for the intended policy objectives to be realised.

Black Economic Empowerment and Quota Allocations in South Africa's Industrial Fisheries

ABSTRACTPower asymmetries in the governance of value chains mean that inequalities in access to resources and share of value added are skewed against smaller players. Policies enforcing market rules and ensuring fairness are ineffective when power is deeply entrenched, necessitating different rules to address such inequalities. South Africa's Black Economic Empowerment (BEE) policies and competition laws target economic redress and inclusion of historically disadvantaged people in business ownership and control of economic activities. BEE criteria have been embedded in many industry charters and implementation codes, and competition law is well established and effectively implemented. Yet, the impacts of these instruments have been limited and slow, especially in sectors where a few companies dominate. This article examines the interactions between value chain dynamics and industrial fishery quota allocations, BEE policy and competition dynamics in the hake deep‐sea trawl fishery sector. It shows that, even in one of the most regulated sectors of South Africa's economy, large incumbents retain a disproportionate amount of power vis‐à‐vis smaller players. The article concludes that if rules protect incumbency, inequality will be sustained. Quota allocations, transformation and competition regulation should go hand in hand to facilitate the effective participation of black‐owned businesses as competitors in value chains.

Are secondary equity offerings of Black Economic Empowerment (BEE) REITs less underpriced than non-BEE REITs?

PurposeThe purpose of this paper is to contribute to the literature on secondary equity offerings (SEOs) by examining the impact of the Black Economic Empowerment (BEE) policy on secondary equity offering (SEO) pricing dynamics of South African Real Estate Investment Trusts (REITs).Design/methodology/approachWith a sample of 152 SEOs of South African REITs from 2010 to 2020, ordinary least squares (OLS) models, fixed effect models, parametric and non-parametric tests were applied to test for the impact of BEE on the underpricing of SEOs.FindingsSignificant underpricing is discovered in highly compliant (BEE) REITs; in other words, SEOs pricing of BEE compliant REITs are more underpriced compared to non-compliant BEE REITs. With this, BEE compliant REITs and more so, highly compliant BEE REITs in particular leave more money on the table.Practical implicationsThe government is therefore aware of the impact policy interventions play when REITs raise financing through SEOS. With these, highly compliant BEE REITs will need to be more strategic when making BEE compliance decisions as this is shown in our study to impact the underpricing of SEOs.Originality/valueThis is the first study to investigate SEO underpricing for the BEE policy using the South African REITs context.

The Relationship of Social Policy and Public Diplomacy: Black Economic Empowerment Strategy and Turkey-South Africa Relations

Turkey-South Africa Relations, whose history goes back to the beginning of the 19th century, entered the process of development again in the post-2000 period. Although Turkey and South Africa are two countries that have the potential to support each other economically and politically, the relations are not at the desired level. In this new period, unlike previous years, Turkey has been using public diplomacy tools intensively in the relations between the two countries within the framework of the African expansion in foreign policy. South Africa's policies to change the unequal social structure from the past and the failure of these policies with respect to the desired performance emerge as an appropriate and even necessary field for public diplomacy that can be implemented by Turkey in the relations between the two countries. For this reason, it is thought that Turkey's understanding of the black economic empowerment policies of South Africa since 1994, the problems related to these policies, and the development of appropriate public diplomacy tools for these problems will contribute to the development of relations between the two countries.

Racial capitalism, ruling elite business entanglement and the impasse of black economic empowerment policy in South Africa

The high rate of inequality in South Africa is rooted in colonial dispossession and racial exploitation, and still runs primarily along the racial divide. Policy initiatives taken to redress past economic injustices through the black economic empowerment (BEE) have failed to bring economic transformation. Using the twin lenses of epistemic violence and racial capitalism, this study analyses how entangled interests aimed to co-opt the ruling party elite by the apartheid-era business elite led to the BEE impasse. The pervasiveness of cultural alienation in BEE failure suggests that a shift to restorative justice is necessary to break from the impasse.

Intruders in a Balancing Act: Black Economic Empowerment, Transitional Justice and Investment Arbitration Tribunals

Abstract This article examines the role of ad hoc investment arbitration tribunals in arbitrating highly sensitive matters in transitional justice contexts, focusing on disputes arising from black economic empowerment (BEE) policies in countries formerly under racially discriminatory regimes. After an overview of the investment protection system, the article introduces the historical context of BEE policies. It subsequently analyses three main disputes, one against South Africa and two against Zimbabwe, where white concession holders and landowners relied on Bilateral Investment Treaties to claim compensation for the consequences of BEE mining and land redistribution policies. These disputes provide a testing ground to shed light on the role of investment arbitration in the context of transitional justice. The article concludes that such a role essentially amounts to an intrusion in the perilous ‘balancing act’ of managing a transitional justice process.

Black economic empowerment policy and the transfer of equity and mine assets to Black people in the South Africa’s mining industry

Background: The Minerals and Petroleum Resources Development Act (MPRDA) and the Mining Charter, which both came into force in 2004, required white-owned and foreign-owned companies operating in the country to transfer 26% of the value of equity ownership and ensure that historically disadvantaged persons (HDSAs) attain 40% control of mine assets. The regulations are part of the broad-based black economic empowerment (B-BBEE) policy that seeks to transform the whole economy and enable black people to participate fully in all sectors of the economy after years of exclusion under apartheid laws. The inclusion of black people in the industry started with conglomerates unbundling mining houses in the early 1990s. Elsewhere such programmes succeed through selective government intervention. The South African government instead is pursuing a hands-off approach leaving HDSAs to survive under market mechanisms, which limits HDSAs’ chances of exploitation of opportunities.Aim: To explain challenges of attaining and sustaining equity target levels and highlight the extent to which black people own equity and mine assets, explore strategies used and reveal other realities in the implementation of the policy. These aims are met by exploring the ownership structures of white-owned, foreign-owned and black-owned companies and BEE deals concluded by them between the 1990s and 2015. It was also important to learn from the experiences of countries that pursued similar policies as a means of providing knowledge and information to policymakers and the general public.Setting: The study used a sample of 72 mining companies in South Africa operating in various mineral categories.Methodology: This article used a qualitative approach involving both secondary and primary data. Purposeful selective sampling was used to draw from all listed mining companies with a cut-off of July 2011. The market capitalisation of these were used to estimate equity targets owned by black people. Another 16 mining companies not listed were used to explore the strategies, challenges and other realities. This required exploring changes in shareholding structures and BEE deals concluded. Face-to-face structured interviews were conducted with a total of 35 executives, top management or their representatives from 27 companies, a few members of academia and government officials between 2012 and 2014.Results: Targets set by the MPRDA and the Mining Charter have not been met. Thus, little equity ownership has been transferred to black people. A broad category of black people have, however, benefited from BEE deals. These include individual companies, consortiums, communities and employee ownership schemes. To avoid risks, the sellers of mine assets host black people in separate companies, special purpose vehicles and holding companies. In general, lack of capital, dilution of black shareholding, indebtedness and limited expertise to run extractive ventures successfully challenge the survival of black-owned companies. Despite these problems, a few such companies are worth billions of rand.Conclusion: The success of empowerment policies that seek to offer selective preferences to enterprises elsewhere has depended on the government’s concerted efforts. These include establishing institutions to oversee policy execution and having financial and other supports. Challenges that black-owned mining companies face indicate a call for help. Unless the government intervenes and supports them there is a danger that white-owned and foreign-owned companies will completely buy back the assets once sold to black people resulting in a failure of the empowerment policy.

Ahlak ve Sosyal Refah İlişkisi: Güney Afrika Örneği

Gelir dağılımı ve yoksulluk durumları biçiminde somutlaşan sosyal refahın oluşumunda ahlaki değerlerin önemli bir belirleyiciliği söz konusudur. Ahlaki değerlerin toplumda işlevsel ve baskın olduğu durumlarda iktisadi üretkenlik-etkinlik ve sosyal adaletin varlığı şeklinde tezahür eden bu durum, tersi durumda ekonomik kalkınma ve sosyal adalet sorunlarının bulunduğu, sosyal güven eksikliği ve yolsuzluğun karakteristik özellikler olduğu bir toplumsal yapı olarak ortaya çıkmaktadır. Modern dünyanın sosyal refahla ilgili sorunlarını çözmede piyasanın yanı sıra kamu ekonomisinin de etkin olamaması sosyal refahın ahlak boyutunun önemini göstermektedir. Güney Afrika’da yüzyıllık bir sömürü düzeninin ardından iktidarı devralan siyah hükümet tarafından başlatılan ulusal ölçekli bir sosyal adalet girişimi olarak siyah ekonomik güçlendirme politikalarının başarısızlık nedenleri arasında yolsuzluk önemli bir yere sahiptir. Yolsuzlukların güçlendirme politikalarına başarısızlığın yanı sıra ekonomik yapı ve sorunlar gibi teknik nitelikli diğer faktörlerden farklı olarak meşruiyet kaybı gibi daha köklü etkide bulunması ve sosyal refahı artırmak yerine daha da kötüleştirmesi ahlak sosyal refah ilişkisini somut olarak ortaya koyan çarpıcı bir örneklik oluşturmaktadır.

The Efficacy of South Africa's Broad-based Black Economic Empowerment Policy

The Efficacy of South Africa's Broad-based Black Economic Empowerment Policy

The potential financial impact and influence of black economic empowerment (BEE) on private higher education institutions in South Africa: management alert

Education is considered an important pillar of economic development and a vital factor for nation building in post-1994 South Africa. Higher education (HE) is offered by government-subsidized universities and colleges, while there has been an increase in the number of private higher education institutions (PHEIs), which offer more expensive, unsubsidized tertiary education. While all state bodies and public entities are required to apply the provisions of the Broad-Based Black Economic Empowerment (B-BBEE) Act, this is not (yet) seemingly a requirement for PHEIs. This study used an adapted version of the “5 Star” research methodology to explore the potential financial impact and influence of the African National Congress’s (ANC’s) black economic empowerment (BEE) policy on PHEIs. The research shows that the BEE policy has the potential to financially impact and influence most of the components of the total quality service (TQS) framework for PHEIs in terms of preferential procurement from suppliers, company ownership, appointment of executive, middle and junior managers, employment of academic and administrative staff, and throughput of black student graduates. Management at PHEIs should be alerted to the fact that it is probably not merely a matter of IF, but rather WHEN the policy will start impacting on the financial stability and viability of PHEIs as BEE compliance becomes mandatory.

Black economic empowerment policy in Durban, eThekwini, South Africa: economic justice, economic fraud and ‘leaving money on the table’

ABSTRACTBlack Economic Empowerment (BEE) policy in South Africa is intended to mitigate the economic disadvantage of apartheid and contribute to inclusive growth and development. This article examines perspectives on BEE from economic actors and accreditation agencies in eThekwini between 2012 and 2016. The article finds that BEE policy has contributed to building a political economy of connectivity and concession embedded in localised categorical framings of race, class and gender, where some economic fraud and corruption has taken place. However, BEE has also contributed to growing a black capitalist class which eschews political concession and identifies with market-based economic transformation.

Black economic empowerment policy and state–business relations in South Africa: the case of mining

ABSTRACTThe article analyses contestation of black economic empowerment ownership transfer policies in South Africa’s mining industry. Using case study material from platinum, the article examines the transition between the first Mining Charter of 2004 and the third Mining Charter of 2018. It argues that the inherent fragilities of this financialised redistribution mechanism have generated poor redistributive outcomes and achieved limited progress in the formation of a black capitalist class aligning political and economic power. This has contributed to increased factional and ideological contestation over the pace and method of economic transformation, and a deterioration in relations between the state and big business in mining.

Macro-environments of South Africa: time to stop the rot, deterioration, distrust and dysfunctionality

Since the introduction of black economic empowerment (BEE) in South Africa by the African National Congress (ANC) in 2003, the impact of the legislation and its accompanying policies on the six major “PESTIS” (political, economic, social, technological, institutional and structural-physical) macro-environments in which businesses in the private sector and government in the public sector operate, has largely gone unnoticed or has been ignored. In an exploratory study using the “5 Star” research methodology, and with the aid of specially developed qualitative research adjudication matrix (QRAM), the impact of the ANC’s BEE policies on these macro-environments was investigated. Unfortunately, it appears that these policies have negatively affected South Africa’s political, economic, social/cultural and institutional macro-environments. Allegations of state capture and nefarious influences on government and ministerial appointments, poor economic performance and possible further credit downgrade to “junk” status by the international ratings agencies, increased prevalence of racism, hate speech and discrimination, and violation of the Constitution of South Africa and international treaties by the ANC government, paint a dismal picture. In addition, the coun¬try is facing unseen high levels of corruption, graft, fraud, looting, bribery, nepotism and self-enrichment in government, state-owned enterprises (SOEs) and businesses. BEE can be regarded as the ANC’s “Achilles heel” in South Africa, and the political party should rather abandon this policy in order to stop the rot, and further deterioration, distrust and decay in the country’s most important macro-environments.

Power and Accumulation Coal Mining, Water and Regulatory Failure

Coal mining companies in South Africa have evaded transformative water licencing laws. This article examines how and why South Africa’s coal mining water regulatory systems have failed. In light of BEE (Black Economic Empowerment) policies it scrutinises contradictory state imperatives of black class formation versus the protection of water resources in a water scarce country. A case study of the maize farming area of Delmas in Mpumalanga province found that all coal mines transgress water laws through formal and ‘grey zone’ systems which legalise the illegal. This has consequences for water quality, agriculture and food security. This is compounded by the state’s weak enforcement in which the department responsible for issuing licences dominates a crumbling cooperative governance regime. Farmers resist mining but their rights are trumped by the elevation of mining over the environment. The article contributes to international commentary on coal mining’s impacts and regulation by demonstrating the importance of analysing underlying socio/political issues which engender environmental destruction. Unless this context is unpicked it will not be possible to understand why harmful environmental practices persist, or to advocate for change and make interventions to prevent the destruction of natural resources.

Business Impact of the Black Economic Empowerment in South Africa: A Critical Review of Four Case Studies

The majority blacks in South Africa were systematically excluded from meaningful participation in the economic life of the country during the apartheid era from 1948 to 1994. More specifically, the blacks were deprived of ownership in industrial firms and denied responsible positions in the private as well as the public sectors. To address this injustice, the South African government introduced the policy of Black Economic Empowerment (BEE) in the aftermath of the collapse of the apartheid regime in 1994. This paper investigates the impact of the BEE policy on the businesses in South Africa by reviewing four case studies. The companies covered in three of the four case studies and 500 managers surveyed in the fourth reported different challenges in implementing BEE while at the same a number of commonalities were also found. This paper concludes with a discussion of the challenges and commonalities in implementing BEE in South Africa.

Black economic empowerment in post-1994 South Africa: ANC curse and/or socialist/communist covenant?

After more than 21 years under the leadership of the African National Congress (ANC), post-1994 South Africa finds itself yet again embroiled in race-related politics. Government policies such as black economic empowerment (BEE) and employment equity (EE) have not brought about the economic growth, social development and political democracy that the late former President Nelson Mandela had envisaged and what the ANC had promised to all the people of South Africa. South Africa is currently disengaging itself from the West including the Unites States of America (USA) and certain European Union (EU) countries and appears to rather embrace and align itself with countries such as Russia and China that pursue socialist and communist ideologies. Both these two issues may have a profound impact on how businesses will be managed in the future. In an exploratory, qualitative study using a “5 Star” research methodology, the direct and indirect impacts of BEE policies were investigated and the possible movement in South Africa’s ideological stance was explored. BEE does not appear to have helped to bring about high economic growth to help to reduce unemployment and eradicate the high levels of poverty and inequality, and government graft and corruption have increased at all levels of government, including local municipalities. BEE appears to have become the ANC’s curse to economic, social and political progress and should be scrapped. A national debate should follow on whether the ANC’s current covenant with pro-socialism and pro-communism rather than Western free-market capitalism is the appropriate ideology for South Africa to pursue. Keywords: black economic empowerment (BEE), employment equity (EE), African National Congress (ANC), capitalism, socialism, communism. JEL Classification: M14, M21

Distance Makes the (Committed) Heart Grow Colder: MNEs’ Responses to the State Logic in African Variants of CSR

The question of how multinational enterprises (MNEs) respond to local corporate social responsibility (CSR) expectations remains salient, also in the context of many African governments’ attempts to define and regulate business responsibilities. What determines whether MNEs respond to such local, state-driven expectations as congruent with their global commitment to CSR? Adopting an institutional logics perspective, we argue that a higher global CSR commitment will lead to higher local responsiveness when regulatory distance is low, but it will lead to lower local responsiveness when regulatory distance is high. We find support for our hypothesis using data on 93 MNEs’ responses to the South African state’s Broad-Based Black Economic Empowerment policy. We thus contribute to the global–local CSR literature and show how MNEs’ local CSR responsiveness will be shaped by not only the local context but also their home country and firm-internal environments.

The performance of the Broad Based Black Economic Empowerment compliant listed property firms in South Africa

Purpose– The purpose of this paper is to examine the impact of Broad-Based Black Economic Empowerment (BBBEE) on the risk and returns of listed and delisted property firms on the Johannesburg Stock Exchange (JSE). The study was investigated to understand the impact of Black Economic Empowerment (BEE) property sector charter and effect of government intervention on property listed markets.Design/methodology/approach– The study examines the performance trends of the listed and delisted property firms on the JSE from January 2006 to January 2012. The data were obtained from McGregor BFA database to compute the risk and return measures of the listed and delisted property firms. The study employs a capital asset pricing model (CAPM) to derive the alpha (outperformance) and beta (risk) to examine the trend amongst the BEE and non-BEE firms, Sharpe ratio was also employed as a measurement of performance. A comparative study is employed to analyse the risks and returns between listed property firms that are BEE compliant and BEE non-compliant.Findings– Results show that there exists differences in returns and risk between BEE-compliant firms and non-BEE-compliant firms. The study shows that BEE-compliant firms have higher returns than non-BEE firms and are less risky than non-BEE firms. By establishing this relationship, this possibly affects the investor’s decision to invest in BEE firms rather than non-BBBEE firms. This study can also assist the government in strategically adjusting the policy.Research limitations/implications– This study employs a CAPM which is a single-factor model. Further study could employ a multi-factor model.Practical implications– The results of this investigation, with the effects of BEE on returns, using annualized returns, the Sharpe ratio and alpha (outperformance), results show that BEE firms perform better than non-BEE firms. These results pose several implications for investors particularly when structuring their portfolios, further study would need to examine the role of BEE on stock returns in line with other factors that affect stock returns. The results in this study have several implications for government agencies, there may be the need to monitor the effect of the BEE policies on firm returns and re-calibrate policies accordingly.Originality/value– This study investigates the performance of listed property firms on the JSE which are BEE compliant. This is the first study to investigate listed property firms which are BEE compliant.

Trade unions, the state and ‘casino capitalism’ in South Africa's clothing industry

Relationships between trade unions, the state and capital in South Africa have changed dramatically, especially in the clothing sector. The clothing workers’ union became heavily dependent on its political alliances with the governing party, not only for the regulation of wages and industrial policies, but also for Black Economic Empowerment policies that helped it to acquire massive shareholdings, including in the largest clothing manufacturer. In terms of both its exposure to capitalist risk and its investments in the casino industry specifically, the union acquired a stake in ‘casino capitalism’, whilst relying on government to stack the odds in its favour.