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Broad-Based Black Economic Empowerment Codes of Good Practice

Category: Policy/Strategy
Binomial Name: Government of the Republic of South Africa
Date: 9 February 2007
Sub Category:Policy/Strategy (South Africa)
Location:Republic of South Africa
Legal Status: The Codes of Good Practice on Broad-Based Black Economic Empowerment became law on 9 February 2007.
Alternative Names:
  • Codes of Good Practice on Broad-Based Black Economic Empowerment
  • Subject Matter:Economic Development
    URL: http://www.thedti.gov.za/bee/beemaincodes.htm
    Summary Information:
    The Broad-Based Black Economic Empowerment Codes of Good Practice ('the Codes') were issued on 9 February 2007 under the Broad-Based Black Economic Empowerment Act, 2003 (South Africa). According to the Department of Trade and Industry's Interpretive Guide to the Codes of Good Practice, the Codes are intended to 'provide a standard framework for the measurement of broad-based Black Economic Empowerment (BEE) across all sectors of the [South African] economy' (8).
    Detailed Information:
    Background to the Codes

    The Codes were issued under s 9(1) of the Broad-Based Black Economic Empowerment Act, 2003 (South Africa) ('the BEE Act'), which was enacted on 7 January 2004 amidst growing awareness of the limitations of South Africa's former narrow-based black economic empowerment policy. Broad-based black economic empowerment ('BEE')was intended to provide 'a more inclusive approach to empowerment' that would 'begin to narrow the divide between the first and second economies by putting mechanisms in place to accelerate the entry of black people into the first economy' (Department of Trade and Industry, Interpretive Guide to the Codes of Good Practice, 8). In other words, it was designed to 'ensure that empowerment benefits not only the black elite but also women, workers, the youth, people with disabilities and the rural poor' (SouthAfrica.info).

    The BEE Act seeks to achieve these goals by measuring a company or organisation's broad-based BEE, and then requiring public entities to take its BEE status into account when making certain decisions. These decisions include determining qualification criteria for the issue of licenses, concessions or other authorisations, as well as developing preferential procurement policies and criteria for selling state-owned enterprises and entering into partnerships with the private sector (BEE Act, s 10). When seeking to do business with government organs and enterprises, companies must therefore present their BEE credentials to be assessed on certain criteria that are set out in the Codes of Good Practice.

    Objects of the Codes

    As mentioned previously, the Codes constitute an implementation framework that complements the BEE Act by providing certain comprehensive criteria for the presentation of BEE credentials by different entities (Department of Trade and Industry, Interpretive Guide to the Codes of Good Practice, 8-9). In doing so, the Codes seek to ensure 'that no industry will be disadvantaged over another when presenting their BEE credentials' (Department of Trade and Industry, Background to, Intention and Application of the Codes of Good Practice, 5).

    More specifically, the Codes seek to promote the objectives of the BEE Act itself. For these objectives, which are listed in s 2 of the Act, please refer to the ATNS Database entry on the BEE Act, for which a link has been provided below.

    Measuring BEE under the Codes

    To measure the BEE of a particular enterprise, the Codes use a scorecard that comprises, among other things, the following criteria:

  • The effective ownership of enterprises by black people;

  • The effective control of enterprises by black people;

  • Initiatives used to achieve equality in the workplace;

  • Extent to which employers carry out initiatives designed to develop the competencies of black people;

  • Extent to which enterprises buy goods and services from BEE-compliant suppliers;

  • Extent to which enterprises carry out initiatives aimed at contributing to socio-economic and enterprise development; and

  • Extent to which enterprises carry out initiatives aimed at contributing to socio-economic development and promoting access to the economy for black people.


  • There is also a separate, narrower scorecard for Qualifying Small Enterprises, which must only comply with four out of the ordinary seven elements on the broader BEE scorecard (Department of Trade and Industry, Background to, Intention and Application of the Codes of Good Practice, 7).

    Industry Transformation Charters

    In the lead-up to the passing of the BEE Act, many of South Africa's industries drew up charters containing undertakings of commitment to transformation towards BEE, as well as BEE scorecards for industry members. These charters must comply with the Codes of Good Practice if they are to be passed into law (SouthAfrica.info). This is to prevent stringent industry charters from being applied to some entities while more lenient charters are applied to others.
    Outcomes:
    In a media release dated 6 April 2010, South Africa's Minister of Trade and Industry Dr Rob Davies stated that according to research conducted in 2008-2009, over 75% of private enterprises were in fact not complying with the BEE Codes of Good Practice. Hence according to Dr Davies, 'the overall impact of BEE remains modest' given that, for example, less than 5% of the Johannesburg Stock Exchange is currently owned by black people.

    In an interview with Stephanie Nieuwoudt, Moeletsi Mbeki, the brother of former South African president Thabo Mbeki, also suggested that the government's BEE policy has not been a success. Mr Mbeki argues that BEE undermines the emergence of black enterpreneurship by creating a small elite class of current and former black ANC politicians (Nieuwoudt, 2009). This view, however, is rejected by Black Management Forum president Jimmy Manyi, who believes that Mr Mbeki's view is an 'outdated understanding of BEE and limited to [its] ownership aspect' (Thomaz, 2009). Mr Manyi has argued that the BEE framework is a 'useful' one, but that in order to be implemented successfully, it must be accompanied by a change of mindset and the elimination of racist stereotypes that equate black people with 'incompetence' (Thomaz, 2009).

    Related Entries

    Agreement
  • Sasol Inzalo Black Economic Empowerment ('BEE') Transaction
  • Organisation
  • Black Economic Empowerment Advisory Council
  • Legislation
  • Broad-Based Black Economic Empowerment Act, 2003 (South Africa)
  • Policy/Strategy
  • Wine-BEE Industry Transformation Charter and Scorecard
  • Tourism BEE Industry Transformation Charter and Scorecard
  • Construction Sector Broad-Based Black Economic Empowerment Charter
  • Draft Black Economic Empowerment Charter for the Information and Communication Technology (ICT) Sector
  • Broad-Based Black Economic Empowerment Transformation Charter for Agriculture

  • References

    General Reference
    South African Government (7 January 2004) Broad-Based Black Economic Empowerment Act, 2003
    Article
    Stephanie Nieuwoudt (26 August 2009) 'South Africa's Black Economic Empowerment Has Failed'
    Carla Thomaz (21 August 2009) Concerted Mindset Change Stimulus for Success of BEE
    Chris Bathembu (18 February 2011) Zuma Calls for Inclusive Economy
    Media Release
    Department of Trade and Industry (South Africa) (6 April 2010) Minister Davies Says BEE Compliance is Low
    Resource
    Department of Trade and Industry (South Africa) (2007) Interpretive Guide to the Codes of Good Practice
    Department of Trade and Industry (South Africa) (2007) Background to, Intention and Application of the Codes of Good Practice
    SouthAfrica.info Black Economic Empowerment: Codes for Better BEE

    Documents

    Document
    Broad-Based Black Economic Empowerment Codes of Good Practice - Part 1 - ( PDF)
    Broad-Based Black Economic Empowerment Codes of Good Practice - Part 2 - ( PDF)
    Broad-Based Black Economic Empowerment Codes of Good Practice - Part 3 - ( PDF)
    Broad-Based Black Economic Empowerment Codes of Good Practice - Part 4 - ( PDF)
    Broad-Based Black Economic Empowerment Act, 2003 - ( PDF)

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