BBBEE is an opportunity to incubate some "wild ducks" that your business needs
Updated: Dec 7, 2020
Worlds apart. That is how until fairly recently, one would have described the space between “the world mediated by supply and demand and competitiveness” and “the world driven by provision of social goods, public institutions and doing no harm.”
The divide between the two worlds has been falling, mainly caused by changing reality and perceptions as well as a need and drive to forge new partnerships to find solutions to improve or reduce harm on; 1) People, 2) Planet; 3) Prosperity and; 4) Peace. In broad terms, efforts to do good or no harm are initiated by two forces; 1) public policy in the form of laws and incentives to either regulate behavior or incentivize private players to solve market failures and; 2) private solutions in the form of “moral codes” and “social sanctions.”
Typical examples of the latter include United Nation’s Seventeen (17) Sustainable Development Goals as well as the UN’s Principles of Responsible Investing (PRI) at a multilateral level. This also includes current trends by private companies around; a) doing good or good corporate citizenship; b) Sustainability; c) license to trade; d) reputation and lately; e) the integration of doing good with company performance. Larry Fink, chairman and chief executive officer of BlackRock’s letter to CEO’s would also belong to this mold.
In South Africa as well, the divide between the two worlds has been falling, mainly motivated by the need to forge new partnerships to address “non-market” challenges such as unemployment, poverty, general people well-being and prosperity of South Africans in general as well as “market distortions” in product, labour and capital markets along racial lines.
Examples of the above include the following; 1) t is estimated that 49%+ of people aged 18+ in South Africa live below upper bound poverty line of R1183 per month; 2) Statistics South Africa’s Quarterly Labor Force Survey Q3 2020 indicates that 30.8% of economically active people are unemployed. 89% of these unemployed persons are black, 6.8% coloured, 1.6% Indian and 2.5% white. Lastly, it is estimated that black people only have equity holding of 3% on the local bourse, the JSE and also that white people represent 70% and 60% of top and senior management positions, whilst blacks represent 13% and 21% respectively.
In the commercial world, the BBBEE Act number 53 of 2003 as amended, is an example of a public policy instrument seeks to address some of the “non-market” challenges and “market distortions” mentioned above. It does this by placing BBBEE scorecard elements, but more priority elements; 1) skills development, 2) enterprise and supplier development and; 3) broadening and diversifying ownership of private businesses in South Africa on the strategic and operational agenda of operating entities.
Looking at BBBEE as an investment and putting it on your strategic and operational agenda is the right thing to do. Firstly, at a basic level, it helps your entity to comply with the law. Secondly, it gives your business social legitimacy or the social license to trade. Thirdly, beyond compliance, BBBEE could be a leverage point to boost your competitiveness (lower cost or source of differentiation). In addition to this, BBBEE, especially enterprise and supplier development could be an opportunity for South African businesses, to develop a Microsoft equivalent, the same way that IBM did when they gave Microsoft contract of $430K back in 1980. Lastly, by investing in skills development, you could be developing another set of “wild ducks” that Thomas Watson Jr referred to that may reward your business with creativity and innovation.
1. BlackRock. (2020). Larry Fink’s Letter to CEOs | BlackRock. [online] Available at: https://www.blackrock.com/corporate/investor-relations/larry-fink-ceo-letter [Accessed 1 Dec. 2020].
2. Africa, S.S. (n.d.). 29 September Quarterly Labour Force Survey (QLFS) – Q2:2020 | Statistics South Africa. [online] Available at: http://www.statssa.gov.za/?p=13652 [Accessed 1 Dec. 2020].
3. B-BBEE Commission | Department of Trade & Industry. (2016). Strategic Plan. [online] Available at: https://www.bbbeecommission.co.za/strategic-plan/ [Accessed 1 Dec. 2020].
4. B-BBEE COMMISSION NATIONAL STATUS AND TRENDS ON BROAD -BASED BLACK ECONOMIC EMPOWERMENT. (2020). [online] Available at: https://www.bbbeecommission.co.za/wp-content/uploads/2020/07/National-Status-and-Trends-on-Broad-Based-Black-Economic-Empowerment_.pdf.
5. Harvard Business Review. (2015). Creating Shared Value. [online] Available at: https://hbr.org/2011/01/the-big-idea-creating-shared-value.
6. Hbs.edu. (2015). Creating Shared Value - Institute For Strategy And Competitiveness - Harvard Business School. [online] Available at: https://www.isc.hbs.edu/creating-shared-value/Pages/default.aspx.
7. United Nations (2015). The 17 Goals. [online] sdgs.un.org. Available at: https://sdgs.un.org/goals.