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9 THE BBBEE STATUS IN SOUTH AFRICA

9.1 SELF REPORTED STATUS OF BBBEE PROGRESS

At the onset of the interview respondents were asked what their current status with regard to BBBEE was.

The following question was posed to respondents:

A.1 Which one of the following best describe your company's current status with regard to Broad

Based Black Economic Empowerment - BBBEE (Please select the most appropriate description of your

status)

Figure 2 – REPORTED BBBEEE STATUS

38.9%

9.9%

20.3%

19.7%

11.2%

No plan or progress

Planned, not approved

Approved, not fully implemented

Fully implemented

Not disclosed

It is clear from this response that the majority of organisations are not far down the road to implement

BBBEE (only 19.7% declared that BBBEE reported fully implemented). A worrying 38.9% said that they

have “No plan or progress” and might be due to the fact that the study was conducted so close to the

publishing of the Codes. It is somewhat encouraging to note that 30.2% of the respondents have at least a

BBBEE plan albeit it might not be fully implemented.

Further analysis of this result indicated that the biggest problem lie with the small and medium

enterprises where 72.7% and 71.5% respectively indicated either “No plan”, “Planned” or “In process of

implementation” (compared to the 41.8% for large organisations). Only 16.7% of small enterprises

reported that BBBEE was “Fully implemented”. Medium and large organisations were on practically the

same level with 26.3% and 21.1% respectively reporting to have “Fully implemented” BBBEE. The

“missing” percentages was due to refusals to answer the questions and could be constituted to mean no

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progress and if so, would bring large organisations somewhat in line with their smaller counterparts as

37.1% of large organisations refused to disclose this information.

9.2 EXISTENCE OF A FORMAL BBBEE SCORECARD, THE SOURCE THEREOF AND THE LEVEL OF

COMPLIANCE

Of those respondents that confirmed that their BBBEE plan is fully implemented, 63.5% said that they “Do

not have a formal BBBEE scorecard”. The 24.7% (11.8% refused to answer the question) that did confirm

that they have a “Formal BBBEE scorecard” declared that they adhere to the following compliance levels

and indicates a fairly even spread with 40.7% falling between Levels 1 and 4 and 42.3% below Level 5.

Figure 3 – SELF REPORTED LEVEL OF BBBEE COMPLIANCE

9.5%

9.8%

9.5%

11.8%

10.9%

9.3%

9.1%

7.5%

5.5%

17.0%

Level One

Level Two

Level Three

Level Four

Level Five

Level Six

Level Seven

Level Eight

Non-compliant

Not disclosed

On inquiry about the source of the scorecard, 8.4% said it was as a result of their own calculation, 14.4%

said the source was a verification agency and 11.8% was unsure about the source of the scorecard. It is

significant to realise that 63.5% of companies interviewed reported having “No Scorecard” yet.

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9.3 CALCULATED NATIONAL SCORECARD

Based on information provided by respondents and through the analysis of the published data, the first

ever Baseline scorecard for South African companies was calculated as follows.

TABLE 1 – NATIONAL SCORECARD

SCORECARD ELEMENT WEIGHTING TARGETS SCORE

ELEMENT 1 - OWNERSHIP 20 25% + 1 12.06

ELEMENT 2 - MANAGEMENT CONTROL 10 40% to 50% 3.24

ELEMENT 3 - EMPLOYMENT EQUITY 15 43% to 80% 5.50

ELEMENT 4 - SKILLS DEVELOPMENT 15 3% of payroll 6.57

ELEMENT 5 - PREFERENTIAL PROCUREMENT 20 70% 3.34

ELEMENT 6 - ENTERPRISE DEVELOPMENT 150.375% of

Turnover1.83

ELEMENT 7 - SOCIO-ECONOMIC DEVELOPMENT 50.125% of

Turnover1.35

Total BBBEE Points 100 33.89

As can be seen fro the above the most progress is made with regard to Element 1 – Ownership, where

organisations on a national basis has managed to accrue 60.3% of the weighted target of 25.1% black

ownership (equivalent to 15.13% Black ownership) for this element. This is followed by Element 4 – Skills

Development with a 43.8% accrual of the weighted target (3% of payroll). The element most lagging

behind is Element 6 – Enterprise Development with a 12.2% accrual to the weighted target.

The calculated BBBEE Baseline score for South African Companies in July 2007 thus stands at 33.89

points which is equivalent to a Level 8 Compliance or 10% BBBEE recognition according to the official

BBBEE Scorecard published by the DTI in February 2007.

60.3%

32.4%

36.7%

43.8%

16.7%

12.2%

27.0%

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FIGURE 4 – BBBE SCORECARD FOR DIFFERENT SIZE COMPANIES

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Large 60.5% 32.2% 35.0% 45.5% 27.4% 12.6% 30.4%

Medium 76.3% 36.5% 33.8% 48.7% 19.0% 18.9% 43.8%

Small 58.9% 31.8% 32.5% 37.1% 11.6% 8.2% 17.2%

1 -

OWNERSHIP

2 -

MANAGEMENT

CONTROL

3 -

EMPLOYMENT

EQUITY

4 - SKILLS

DEVELOPMENT

5 -

PREFERENTIAL

PROCUREMENT

6 -

ENTERPRISE

DEVELOPMENT

7 - SOCIO-

ECONOMIC

DEVELOPMENT

Medium organisations showed the best performance with a Level 7 compliance (BBBEE Score = 40.98)

This “low” overall score might be due to the following aspects:

Small enterprises make up the largest percentage the South African economy (67% of all registered

organisations) and they have difficulty in implementing the Codes on levels associated with ownership,

management control and employment equity due to:

o Ownership consisting of one/two owners (usually family members) hence limited opportunity for

another person.

o Flat structures (owners and workers) thus leaving little room to implement another level for the

purpose of management control and employment equity on a management level. One might find a

number of black people on levels currently not counting in the Scorecard.

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o No real profit to “spend” on “Socio-economic development” and “Enterprise development” and

furthermore smaller organisations are often located in remote areas where the opportunities for

such initiatives (and Preferential Procurement as well) do not present themselves.

o The one aspect that smaller companies can really focus on is Element 4 – Skills Development and

hence the good score and progress in this field.

o The complexity of the Codes if measured against the general level of education of such business

owners.

9.4 BBBEE PROGRESS

From the calculated scorecards it is possible to categorize responding companies into one of the following

progress classifications:

Percentage of Target

No Compliance 0% compliance

Low Compliance More than 0%, but less than 50% compliance

Moderate Compliance 50% and more, but less than 80% compliance

Good Compliance 80% and more, but less than 100% compliance

Excellent Compliance 100% and more compliance

In the following paragraphs the progress in BBBEE is shown according to the percentage of companies

classified into the progress classifications shown above.

Unpacking the components of the Elements led to the following observations:

9.4.1 Element 1 – Ownership

o Good progress is made in the field of economic interest, but may be hampered by the following

known view about the so-called “small group of black elite”:

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(Source: CEO Magazine, vol 5 no 10, 2006, p. 92)

o Exceptional progress is made in involving black new entrants but the benefit of this is negated by

low “Voting Rights” scores.

FIGURE 5 – ELEMENT 1 – OVERALL OWNERSHIP COMPLIANCE

17.9%

0.7%

1.4%

5.2%

74.8%

Excellent Compliance

Good Compliance

Moderate Compliance

Low Compliance

No Compliance

9.4.2 Element 2 – Management Control

o With regard to this element one finds good progress with regard to black board members and to a

degree supports the first bullet under Element 1- Ownership above.

o Apart from some progress with regard to non-executive board members, the overall progress with

regard to management control is disappointing.

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FIGURE 6 – ELEMENT 2 – MANAGEMENT CONTROL COMPLIANCE

8.5%

1.0%

3.6%

6.4%

80.5%

Excellent Compliance

Good Compliance

Moderate Compliance

Low Compliance

No Compliance

9.4.3 Element 3 – Employment Equity

o Only 38% of the black management target of 58% (as adjusted and motivated above under Point 3 –

Constraints of the Study) has been reached and is equally disappointing.

o This aspect might coincide with 50.2% of the respondents claiming to have difficulty in finding

suitable employees

FIGURE 7 – ELEMENT 3 – OVERALL EMPLOYMENT EQUITY COMPLIANCE

11.6%

5.0%

4.3%

18.9%

60.3%

Excellent Compliance

Good Compliance

Moderate Compliance

Low Compliance

No Compliance

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9.4.4 Element 4 – Skills Development

o This is clearly the element where the most progress is shown and mostly likely due to the

economic incentive around this aspect and is supported by the 60.1% claim of respondents to have

a skills development plan and 52.3% saying they are familiar with accredited learning.

o Further enhancement of this element should come through the Seta’s and involvement here is

quite low with only 37.3% claiming affiliation to a SETA. This should have been higher if SETA

involvement could be promoted.

FIGURE 8 – ELEMENT 4 – OVERALL SKILLS DEVELOPMENT COMPLIANCE

11.8%

0.8%

1.2%

3.5%

82.8%

Excellent Compliance

Good Compliance

Moderate Compliance

Low Compliance

No Compliance

9.4.5 Element 5 – Preferential Procurement

o Another disappointing element with only procurement spent on QSE’s and EME’s showing some

progress with a reported compliance of 37% of the target of 10%.

o Slow progress in this regard might be due to perception of non-availability of such enterprises to

support (see “chicken-egg” perception as perceived constraint to progress), the fact that the

existence of such organisations are not known or the notion of bad quality delivered by such

organisations.

o “The low levels of initial capital endowment of the black business community” was earmarked by

the respondents as the sixth highest constraint in the progress of BBBEE and supports the

deduction made above. The index score for this statement was 62.7 with 63.2%% of the

respondents agreeing with the statement

o One of the major constraints to progress in this field (the fifth highest constraint identified) was

also identified as being the “slow progress made by suppliers to become compliant thus impacting

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on the purchasing organization’s own compliance” (the index score for this aspect was 63.4 with

61.3%% of the respondents agreeing that this was a constraint to the progress of BBBEE). This was

also the statement with which the lowest percentage of respondents disagreed, i.e. 5.8% of the

respondents totally disagreed that this was a constraint and can thus be viewed as an important

factor that requires attention.

FIGURE 9 –ELEMENT 5 – OVERALL PREFERENTIAL PROCUREMENT COMPLIANCE

6.7%

1.5%

2.0%

4.4%

85.4%

Excellent Compliance

Good Compliance

Moderate Compliance

Low Compliance

No Compliance

9.4.6 Elements 6 and 7 – Enterprise and Socio-economic Development

o Very low progress reported on both these elements and this might be due to the fact that

organisations are unaware that they do in fact comply with this or support such initiatives.

o The mere fact that Socio-economic development showed a bit more progress than Enterprise

Development supports this deduction – it is easier to do and measure and the opportunities for this

are more abundant.

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FIGURE 10 – ELEMENT 6 – OVERALL ENTERPRISE DEVELOPMENT COMPLIANCE

6.7%

1.5%

2.0%

4.4%

85.4%

Excellent Compliance

Good Compliance

Moderate Compliance

Low Compliance

No Compliance

FIGURE 11 – ELEMENT 7 – OVERALL SOCIO-ECONOMIC DEVELOPMENT COMPLIANCE

6.2%

1.4%

0.1%

11.3%

81.0%

Excellent Compliance

Good Compliance

Moderate Compliance

Low Compliance

No Compliance