I have followed with considerable interest the debate that has been raging around the Broad-based BEE

in recent weeks. There are media reports that see the debates as a challenge to President Mbekis empowerment model. It is important to outline the practical implications of the Broad-based BEE strategy and explore the critical issues raised from these debates. The current BEE strategy espoused by government aims to accelerate the integration of black people into the mainstream economy through getting black people operationally involved in the ownership and management of the assets within that economy. The strategy outlines three key areas of BEE: direct empowerment through ownership and control of enterprises and assets; human resource development through employment equity and skills development and indirect empowerment through preferential procurement and enterprise development. Furthermore for this process to be accelerated a broad-based approach has to be adopted to ensure that economic and other benefits trickle down to a broader base of beneficiaries. The three types of beneficiaries who will benefit from the BEE process are: Individual equity holders and managers. These include entrepreneurs who drive business with the company, the directors who steer the strategic direction of a company and key senior executives who implement on daily basis the decisions taken by the board of directors. An entitys employees and External stakeholders to the company, such as the companys BEE suppliers, disadvantaged communities, etc. The direct empowerment area benefits the first type of beneficiaries. These individuals take a certain level of risk, and therefore in line with sound economic principles, they expect a reward that would be comparable to the risk taken. The employees of the company gain from the human resources development aspect of the BEE process. This aspect will ensure that there is fairer representation of the black people within companies in South Africa and income equalities across the different population groups in the same skills level. The black employees will also benefit from the skills development initiatives undertaken within the companies. The third type of beneficiary gains from initiatives such as affirmative procurement, enterprise development and social development. Affirmative procurement is the purchasing of goods and services from companies that are run by black people and that contribute meaningfully to the economic empowerment process. This is an effective way of creating market access for black entrepreneurs. Coupled with affirmative procurement is enterprise development which will assist BEE companies with the building of operational and financial capacity. The black communities gain from BEE through social development. These are the intended broad-based beneficiaries by the strategy.

The common issue raised in these debates is the practice of empowering the same black individuals within the ownership component of the BEE scorecard. This is a valid concern however the practice is not advocated by the BEE strategy. In practice it is applied by companies that seek black ownership credentials, who choose the same black individuals and not casting their nets wider in search of other black individuals to partner with. The solution to this is for companies to build meaningful relationships with black individuals who are operational within the industry or in the company to ensure that they will be hand-on involved in the running of the company. This is how one can achieve integration of black people in the mainstream economy. The other major issue debated is that BEE has not led to the creation of new markets and new drivers of domestic demand in the economy yet. I would agree with that statement with a proviso that we have not yet measured the impact of the BEE policy issued in March 2003. In reality the trickle down effect of BEE is being felt in almost all the sectors of the economy through the policy of utilizing certain leverages to accelerate BEE. It may be premature to say the Broad-based policy has failed without any significant measurement of its effect being done one and a half years later since release. The Broad-based BEE strategy is one of the most innovative transformation policies in the world to date because there are no direct penalties applied but rely on commercial leverage to achieve its aims and it inherently ensures a spread of benefits to a broader base of beneficiaries. We need to let the child crawl, walk in starts-and-stops and then run in full speed to achieve its aims. If we cripple the child down before it crawls then we cant blame it for not being able to run to achieve its destiny.