EU Investors’ Responses to Broad-Based Black Economic Empowerment: A Skills Enhancement Model

Summary of Research Report

Disclaimer: This report was commissioned by the EU-funded EU-SA Partners for Growth Project in South Africa.  The findings represent the views of the authors and do not necessarily reflect the position of the EU Delegation.

An independent study was commissioned to better understand the experiences of EU companies with B-BBEE in South Africa.  Participants in the study represented a sample of EU investors of diverse profiles, ranging from medium-sized enterprises to large multi-nationals, and extending across various industry sectors from manufacturing to services.

The findings from the interviews were as follows:

  • Respondents displayed a sound awareness of the imperatives of B-BBEE and were generally supportive. Moreover, the effects of B-BBEE implementation are far-reaching; B-BBEE compliance was not perceived as an administrative exercise.
  • Compliance with B-BBEE is resource intensive, usually requiring the use of external consultants. Moreover, B-BBEE implementation requires constant attention with ongoing monitoring and evaluation at all levels of business decision making.
  • Implementing B-BBEE includes “too many ambiguous and often-changing rules”; and keeping up-to-date and compliant with B-BBEE distracts companies from their core business.
  • The greatest challenge for EU companies relates to Ownership. Whilst local managers appreciate the importance of B-BBEE, external business owners (especially family owned-businesses) are often unwilling to sell shares simply to operate within South Africa.
  • All of the companies interviewed make a significant commitment to Skills Development. Many of these skills initiatives extend beyond the framework of their B-BBEE commitments and often ‘exceed’ the points that can be awarded on their B-BBEE scorecards, thus going ‘unrecognized’ from a B-BBEE perspective.
  • The Equity Equivalent Programmes (EEP’s) and the Youth Employment Service (Y.E.S) Initiative are not perceived to be effective. EEP’s processes are generally viewed as being complex and costly, even for large businesses. Companies found it difficult to comply with the Y.E.S Initiative, either because they had not achieved the required BEE status, or because they did not have the capacity to expand their existing workforce.

Overall, it would appear that EU companies have generally gone beyond what is required in terms of the Skills Element of the B-BBEE scorecard, offering extensive skills development programmes, often in specialised areas of study.  These skills initiatives add significant value to their workforces as well as to the industries in which they operate; but they are not always acknowledged. On the other hand, small foreign companies find it difficult to meet the ownership criteria set out in the current B-BBEE framework.

Based on desktop research, the findings from the interviews with EU investors, and lessons from other jurisdictions, the study therefore proposes a Skills Enhancement Model for B-BBEE.   The main purpose of the proposed enhancements would be to create a more flexible Ownership Element through the conditional relaxation of the Black South African Shareholding criteria for foreign-owned businesses.  This would involve increasing the weighting points and related targets of the Skills Development Element; adjusting the Skills Development Element to include bonus points for structured coaching and mentoring programmes and / or business incubator programmes; and providing greater recognition in the Skills Development Element for technical skills training and international training offerings.

The results of the research paper were presented during the B-BBEE and Skills Develoment in South Africa media exchange webinar (11/05/2020).