The development of a strategic model for long-term sustainability of black economic empowerment in South Africa

Abstract

Thesis (MBA)--Stellenbosch University, 2005.

ENGLISH ABSTRACT: The Broad-based Black Economic Empowerment (BBBEE) Act, Act 53 of 2003, has
 made it essential that businesses with more than fifty employees become black
 empowered in the shortest possible time frame (2-3 years) which is both practically
 possible and economically feasible. The aim with government's introduction of BBBEE
 is to address inequalities resulting from the systematic exclusion of the majority of South
 Africans from meaningful participation in the economy. With the introduction of the
 BBBEE Code of Good Practice, compliance with the requirements as set out by the
 government was further defined. A balanced scorecard has been introduced by the
 Department of Trade and Industry that assists companies to measure their level of
 integration. Compliance to the legislation has become a necessity for businesses in South
 Africa to be competitive and to grow.
 The balanced scorecard and the ever mounting pressure to be competitive have resulted
 in black economic empowerment (BEE) transactions being more focussed on equity deals
 than on truly empowerment. A hypothesis is that these types of transactions would not be
 sustainable due to the nature of the relationships and seeming lack of strategic processes.
 With the current balanced scorecard, there is also no provision made for the measurement
 of sustainability.
 To be competitive remains the key to any business' strategic objectives. This would
 therefore imply that the BEE transactions should hold a competitive advantage for the
 business and promote the objective of black economic empowerment as a socioeconomic
 process, ultimately contributing to the economic transformation of South
 Africa. It is within this context that the study explored the application of growth
 strategies and the modelling of these strategies to BEE.
 An exploratory and mainly descriptive research study was conducted to determine
 whether a model for sustainable empowerment could be developed using the strategic
 growth strategies as the framework. Each strategy, namely diversification, mergers and acquisition and strategic alliances was evaluated in terms of its contribution to the
 competitive advantage of a company. Using the principles from a strategic growth
 perspective it is believed that a number of concerns for small and medium size businesses
 in South Africa could be addressed. These include amongst others, growing more
 competitively through diversification into the core business, selecting
 partnerships/alliances that match the strategy of the company, avoiding fronting through
 the establishment of strategic alliances based on the improvement of efficiency and
 effectiveness, transferring skills and knowledge through diversification, strengthening
 existing business domain through an alliance that enhances the core strengths of a
 company.
 The recommendation to apply a more strategic model to BEE also resulted in the
 recommendation of a more comprehensive tool to measure the effectiveness and the
 sustainability of the growth strategy. A recommendation is made to apply the balanced
 scorecard and to integrate the strategic objectives of the company with the BEE
 objectives defined by government. The result is a model that reflects the sustainable
 competitive advantage of a business aligned with its vision and mission.
 Both the competitive advantage and sustainability are therefore addressed through the
 model application that would, in all likelihood, also prove to have a direct effect on the
 financial outcome of the business in the future.
 BEE, in its legislative form, is unique to South Africa and is a strategic tool to contribute
 to the economic transformation of South Africa. In a country that is in the process of
 creating a new middle class, this model could have a distinct impact on other developing
 countries in the world and further research on the application of a sustainable BEE model
 to create economic prosperity in the developing society could prove to be of significant
 value.

AFRIKAANSE OPSOMMING: Ingevolge die Algemene Swart Ekonomiese Bemagtigings (BBBEE) Wetgewing, Wet 53
 van 2003, is dit vir sake-ondernemings met meer as vyftig werknemers noodsaaklik om
 swart bemagtiging in die kortste moontlike tydsbestek (2 - 3 jaar) in werking te stel; 'n
 tydsduur wat beide prakties haalbaar en ekonomies uitvoerbaar is. Die meerderheid Suid-
 Afrikaners is van enige betekenisvolle deelname in die ekonomie stelselmatig uitgesluit
 en die regering se oogmerk met die implementering van die BBBEE is om dié
 ongelykheid uit die weg te ruim. Met die invoering van die gedragskode is die vlak van
 inskiklikheid meer breedvoerig gedefinieer. Ter wille van mededingendheid en groei het
 dit vir sake-ondernemings noodsaaklik geword om hierdie betrokke wetgewing te
 ondersteun.
 Die ewewigtige meetinstrument en die voortdurende druk om 'n hoër vlak van
 mededingendheid het tot gevolg dat daar meer gekonsentreer word op gewone
 aandeletransaksies as op ware bemagtiging. 'n Hipotese is dat hierdie tipe transaksies nie
 volhoudbaar sal wees nie weens die aard van die verhoudings en skynbare gebrek aan
 strategiese prosesse. Met die huidige meetinstrument is daar ook geen voorsiening
 gemaak vir die meting van volhoudbaarheid nie.
 Van kardinale belang vir enige sake-onderneming is om mededingend handel te dryf. Dit
 veronderstel dat die BEE-transaksies behoort 'n mededingende voordeel vir die sakewêreld
 te ondervang en die doelwitte van swart bemagtiging as 'n sosio-ekonomiese
 proses te bevorder. Hierdie benadering sal mettertyd 'n wesenlike bydrae lewer tot die
 transformasie van Suid-Afrika. Dit is binne hierdie verband wat hierdie studie die
 toepassing van groei-strategieë nagevors het en voorts die uitvoering van hierdie
 strategieë vir BEE toe te pas.
 'n Ondersoekende- en hoofsaaklik beskrywende navorsingstudie is onderneem om te
 bepaal watter model vir standhoudende bemagtiging ontwikkel kan word met gebruik van
 die strategiese groeistrategieë as raamwerk. Elke strategie, dit wil sê diversifisering, samesmeltings en strategiese alliansies en venootskappe, is in terme van hulle bydrae tot
 die mededingende voordeel van die maatskappy, beoordeel.
 Met die toepassing vanuit 'n strategiese groei-perspektief, is die skrywer van mening dat
 verskeie besorgdhede oor BEE vir klein- en medium sake-ondernemings in Suid-Afrika
 aangespreek kan word. Dit sluit onder andere in, om mededingendheid te ontwikkel deur
 diversifikasie in die sake kern, selektering van vennootskappe/ alliansies wat ooreenstem
 met die strategie van die maatskappy. Ook deur frontering te verhoed deur die vestiging
 van strategiese samewerking, gegrond op verbeterde doeltreffendheid en doelmatigheid.
 Voorts deur kennis en vaardigheid oor te dra deur diversifikasie, versterking van die
 bestaande sakedomein deur samewerking, wat die inherente krag van die maatskappy
 ondervang.
 Die aanbeveling om 'n meer betekenisvolle model vir BEE toe te pas het gelei tot 'n
 aanbeveling vir 'n meer toepaslike instrument om die doelmatigheid en standhoudenheid
 van die groeistrategie te meet. Ook word aanbeveel dat die ewewigtige meetinstrument
 toegepas word en die strategiese doelwitte van die maatskappy te integreer met die BEE
 doelwitte, soos deur die regering gedefinieer. Die uitkoms is 'n model wat die volhoubare
 mededingende voordeel van 'n sake-onderneming, gerig op sy visie en missie,
 weerspieël.
 Beide die mededingende voordeel en volhoubaarheid word dus aangespreek deur die
 toepassing van die model, wat in alle waarskynlikheid ook sal bewys dat dit 'n direkte
 invloed op die toekomstige finansiële uitkoms van die sake-onderneming sal uitoefen.
 BEE, in sy wetgewende formaat, is eie aan Suid-Afrika en is 'n strategiese instrument
 wat bydra tot die ekonomiese transformasie van Suid-Afrika. In 'n land wat in die proses
 is van die skepping van 'n nuwe middelklas, kan hierdie model 'n besliste uitwerking hê
 op ander ontwikkelende lande in die wêreld. Verdere navorsing in die toepassing van 'n
 volhoudbare BEE-model om ekonomiese vooruitgang in die ontwikkelende samelewing
 te bewerkstellig kan heel waarskynlik 'n betekenisvolle bydrae lewer.