The impact of broad-based black economic empowerment (BBBEE) on small enterprises

Abstract

Since 1994 the South African Government introduced legislation to provide new economic opportunities to all people in South Africa, particularly those who were previously disadvantaged. In 2004 the Broad-Based Economic Empowerment Act (53/2003) was promulgated, which led to some robust debates in different sections of the population. The purpose of this Act is to substantially increase the number of black people having ownership and control in enterprises and especially in the priority sectors identified by the Government. Promotion of small and medium-sized enterprises is a key element in the Government's strategy of addressing the imbalances of the past and to create employment and income generation. It is estimated that there are 2.5 million small and medium-sized enterprises in South Africa and that these enterprises contribute between 52% and 57% to the country's Gross Domestic Product. The Metal and Engineering industry constitutes 29.3% percent of formal manufacturing employment and employs over 300 000 people. The small and medium-sized enterprises in this sector are mainly owned by artisans, very few have employees and a relatively high annual turnover. The primary objective of this study is two fold; firstly to investigate the impact of Broad-Based Black Economic Empowerment (BBBEE) on white-owned small and medium-sized businesses in the Metals and Engineering sector, secondly, to make practical recommendations to these small and medium-sized businesses on the management of these issues. The research was conducted by means of a literature and empirical study. The literature study was divided into two sections. The first section studied Broad-Based Black Economic Empowerment and highlighted aspects such as: the history, policy objectives and the policy instruments used to achieve Broad-Based Black Economic Empowerment. A major focus of the section on Broad-Based Black Economic Empowerment was the codes governing qualifying small enterprises. The second part of the literature study dealt with the Metals and Engineering industry and highlighted aspects such as: the structure of the industry, employment levels, the structure of employment and employment by small and medium-sized enterprises. The literature study formed the basis for the assessment of the impact of Broad Based Black Economic Empowerment on qualifying small enterprises in the Metals and Engineering sector. Specific indicators were empirically tested in practice by means of a developed questionnaire where-after the results were assessed. Based on the findings of the study, it was concluded that the majority of owner-managers of small and medium-sized enterprises in the Metals and Engineering industry do not believe that there are substantial advantages in the implementation of Broad-Based Black Economic Empowerment. Practical recommendations were also made to guide and support owner-managers through this highly emotional, but critical important, issue that can ultimately ensure the future continuity of the white-owned small businesses.