Effect of Black Economic Empowerment on profit and competitiveness of firms in South Africa
Abstract
Orientation: The key obstacle hindering optimal profitability levels and competitiveness
in firms in South Africa is the application of labour legislation policies and tools aimed at
narrowing the income gap between different racial groups and resolving inequality amongst a diverse workforce.
Research purpose: This article determined whether the implementation of a Black Economic Empowerment (BEE) policy by companies has a positive effect on their growth in terms of profits and competitiveness.
Motivation for the study: This study determined whether the implementation of BEE could
be profitable for companies.
Research design, approach and method: A quantitative study was undertaken in order to
find empirical evidence supporting the relation between high BEE Scores, profitability and
competitiveness. The empirical investigation utilised regression analysis, correlations and
other methods, based on data between January 2009 and December 2011. The BEE Scorecard was used to obtain BEE scores of the top 50 BEE companies. Thereafter, the top 50 companies’ financial information was gathered from the Johannesburg Securities Exchange.
Main findings: The implementation of BEE within companies has a positive effect on
profitability, turnover and investment. Numerous factors have, however, been hindering,
while other factors enhanced the success of BEE.
Practical/managerial implications: The findings encourage mangers to engage in BEE as it
may facilitate higher profits and indicates where labour legislation could be improved.
Contribution/value-add: Value was added through new research determining the effects of BEE and labour legislation on profitability and competitiveness of firms on a micro-level.