Impact and Views of BBBEE on Small Business in South Africa
By
TSHOLOFELO MOTLOUNG
STUDENT NUMBER: REG1163891
MINI-DISSERTATION
Dissertation submitted in partial fulfilment of the requirements for the degree
MASTERS OF BUSINESS ADMINISTRATION
at the
REGENESYS BUSINESS SCHOOL
Supervisor: Dr. Spiwe Masarira
FEBRUARY 2021
i
DECLARATION
I, Tsholofelo Motloung hereby declare that this research project for the Master of
Business Administration degree at Regenesys Business School is all my work in design,
execution, and work from other related sources. This research proposal has not been
submitted before for any examination or degree purposes at this or any other university.
This proposal has therefore obtained and found the necessary approval and supervisory
consent to carry out this research.
Signature: …. TP Motloung
Date: 21 February 2021………………
ii
Abstract
Several policies and interventions have been put in place since the first South African
democratic elections in 1994. These were directed at empowering the previously
economically marginalised population since the 1950s under the Apartheid regime until
1994. One such policy was the introduction of BBBEE policy of 2004 with the focus on
overcoming and redressing the economic and social legacies while endeavouring to
increase economic participation among the previously disadvantaged individuals.
The aim of the conducted research study was to highlight the thoughts, perceptions, and
views of small business owners on the impact of BBBEE on how small business is used
as an engine driving transformation, development, and economic growth.
The design method used was qualitative method coupled with sampling, a formulated
questionnaire to help guide in gathering validated data and conclusions from the
sampled small business owners’ responses. While the study was made up of 30
respondents, only 27 of the participants was used for data collected and data analysis
procedures to support the recommended views and perceptions congruent to the
objective of the research study.
Findings of the research study asserts that BBBEE still has not favourably used small
business in equitably eradicating poverty, unemployment, nor sped up economic
development which contributes to the GDP. Regarding the BBBEE codes of good
practice and score carding, most respondents disagreed that they have impact on small
business. There is also a view that that aspects of fronting, kleptocracy, fraud and
corruption persist and are a constant challenge facing BBBEE and its focus on small
business.
Key recommendations presented will help guide on challenges relating to how the policy
can be monitored, restructured, and evaluated. There will also be emphasis made on
the elements that are crucial for small business in its role in creating stability, prosperity,
and economic development.
iii
Key Terms Defined:
BEE is defined as coherent method of contributing to the South African economic make
over that should bring an increase in the number of black people who manage, own,
and control the economy and aid in reducing income inequalities (Department of Trade
and Industry, 2003:12).
BBBEE is “a process aimed at creating sustainability, transferring of ownership,
management, to empower, create economic inclusion, entrepreneurship and reallocate
wealth to impact change broadly in the business sector and the communities as well as
advanced economic transformation in South Africa” (DTI 2004).
Black people, this term is used as a generic term that means Africa, Indian, Coloured
and Chinese South Africans (BBBEE Act, No 53 of 2003).
Affirmation / Affirmative Action refers to a policy that takes factors of race, colour, religion
or national origin into consideration to benefit a previously disadvantaged group as a
means of redressing the mistakes and effects of the past (Government Gazette:
Affirmative Action Act 29 of 1998).
Employment Equity put in place to provide and promote constitutional rights of equality,
redress effects of discrimination and promote economic development (Employment
Equity Act 55 of 1998).
Growth, Employment and Redistribution (GEAR) refers to a microeconomic five-year
strategy adopted by the Department of Finance, June 1996 aimed at strengthening
economic development, broadened employment and redistribution of income and
socioeconomic opportunities favouring the poor.
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Table of Contents
Declaration
ii
Abstract
iii
Key Terms
iv
Table of Contents
v
List of Tables
vii
List of Figures
viii
1. Chapter One: Introduction
1
1.1
Introduction
1
1.1.1 Background to the Study
1
1.2
Problem Statement
5
1.3
Aim of Proposed Study
6
1.4
Significance of Proposed Study
6
1.5
Research Objectives
8
1.5.1 Objective 1
8
1.5.2 Subobjectives
8
Conclusion
8
1.7
2. Chapter Two: Literature Review
9
2.1
Introduction
9
2.2
Malaysian Perspective
14
2.3
BBBEE in South Africa
15
2.3.1 Advantages and Disadvantages
17
Future Impact of BBBEE
19
2.4.1 Monitoring and Evaluation
24
2.4
v
2.4.2 Evaluation
25
2.4.3 Reasons for Evaluation
26
2.4.4 Benefits of Evaluation
26
2.4.5 Kinds of assessed Evaluation
27
2.4.6 Scope of Evaluation
28
2.4.7 Monitoring, Evaluation and Assessment
29
2.4.8 Monitoring and Evaluation Principle
30
2.5
Shareholder return
33
2.6
Situational Philosophy
34
2.7
Transformational Plans and Analysis
35
2.8
Gaps in the policy
40
2.9
BBBEE Now and Beyond
41
2.10 Conclusion
50
3. Chapter Three: Research Method
53
3.1
Introduction
53
3.2
Research Design
54
3.2.1 Philosophy
55
3.2.2 Approach
57
Research Methodology
57
3.3.1 Target Population
58
3.3.2 Sampling
60
3.3.3 Research Instruments
61
3.3.4 Data Collection Techniques
61
3.3.5 Reliability and Validity
62
3.3
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3.3.6 Data Analysis
62
3.3.7 Delimitations
63
3.4
Ethical Consideration
65
3.5
Conclusion
66
4. Presentation of Research Findings
68
5. Analysis of Results
73
6. Conclusion and Recommendations
75
6.1
Government Recommendation
77
6.2
Department of Trade and Industry Recommendation
78
6.3
Small Business Recommendation
78
6.4
Empowering Partners Recommendation
79
6.5
Future Research Recommendation
79
7. References
81
Annexure 1 Consent Form
90
Annexure 2 Demographic Information
91
Annexure 3 Questionnaire
93
List of Tables
Table 1.1 BBBEE status and Qualifying Criteria
7
Table 2.1 Weighting and Elements of Generic BBBEE
14
Table 2.2 BBBEE Scorecard Components
33
Table 3.1 Study Provincial Breakdown
58
Table 3.2 Study of Participants
58
Table 3.3 Study Codes and Themes
62
Table 3.4 Thematic Data Analysis
69
vii
List of Figures
Figure 2.1
Statista Unemployment Rate
11
Figure 2.2
S.A. Poverty rate by region
23
Figure 2.3
SA Economy by the numbers
27
Figure 2.4
Monitoring and Evaluation Model
32
Figure 2.5
Poverty Headcount by Age
37
Figure 2.6
History of Real Economy
38
Figure 2.7
Gini Index by World Bank
39
Figure 2.8
Provincial GDP Growth
40
Figure 2.9
Change Triangle
43
Figure 3.1
Independent and Dependent Variables
56
Figure 3.2
Financial Performance
71
viii
1. Chapter One: Introduction
1.1 Introduction
Since the first South African democratic elections of 1994, various policies were formed
(Republic of South African Constitution 108/1996) and introduced by the ruling party,
the African National Congress (ANC) such as the Growth Employment and
Redistribution (GEAR) policy which was aimed at creating more jobs, attracting more
foreign investment as well as creating a more sustainable microeconomic environment.
Another intervention was the Affirmative Action Act (29/1998) policy, an initiative used
to compensate for the existing inequalities, unemployment, and the underdoing of the
discrimination imposed on Blacks where receiving skill development, promotion in the
workplace, receiving preferential procurement and other economic opportunities is
concerned, (Janse van Rensburg, 2010:43). It was therefore through the Affirmative
Action policy that we see an onset of the Broad Based Black Economic Empowerment
(BBBEE) policy geared towards social reformation intervention that among other
programmes, included using small business as a process to speed up economic
development, balance the existing inequalities, reduce the unemployment rate, and
ensure skill development for entrepreneurs.
1.1.1 Background to the Study
While Apartheid policies of the past favoured the white minority enjoying access as well
participation in the economy, most Blacks were being marginalised for a period of over
40 year. Based on this, it becomes essential to understand why it was necessary for the
ANC government to introduce and initiate a rapid economic transformation plan such as
BBBEE. The concept and policy of BBBEE Act (53/2003) was designed to address such
injustices and as a result used as a catalyst to advance economic development of
majority Black South Africans.
These policies were initially introduced with the aim and objective of redressing the
mistakes of the past during the Apartheid era. These policies were designed for
economic reformation, sustainable development and economic participation of the
previously disadvantaged groups (Ryan, 2012:12). What is meant by “the previously
disadvantaged groups,” is people who were segregated racially and excluded from
participating in the economy, from management, excluded from gaining entrepreneurial
skills and/or even owning property. Additionally, black in Broad Based Black Economic
1
Empowerment broadly refers to Africans, Coloureds, Indians (53/2003:4; Janse van
Rensburg, 2010:27-43).
Against the backdrop of these legislation was among others, the National Small
Business Act (102/1996) and the Broad Based Black Economic Empowerment Act, Act
No. 53 of 2003. As its aim, Broad Based Black Economic Empowerment focused on
processes to empower the previously marginalised people of South Africa and sought
ways to achieve employment, skill development, economic participation and inclusion
and equality through BBBEE projects such the small business enterprises.
In order to broaden economic participation of the previously disadvantaged groups, the
Department of Trade and Industry (2003:8) was tasked through equity and
empowerment policies with overseeing monitoring, planning, evaluating, implementing,
and reporting on the BBBEE work of ensuring access and inclusion to economic
participation of blacks, women, and those in rural communities. The intent with BBEEE
was for it to be used as a coherent and clear process that will be used to have an impact
in employment, mainstream economic participation, economic growth, and redistribution
of income through generated access to economic participation and inclusion for the
previously disadvantaged group.
As defined by the DTI, BBBEE was “an economic empowerment process aimed at
creating sustainability, transferring of ownership, management, to empower, create
economic inclusion, entrepreneurship and reallocate wealth to impact change broadly
in the business sector and the previously disadvantaged communities as well as
advanced economic transformation by black owned small business in South Africa”
(DTI, 2007). By Economic Empowerment, this means economic empowerment and
economic participation of all black people with the inclusion of workers, women, people
with disabilities, youth, and those in rural areas. This would be carried out through the
means of using varied strategies for economic empowerment integrated to socioeconomic issues relating to the number of people that own, control, and manage
production and enterprise. In this regard, BBBBE would as a result and in simple, refined
terms, be used to promote inclusion in the economy by all blacks and not only a few
blacks who have previously benefited. Subsequently this would also include the
introduction of scorecards and the Codes of Good Practice for small business as a tool
to eradicate poverty and job creation. This would also be promulgated through and in
alignment with policies such as the Employment Equity Act of 1998 and Affirmative
2
Action Act of 1998 and later the National Development Plan of 2011. These were
measures put in place that would aid in addressing issues of economic discrimination
experienced by the previously disadvantaged designated Black groups. These
measures would also be used to quantify apart from socioeconomic development, be
used to measure skills, ownership, procurement, and management.
As recorded by the South African Banking Association (2019), supporting small
business is the most viable way for BBBEE to drive economic development as they are
the backbone of our economy and make up 91% of businesses. This view is further
expatiated in the National Development Plan of (2011). According to the DTI (2014:2),
small business provides 60% of jobs created and should approximately contribute at
least 34% of the country’s GDP. BBBEE under the revised Broad Based Black Economic
Empowerment Act of 2015 and the code of good practice of 2007, as a policy it has
gone through many changes and has become a topical issue in South African business.
While researchers have previously determined that there is limits to attract economic
transformation and participation which results to investment capability, this research
study will primarily be used to investigate and secondly embark on evaluating Broad
Based Black Economic Empowerment impact on small business to increase economic
participation, reduction of socioeconomic inequality and if there is evidence of deprived
access to economic participation.
The research was conducted using literature and by means of first-hand, observed
study. The need for the research study to understand the role of BBBEE, analyse the
future of BBBEE and evaluate its impact on small business as well as determine whether
there are flaws in the BBBEE policy including how it is implemented, monitored,
managed, evaluated and reported is vital key.
As demonstrated later in chapter 3 and further outlined in Annexures A and B, the
demographic information from the study was made up of 30 participants. This included
collecting data which represented 78% males, 22% females, an average age of 46
years, 100% black owned business and an average of 13.6 years of experience as
small business owners. The study comprised 20 questions based on 10 demographic
information type questions and a questionnaire of 10 text questions.
There are however challenges in literature is that there is insufficient demonstration of
the contribution and worth that BBBEE contributes to small business. It is also critical to
determine if the aforementioned is not a result of the lack of skills, scares capital,
3
inexperienced entrepreneurs, bureaucracies or purely acts of corruption and fraud. In
this study, the research will seek to determine while BBBEE was a process geared
towards the restitution of the distortions of the past due to the apartheid system, are the
previously disadvantaged or as known in other terms as the marginalised Black majority
were and still are subjected to adverse inequalities, lack of employment opportunities,
unfair discrimination, and opportunities in South Africa.
In summary, the key issue based on the above outlined is that the history of South Africa
and injustices of the past against black people do necessitate rapid black economic
empowerment interventions such as BBBEE. An initiation to transform and change the
South African economy. It can be defended that this is not a contentious concept
especially when considering the inequalities that exists in the county. Burger (2010:198)
asserts that BBBEE’s strategy was to transform fully the economy in representing the
demographic character of the country. This would be achieved through the promotion of
access to finance building up of skills development, facilitation and participation in the
economy and ownership of assets by cooperatives. Additionally, there would be an
equitable representation in occupational levels and cores by communities and small
business, as well as procurement that is preferential and ownership of black people of
investment in enterprise.
Furthermore, many questioned needs to be addressed on whether BBBEE
implementation is still intent and committed to promoting small business with the aim of
being a stimulus to creating employment, generating income and subsequently
empower black people as beneficiaries of the policy initiative. With the use of a
developed questionnaire to test specific indicators, it was necessary to assess the
results based on the findings of the research study. It was concluded that most people
together with their views believe that BBBEE was yet to be successful, and benefit all in
addressing the mistakes of the past while allowing for economic participation and
inclusion. This is also what has assisted the researcher in answering the research
question below and address the rationale of conducting the research study.
4
1.2 Problem Statement
The previous section looked at interventions by the South Africa government to address
the injustices and structural distortions by the Apartheid regime to prohibit blacks from
participating in the economy. This was one of the effects of the apartheid legacy in South
Africa, that is, the exclusion and segregation of the black majority both at social, political,
and economic spheres (Kruger, 2011:202-211). It is therefore without a doubt that such
ills will have an adverse effect on the country and its economy and one of these is the
resultant of heightened levels of poverty.
BBBEE as one of the policies to promote economic participation and inclusion, not only
does it have a greater implication for economic development but also contributes greatly
to small business development. Small business is the lifeline of South Africa and
collectively, account for more than 60% of job creation, providing sustainable economic
growth and contribute at least over 30% of the GDP with 6% tax pay of corporate taxed
as respectively reported in Statistic South Africa (2019:118) and confirmed by Ballshaw
and Goldberg (2005:11), cited in Olivier (2011:13). Due to the legislated BBBEE policy
codes of good practice, small businesses are floundering and facing challenges
especially with the demand in the shrinking economy putting a threat to their operating
cost to their business.
While challenges such as unemployment, inequality and poverty have forced many
South Africans to start their own business, there is still difficulties experienced by small
business with regards to acceptable licensing and presenting BBBEE credentials and
scorecard affording them to get tenders and contracts for business, BBBEE (2003:53,
Section 4-12). Retrospectively recent data drawn and represented by Statistics South
Africa (2020) depicts that approximately more than 55.5% of the population in South
African is living below the poverty line. The data from Stats SA further reveals that as of
2015, the youngest age group had the highest propensity of people living in poverty.
Proportionally, these are people who should be invested on in terms of skills
development and empowered in order to take the country forward in relation to economic
growth and foreign investment.
The focus of the research study will therefore centre around the impact BBBEE
legislation and adherence by small business in complying with the codes of good
practice in order to get business to survive. Redressing the mistakes of the past using
interventions such as BBBEE to transform small business will present the background
5
and postulate on the scope as well as the objectives of the research study. Lastly,
recommendations made will be based on analysis of the results from the questionnaire
responses of small business owners and will aim to make propositions to lessen the
constraint and implementation of BBBEE for small business owners.
1.3 Aim of Proposed Study
The aim of the proposed research study is for exploratory purposes and gaining an
understanding of the future and impact of BBBEE on small business. This will entail
speaking to challenges and issues that small businesses who are required to comply
with legislation codes in South Africa are faced up with. This is precursor to the business
research study question as follows and that is, what is the view and impact of BBBEE
on small business.
1.4 Significance of the Proposed Study
South African challenges of economic development, sustainable and equitable transfer
of wealth remain. The Apartheid regime resulted in a scant of numerous social injustices
not only in employment opportunities but also in economic inclusion and participation
(Esterhuizen and Martins, 2008:79). This is inherent in infringing human rights
expressed through social justice inherent to equity, fairness and systematically limiting
Blacks to ownership of property, owning the means of production, meaningful
participation in the economy, control, and management (Rawls, 1999:68). Marginalised
South Africans have for long being subjected to classification such as those of
capitalism, colonialism, inequality, enrichment of the monitory, lack of skill and
education. Research based on state or departments of funding (SOE or DFI’s) state that
there is still a huge number of Black people that are still not empowered and therefore
the ones participating towards economic activity are not quiet contributing to the GDP
of the country.
What is significant with the research study is the essential relevance to researching the
role and impact of BBBEE on small business in South Africa. This research will be used
in understanding the implications and challenges on business owners and policy makers
in addressing who exactly benefits wealth, economic participation. The research study
is worthwhile in that it addresses issues of the transformation of small business, provides
a better understanding of small business in cultivating growth in the economy through
6
BBBEE as well as the implementation, evaluation, purpose, and impact of BBBEE on
small business.
According to Timm (2013:13), no sufficient studies have been explicitly and critically
carried out on the impact of BBBEE in promoting small business especially where areas
of skills development, ownership and preferential procurement is concerned. This gap
in literature suggests that more focus is required over and above looking at BBBEE and
small business in terms of redistribution but should expand further to considering
collaborated effort on how BBBEE can effectively support small business as a conduit
of job creation, alleviated poverty, and inequalities. There exist challenges with regards
to measured and adhered compliance in terms of enterprise’s contribution of the generic
scorecard to determine its BBBEE status and scoring based on the qualifying level of
recognition as seen in Table 1.1.
Table 1.1: BBBEE Status and Qualifying Criteria
BBBEE Status
Qualification
BBBEE recognition
percentage level
Level 1 Contributor ≥
100 points on the generic 135
scorecard
Level 2 Contributor ≥
85
(<100)
on
the
generic 125
scorecard
Level 3 Contributor ≥ 75 (<85) on the generic scorecard 110
Level 4 Contributor ≥ 65 (<75) on the generic scorecard 100
Level 5 Contributor ≥ 55 (<65) on the generic scorecard 80
Level 6 Contributor ≥ 45 (<55) on the generic scorecard 60
Level 7 Contributor ≥ 40 (<45) on the generic scorecard 50
Level 8 Contributor ≥ 30 (<40) on the generic scorecard 10
Non-Compliant
<30 on the generic scorecard
Contributor
Source: DTI (2007)
7
0
In summary, the focused aim and significance of the research study is to have a
considerate look at the impact of BBBEE on small business and views based on
challenges experienced by many small businesses in South Africa where factors of
compliance and adherence to legislation as laid down to them is concerned. Secondly,
recommendations of the study will be based on the assessment and analysis of the
questionnaire completed by sampled respondents and these recommendations will
seek to answer the research question as well as outline the impact of BBBEE for small
business especially in how small business contributes to economic growth and wealth
generation.
1.5 Research Objectives
1.5.1 The objective of the research study is to explore and understand the impact of
BBBEE as a policy on small business in terms of wealth generation, addressing socio
economic constraints. Secondly, the objective is to define Broad Based Black Economic
Empowerment, assess its effect on small business as well as understand the underlying
forces of BBBEE.
It is not the intention of the researcher to judge the how BBBEE as framework of
economic inclusion and transformation is implemented, but rather to explore the impact
of BBBEE based on the views and opinions of small businesses. Recommendation
therefore on managed BBBEE and small business will be made based on the literature
reviewed as well as the analyses on the questionnaire completed by small business
owners as respondents.
1.6 Conclusion
It is necessary to recognise that BBBEE ownership in comparison to its stated strategic
objectives, still makes up a small percentage of the overall scorecard hence the scope
of study focused on small businesses representing varied industries. The other elements
of the scorecard such as skills development, employment equity, management control,
preferred procurement, enterprise development, and socio-economic development are
just as crucial and imperative in determining the impact of small business and enterprise.
Consequently, while small business is urged to participate in economic growth, there
seems to be insufficient government support in using BBBEE scorecard and codes of
good practice to close the inequality gap, create jobs, improve company performance,
8
innovation and competitiveness, increase excellence in service and client satisfaction.
The elements of BBBEE codes of good practice are burdensome to small business and
hinders them from getting procurement opportunities, funding, and government tenders.
Lastly the few black elite and elements of fronting continue to loom and usurp the funds
allocated for small business relief for their own gains.
The next chapters will discuss the literature review based on historical developments in
South Africa, research methodology, the impact of BBBEE in small business, the future
of BBBEE, analysis of research study and will conclude with a summary of
recommendations.
2 Chapter Two: Literature Review
2.1 Introduction
The literature review is made up of an analysis on the meaning of empowerment not
only globally but also through South African lenses. The use of the Malaysian New
Economic Policy perspectives and other global experiences of Black Economic
Empowerment were drawn in comparison to the South African perspectives. Secondly,
the review focused on current and existing literature including what drives BBBEE within
a South African landscape. Thirdly, there was a consideration to the use of both
qualitative measures on the impact of BBBEE on small business and if BBBEE for small
business is profitable financially in both public and private in South Africa.
The DTI (2017) defines BBBEE as empowerment of all previously disadvantaged black
people in South Africa. The phrase black people not only make a reference to race but
also denotes black people as mixed race, Coloured, Indians and Chinese (Van Wyk,
2011:18). This definition also includes women, youth, people living with disabilities,
workers, and those in rural communities. The context and premise of BBBEE was to
primarily heighten the number of black people who own management control and
enterprise with an ardent to reduce the lack of economic participation by black people
and reduce inequalities existing in the country (Tait, 2012:12).
In this respect, initiatives and programmes that can help alleviate poverty serve as
supplement measures that can be adopted. Such programmes include Broad Based
Black Economic Empowerment (BBBEE) as a specific programme that can be used to
advance economic development, decrease the unemployment rate while enhancing
9
economic participation of the previously disadvantaged people. Majority of blacks in
South Africa were marginalise for over 40 years under the apartheid regime. Ownership,
access to means of production, control and economic participation in business sectors
was controlled by whites in the past apartheid regime and white minority were given and
appointed to top jobs while the previously disadvantaged groups were offered menial
jobs which offered no skills, be it personal development skills, business skills,
entrepreneurial skills and hence the term non-skilled workers was commonly associate
with them in the workplace.
Such an injustice towards the black population is what necessitate a nimble and agile
change after the first South African democratic elections of 1994. One of the significant
changes required was in a form of strategies regarding empowerment, employment,
eradicated inequality, economic transformation, and reformation especially in small
business. Based on this assessment, it was determined that small business would play
a crucial role in the providing sustainable growth, creation of employment as an effective
means of fighting poverty, and skill development which will eventually contribute to the
South African economy. Economic engagement and participation is key to political buy
in as it provides not only a sense of security but also creates a competitive edge and the
country’s economic participation globally. This is an idea of enterprise and capital
accumulation which is central to the idea of job creation, market economy and
contribution to the GDP of the country (Lucas-Bull, 2010:79).
Since its democracy, many businesses in South Africa have been established and to an
extend have contributed to the country’s economy. According to Swart (2005:89), it is
important to recognise and appreciate the role of small business and the contribution it
can and makes to economic growth, job creation and wealth generation. The above
pointed brings to the issue of unemployment, South Africa is still experiencing high
unemployment rate and the suggestion is that BBBEE to have impact should be used
not only as an investment in people but also be perceived as a means that transfers and
facilitate wealth creation through small business for employment creation and poverty
eradication. This is supported by the fact there is a huge supply of unskilled worked
characterised in South Africa and this is contributed to not only the history of the country
but also the rapid growth in the population. (Coetzee, 2013:17). According to Statista as
at year ending 2019, the south African unemployment was sitting at 28.18%. This
10
number has increased as at the last quarter of 2020 and is now sitting at 32.5%, see
figure 2.1 below.
Unemployment occurs when there is a lack of skill coupled with development and as
means of curbing and reducing unemployment in the country. Since small business
plays a crucial role as a catalyst to job creation, skills development, and enterprise
development and to alleviate high rates of unemployment in the country, its role as a
project of BBBEE should be recognised, promoted, and supported by government in
partnership with private business.
It is undeniable that apartheid as an agenda and system to exclude blacks, caused major
injustices, created huge inequalities resulting to social ills, discriminated against black
people by restricting them from development of skill and involvement in business thus
resulting in black people working for white people instead of being included in economic
development. These inequalities exist even today resulting to a high rate of
unemployment and poverty. This is the poverty that has contributed to increased rates
of crime which unfortunately from a South African context, it is crime that is mostly brutal
and violent. It is therefore critical to understand and comprehend that because of this
horrible past, it was paramount for the government of the ANC to implement rapid
11
economic transformation for small business in South Africa. While much focus from
literature authors lenses on BBBEE with a focus to measure the success of its
implementation, management, monitoring, evaluation, and its outcomes with regards to
economic empowerment, impact on small business, control, and ownership, much has
not changed where the unemployment rate concerned. Pandemics like the COVID-19
have shrunk the economy and as a result also disrupted the role of small business in
job creation.
According to Schoeman (2013:2), BBBEE can be viewed as the best defence used in
ensuring economic growth for small business in South Africa. Ryan (2016:7) asserts that
in order to alleviate poverty, its vital to have sustainable programmes in aiding that.
Before the democratic elections of 1994, white minority were priviledged economically
and empowered and the advantaged over the black majority who were excluded from
empowerment and economic development. White minority prospered from mining (gold
and diamond), enjoyed the fruits of the hard labour and unfair practiced of black majority.
(Kroll and Dolan, 2016:1).
Fully embedded in the country’s constitution is the need to correct the mistakes of the
past through BBBEE Act 53 of 2003, an instrument that would provide a legislative
framework to help the ANC in promoting the right to employment, right to equality and
the right to economic development and transformation. To tap into the offering of the
policy, many South African endeavoured to start small businesses with the goal to not
only participate in the economy but also to alleviate the pressures of poverty, inequality,
unemployment and as a result reduce crime. This would be achieved through complying
with the BBBEE scorecard which addresses components of skills development,
economic development and growth, preferential procurement (based on race, gender,
and ethnic group), human resources, enterprise development, wealth redistribution and
economic participation of the previously marginalised disadvantaged groups. As a
qualifying criterion, a small business is an entity with a turnover of less than R5 million.
An elaborate description is found in the BBBEE Act 53 of 2003: Code of good practice
and the codes refer to the following:
-
All public entities such as DBSA, Eskom, Transnet, etc.
-
Any public entity that takes up any business with a state organ including various
government departments.
12
-
Any enterprise that takes up any business directly or indirectly and looking to
establish its own level of BBBEE compliance.
The statements made above are certainly not outside but rather from a small business
funding perspective, inherent in other legislation such as the National Empowerment
Fund Act 105 of 1998 aimed at establishing a trust for facilitating control and ownership
of income, economic participation (including opportunities to buy shares), and promoting
skills development of the previously disadvantaged people. Following this is the
Preferential Policy Framework Act 5 of 2000 which was aimed at instituting policies in
relation to government tenders. Notwithstanding the Skills Development Amendment
Act 31 of 2003 with its main goal of improving people skills, education, and training in
an effort to promote productivity and competition advantage in the market economy.
At the backdrop of this, is the many changes with regards to complying with BBBEE
legislation hence the study will focus on how these changes have impacted on the
survival of small businesses / enterprise. The research study will also make
recommendations on the analysed results from the questionnaire completed by small
business respondents and these recommendations will seek to ease the impact of
changes of BBBEE for small business owners.
BBBEE has become one of the debated issues even to a point of controversy in South
Africa. According to Chingwaru (2014:82) BBBEE has become a hinderance with core
the issue relating to BBBEE scorecard compliance required by small business. That is,
being compliant in ensuring the ownership and control of small business, increasing the
number of blacks fulfilling executive and senior positions, ensure heightened income
levels of blacks and eventually overcome the inequalities of the past. Compliance in this
instance relates to qualifying businesses in reference to the legislative compliance
requisites of BBBEE framework using the balanced scorecard and the codes of good
practice. This of course comes with financial benefit however it also has it shortcomings,
that is, the administration and far-reaching bureaucracy of adhering to legislation. As
previously mentioned, a small enterprise with a total annual turnover of R5 million Rands
and above needs to implement BBBEE in their enterprises before conducting business
with government or other entities be it to get tenders, preferential procurement or funding
towards economic growth.
13
Critical and of significance for small business rests on the basis that business failing to
show acceptable scorecard, codes of good practice, Black Economic Empowerment
credentials, tenders, new business or contracts cannot be awarded to the businesses.
For practicalities, these codes of good practice apply to all entities both public and
private and provide a clear framework as well as measurement of ownership. For
illustration, see Table 2.1.
Table 2.1: Weightings and Elements of Generic BBBEE Scorecard
Element
Weightings
Scorecard Code Series
Ownership
20 points
100
Control of Management
10 points
200
Skills Development
15 points
400
Enterprise Development
15 points
600
Employment Equity
15 points
300
Preferred Procurement
20 points
500
Socioeconomic
5 points
700
Development
Source: DTI (2007)
As a result, it should therefore be emphasised that considering that most small
businesses are built over years through commitment, dedication and hard work, issues
around compliance should be repurposed and not be burdened or constrained as would
your big business as argued by (Mashugane, 2018).
This brings us to the next section whereby a comparison on government legislated
economic and empowerment initiatives and interventions was mad between Malaysia
and South Africa, respectively.
2.2 Malaysian Perspective
The implementation of the Malaysian New Economic Policy (NEP) in 1970 as a result
of the 1969 racial riots closely represents the South African context of the formulation
and implementation of BEE in 2003. As the most studied and best-known example of
affirmative action and empowerment, the Malaysian government implemented what
would be known as the national unity 20-year plan.
14
The objective of the NEP was to eradicate poverty while promoting equality
economically among pure Malaysians and non-Malays. Positively, this contributed to
Malays corporate ownership share increasing from 2.4% in 1970 to over 30% by 2016
with an unemployment rate of 3.32% in 2019 and poverty line falling drastically. It is
worthy to note that the contrast between Malaysian’s programme of economic
empowerment and the South African economic empowerment programme is that the
NEP in Malaysia was led by its government whereas BEE in South Africa is an initiative
overseen by a department of trade and industry which is a branch / arm’s length of the
government. Although there are pockets of success with the NEP, it was not a broadbased initiative as the South African BBBEE and as a result only highly politically
connected and the elite benefited from the programme. This resulted in effects such as
lower standards of learning in institutions of higher learning and while poverty lines were
reduced, there remains inequalities on wealth and ownership of management and
enterprise. Similar to the South African context, this programme also created a lot of
fronting, tendepreneurs and was used for patronage purposes. In order for BBBEE to
have impact and prove lucrative for small business, these are some of lessons South
African can learn from.
Gaps: Not much literature was found on how NEP had an impact on the financial
performance of businesses listed on the Malaysian Stock Exchange. A similar scenario
in South Africa context whereby research is limited and according to state department
of funding institutions (SOE’s) assert Black people are still not empowered, and
therefore the ones participating towards the economy are not necessarily adding to the
GDP of the country. Costa (2006: 183) reports that “black companies put together, only
own 1.2% of the Johannesburg Stock Exchange’s total market capitalisation, a
representation that close to 98.8% of the JSE’s ownership is still in white minority
hands.”
2.3 BBBEE in South African
Whether BEE and BBBEE are catalyst for growth in South Africa remains arguable.
According to Andrews (2007: 34), there is a need for a solid structure of the BBBEE
approach and measurement framework as well as a link to current micro economic
policies. The BBBEE balanced scorecard measurement and instruments used for small
business is quiet encouraging especially with regards to financial growth. A good
example is based on the views and understandings of (Fauconnier and Mathur-Helm,
15
2008: 122) on South African companies, ABSA Group Limited and Exxaro Limited who
early on developed a strategy in the business encompassing a need for broad based
economic empowerment based on the Mining Charter. According to an analysis of 68
companies listed on the JSE, only 25% equity was transferred to BEE (Sartorious, Botha
2008: 64).
For the majority of organisations, only the social aspect of BEE was supported.
Furthermore, the main of funding for BBBEE in small business equity transactions was
third party driven funding. This therefore resulted in only 25% of equity transferred to
small business with low rates of ownership, control, management. This therefore would
also suggest that ownership initiatives would have to be implemented with solid
measurement on scorecard and monitored codes of good practice for small business.
Based on the BBBEE legislation, companies are propelled to meet the requirements of
the Act which among other things, includes transferring more than 20% equity to black
entrepreneurs and shareholders. The policy extends beyond equity transfer but also
requires companies to assign a portion of their capital, management structures, control,
skill development, enterprise development, equity development and procurement from
black or previously disadvantaged suppliers, corporate social responsibility to small
business. This is what reflects generic BBBEE scorecard and codes of good practice
used in assessing a company’s BEE status qualification, recognition, and level of
contribution.
While there are no legal or financial implications should a company fail to comply, there
are however recognition and BBBEE status consequences inhibiting them to gain more
business especially from public sector / government business endeavours. BBBEE is a
competitive tool which relates and translates to currency since customers may also
choose to buy services and goods from a supplier carrying a level 1 status according to
the BBBEE status and qualifying criteria stated above in table 2.
As a response to the need for regulated intervention to increase the process of
transformation, the BBBEE Act 53 of 2003 and the Codes of Good Practice must
prioritise small business as part of the strategy for the economic growth of South Africa
with major aims on developing the country while ensuring mainstream economic
participation of black people. Additionally, according to the U.S. Department of State
16
and based on its analysis of the Investment Climate states, there is an assertion that
South African BBBEE is significant and critical on foreign investment. Even though it
appears to be enriching the black elite and a number of ANC cronies, it is probably
necessary and essential given the predispositions of what rests of the created
‘entrenched and rooted elite’ of the past. What remains questionable is the sense of
direction in the quest for a broad social economic model and if this is entrenched in the
black elite.
According to former President Kgalema Motlanthe (2004), since the programme of
BBBEE is referred to in terms of transfer and not transformation, it has since failed to
create what it was set out and designed to create which is to transform the economy,
create employment, entry into new markets, and becoming a driver of domestic
economy through small business. The perceptions of small businesses with regards to
BBBEE is that as a dimension for economic performance and growth, is that it has been
unsuccessful in fulfilling its mandate of economic growth and this could be attributed to
the following advantages and disadvantages.
2.3.1 Advantages and Disadvantages
BBBEE is striving to ensure that economy is transformed through meaningful
participation of the black majority and further create more capacity at all levels and in
broader economic landscapes through the development of skill, equality, employment
equity, enterprise development, economic development, preferential procurement. It is
at this backdrop that promoting entry of black businesses in the mainstream economic
activity can be used as a catalyst to advancing economic growth. According to the DTI,
BBBEE is not just a moral intervention to correct the mistakes of the past apartheid
regime, it should be seen and considered as a growth strategy that is pragmatic and
aiming to realise the country’s full economic potential while brining black majority in the
mainstream economy. This is what will add value to our societies through its
commitment to contributing to social development and transformation as well as having
the advantages below inherent to safeguarding small business growth and sustainability
and these are:
-
Procurement of local products, goods and services through preferential
procurement can be encouraged through the BBBEE program.
-
Transformation and structural reforms throughout the country can be
encouraged.
17
-
Stimulation of the local economy using BBBEE.
-
Significant contribution geared towards uplifting communities in.
-
BBBEE benefiting through corporate social investments.
-
BBBEE seen as tackling and focusing on the issue of unemployment as well as
laying a foundation for an economy that benefits the citizen of the country.
BBEEE does however present with threats or disadvantaged. There is a quote by
“unknown” that capitalism cannot address the legacies that produced it. The result of
not having black ownership is a major problem for many in the country. There is a
continued perception that as a disadvantage, BBBEE only benefits a few black elites
and as a result, this is what creates sustained inequalities and a gap between the rich
and the poor in South Africa. It is argued by (Sefoko, Janse and Bostyn, 2016:284) that
as pitfalls, BBBEE is becoming limited in scope, white elites are being replaced by black
elites, there is an emergence of black entrepreneurs that lack business depth, lack of
skill development and assigning of the previously disadvantaged individuals into position
without proper skills and qualifications has led to the economic effect of the economy
and as a result bankrupted others.
Intrinsically, there is undoubtedly still high levels of inequality in the country with effects
on the socio-economic landscape and resulting in high poverty and crime. Simply, when
people are hungry and in lack, the people steal and kill. With political intervention on
small business through the process of BBBEE, small business is still faced with
challenges of access to funding and mainstream economic participation and the
following disadvantages are but some of the reasons why:
-
Fronting and corruption: this is an unscrupulous opportunism tactics used by big
companies in an effort to comply with BBBEE. This kind of fronting goes against
the grain of the government legislation and its endeavour to achieve Black
Economic Empowerment. As a result, there is an establishment of accreditation
used by government in order to assist with preventing fronting practices.
-
An administrative burden put on small business to adhere to the act and code of
good practice. A consideration for the revision of the codes could have impact in
increased employment levels of people living with disabilities in the workplace,
programmes that will support the employment of youth in targeted geographic
areas. This will not only increase the scoring but will also heighten chances of
18
doing business both with government and with private business partners that
BBBEE complaint.
-
Lack of proper skills and capabilities leading to loss of productivity: skill
development is imperative as investment on people development is key in
creating employment and fighting poverty. Skills development should be a
prominent feature for small business as a BBBEE project commanding more
resources for economic growth and distribution.
-
The employment of incompetent people for empowerments sake.
-
Deterioration of quality control due to preferential procurement.
2.4 The Future and Impact of BBBEE
Broad Based Black Economic Empowerment (BBBEE) has become not just an arising
problem for small business (SMEs) in South Africa (SA), but also has an impact on small
business as an engine for the creation of employment and economic growth which is
one of the driving issues on the SA government's plan (Kruger, 2011:79). The centre
issue encompassing BBBEE SMEs is being BBBEE compliant (Chingwaru, 2014: 22).
Measures, for example, of BBBEE are aimed at defeating the tradition of politically
sanctioned racial segregation, (Chingwaru 2014; Kruger 2011).
The Department of Trade and Industry DTI (2016a) shows that the points of this specific
technique are engaged at guaranteeing that the imbalances from the past are survived,
where the technique guarantees that there is a critical expansion in the amount of black
people who have proprietorship and control of new furthermore, existing undertakings.
The DTI (2016a) also refers in that all qualifying businesses are urged to conform to the
administrative and compliance consistence prerequisites of BBBEE scorecard to
contribute towards social equity in SA. As perceived by (Reuben and Bobat,2014:89),
there is restricted literature writing on efforts to transform SA and a few holes appear to
BBBEE and its impact, particularly small business where advantages to contain
regulatory, financial benefit or profit create deficiencies and comprise of regulatory
hindrances (Van der Nest 2004; Oosthuizen and Naidoo 2010). Accordingly, it is
conspicuous that there are restricted nearby studies led on the impact of BBBEE on
SMEs in South Africa (Janse van Rensburg and Roodt 2005; Moloto, Brink and Nel
2014; Oosthuizen and Naidoo 2010).
As a representation, Lekhanya (2015:7,74) characterised that SMEs involve 90% black
organisations and what is more, give more to 50% of black paid workers with the total
19
national or gross output. Small and medium businesses at present make up 91% of all
official business in SA and utilises an expected 60% of the workforce (The Banking
Association South Africa 2019). There has been a lot of impact by BBBEE on small
business expected to put a higher attention on black ownership and control. This impact
will therefore be felt by small organisations due to changes not being easily measured,
evaluated, and monitored within small businesses in comparison to big organisations.
Numerous requests have been placed by business pioneers asking that the BroadBased Black Economic Empowerment Act be investigated because of the way that it
has neglected to meet its goals of rapid economic inclusion and transformation
(Benjamin 2014; Luiz and Gaspari 2007:214) through small business. Moreover,
Benjamin (2014:22), perceived that both black as well as white business pioneers have
recognised that the policy has not dissolved but fizzled, and its enactment has never
really been seen to uphold independent companies nor supported them.
Furthermore, Chingwaru (2014:187) suggests that there be a survey and alteration to
review the BBBEE legislation so can appear to be investor friendly. Additionally, also
Love and Roper (2015) recognised that SMEs are the biggest employers on a worldwide
scale. In this way, BBBEE strategy management becomes even paramount in its basic
contribution towards the achievement rate and success pace of SMEs.
Retrospectively, in order to build on past strengths and weaknesses of the BBBEE Act
with its aim of using small business to create jobs, an alignment with the National
Development Plan (NDP) could help achieve set predictions of creating 90% of new job
openings made in small and growing firms by 2030, (Public Youth Policy 2015). Such
an alignment with the NDP could help speed up the process of BBBEE promoting small
business via an efficient and proper implementation and management of the process.
In description, the NDP is a holistic plan for the entire country and how it will be
implemented is through planning cycles, proper budget allocations as well as the fact
there should be monitoring and evaluation of evidence-based planning and
implementation for empowerment and economic projects.
As a guiding document for South Africa, the National Development Plan was positioned
after being released in 2011 and adopted by the South African cabinet in 2012 as a
blueprint (a long-term plan and vision) for dealing with South Africa’s challenges
especially where inequality, unemployment and poverty is concerned.
20
The NDP further aims is to grow an economy that is inclusive of black participation, that
can eradicate poverty, promote partnerships, build skill and capabilities, and extensively
reduce unemployment by 2030. The objective of the plan is to have a country where
there is prosperity and equity. It has identified that some of the reasons for slow
economic progress and development especially for small business, is the lack to
implement or monitor policies effectively. It has therefore set out actionable plans and
identified the following key components that can ensure success in economic
development, increasing the rate of employment and using small business as a catalyst
for development as well decreasing poverty lines as well as existing inequalities:
-
Depth in leadership in all business sectors support towards sustainability of small
business.
-
Improved quality of growth, education, skills development, investment, and
innovation through small business.
-
Put effort in having an all integrated, strong, and inclusive economy.
-
Move into a sustainable economy through adopting low carbon (clean and
renewable energy) economy in the country.
-
Deal with the plight of and aggressively fight corruption.
Based on the above and in reference to BBBEE impact to small business, aspects
relating to economic development, reduced unemployment, and inequality, raised
production and income remain long term solution and this is where an alignment with
the NDP becomes an even more viable option towards sustained economic growth
through small business.
It is a solution which requires actively broadening opportunities for previously
disadvantaged individuals. How this can be achieved is through the development of
small business to be used as a catalyst to increase employment, absorb labour in the
different industries, stimulate as well as grow the economy and ensure there’s
opportunities for entrepreneurs. Among other NDP components or elements is the focus
for development. It aims to shake the size of the economy in South Africa by 2030 with
opportunities not only for local investment growth but also global investment
opportunities. According to research from the NDP, in order to achieve accelerated
economic growth, small business plays a critical role as follows:
-
Projections that at least 90% of the 11 million jobs planned to be created by 2030
will be through small to medium businesses. This cannot be done in isolation, but
definitely needs to be coupled with closing skills gaps, having better educational
21
outcomes in place, a population that is well and healthier, low levels of corruption
and a cost of living that is lowered for the poor.
-
Ensure more economic participation and development grows by 40% in the rural
areas by reforming land, support for black owned farmers, social investment in
mining and tourism.
-
Ensure the competitive advantage and growth strategy is based and aligned to
substantial research and development (R&D). This is critical in improving
productivity and sustaining economic growth.
-
Guide innovation and learning as a tool for South Africa’s competitiveness.
-
Use small business as an integral part in the pursuit of better exploiting
knowledge on the economy, innovation and comparatively gain a better or rather
competitive advantage not only an integrated continent but globally.
The plan is however notably also glanced in terms of challenges. According to the
Human Science Research Council, the NDP’s successful implementation would be
based on how well and efficient the plan is implemented, delivered and how effective
the issue of human capacity is managed. It is believed that South Africa has the capacity
to build and form policies, but the challenge is how these policies are translated into
projects and programmes that are implementable, monitored and evaluated across
different tiers of public sector in order to achieve the set goals and objectives within
given timelines. The level of the quality, capacity, capable, skilled, and competent
people is another concern. What is yet perceived as another challenge is the notion and
concerned displayed by NUMSA and SACP in The Mail and Guardian article of 2 July
2017. The SACP has criticised the NDP as a social agreement imposing no obligation
legally or whatsoever on the government, labour or business for its implementation.
There is no legal framework existing to ensure a successful implementation of the NDP
and notwithstanding the NDP was a discussed plan the ANC’s (ruling / governing
political party) policy conference of 2017. The Metal workers union (NUMSA) on the
other hand has described the NDP a version of the government’s former radical
economic growth, employment and redistribution strategy that is too liberal.
Accordingly, this has pointed toward breaking down the eventual future of BBBEE
through the viewpoint and perceptions of SMEs in South Africa. Small businesses
comprise of less than 50 paid workers and it has become precisely clear if policies such
22
as the rapid economic transformation are to succeed, small business needs to be
recognised as catalyst in the prosperity of South African economy. Small business is a
key driver in empowering the previously disadvantaged communities by bringing them
into the economic mainstream, eradicating poverty while contributing to economic
growth and generating wealth through BBBEE. Illustrated in this figure is adults living in
poverty in the country by region as of 2020 and claims can be made that with much
support, attention and focus on small business, this picture can be altered and modified
with the creation of more employment through small business resulting in a decrease in
poverty.
Critically as a measure supporting the above statement, it is of paramount importance
to have a self-mirror reflection on the process and progress of how BBBEE can help to
facilitate economic growth and empowerment through small business. As a form of
measure and aligned to the National Development Plan, there can be improvements
23
with regards to how the implemented BBBEE policy is monitored and evaluated and if it
is yielding desired results as per the intended strategic objectives. The section below
will therefore focus on monitoring and evaluation.
2.4.1 Monitoring and Evaluation
For most developing countries in meeting their own set developmental goals is issues
around governance. Monitoring and Evaluation are not only a requirement for
governance but have as previously observed in South Africa, helped the public sector
in assessing progress made while recognising contributions made on its set policies.
The issue of augmenting effectiveness to achieve developmental impact in areas such
as small business is chief among some of the challenges facing post-apartheid South
Africa. One of the areas identified is in BBBEE and to redeem the policy of BBBEE and
its benefits, it is critical that much attention be placed on Monitoring and Evaluation.
Consequently, this section begins with illustrating the literature on monitoring and in
specific the monitoring of policy framework.
In typifying the meanings of monitoring and evaluation, Kusek and Rist (2004:13) states
that while monitoring gives data on the process of policy strategy anytime according to
its specific targets and results it is also illustrative in purpose. Consistent monitoring and
evaluation of a vital policy such as BBBEE is crucial and further blueprints the illustrative
framework of monitoring and evaluation which centres around activities, inputs, yielded
results, impacts and outcomes, evaluation brings validity to activities.
According to Gosling and Edwards (1995:12) monitoring infers the persistent grouping
and examination of information about the advancement of an activity, for example, that
is precise and systematic about a program, policy or project over the long run. As an
instrument, it is applied to distinguish qualities and deficiencies in an activity and to
present those liable for the exercise or activity with sufficient 'data for the right decision
making at the perfect time' to expand its quality. Data about the activity or program, task
or public policy and about the external milieu ought to be gathered and inspected
continuously.
The South African Monitoring and Evaluation policy framework system displays that
monitoring includes gathering, dissecting, and assessment. The results of the
monitoring cycle can be moved straight into the arranging process and planning, through
24
which any vital adjustments or changes can be figured. Monitoring verifies that a
programme stays on target by examining to see that activities are actualised,
implemented and that progress toward goals and objectives is estimated. Issues are
also determined and recognised as they arise, while qualities are distinguished that can
be based upon, and there is variation to changing conditions which are measured.
Monitoring accordingly looks to give the essential apex and partners ordinary responses
on the progress in usage and results just as early signals of issues or challenges that
should be given attention. All things considered it reports and covers real and genuine
performance against set goals and targets.
Evaluation on the other hand, gives validation regarding why results and targets have
not been or are not being achieved, it is concentrated on the issues of circumstances
and logical results or better still cause and effect. In this sense, it becomes apparent
that monitoring is therefore complemented by evaluation resulting in clear realities and
trends noted in an applied monitoring systems. These trends will best inform the policy
makers on BBBEE and its impact on small business, problems and challenge of the
policy and negate a response or action beneficial to all. It is common sense that with
each policy framework there would be challenges with regards to monitoring and
evaluation which if not properly lensed could create problems for the policy aims,
objectives, desired successes and if problems.
These can be resolved using meaningful, implemented monitoring and evaluation
systems. Hence the essence to note here is there is limits in the field of enquiry with
relatively limited contributions on the enquiry of BBBEE monitoring and evaluation.
Monitoring can be perceived as important to good planning and if carried out well, there
is less evaluation required and if needed, much easier and efficient to conduct.
2.4.2 Evaluation
The idea of evaluation has been granted a variety of definitions by various authors. As
per Sharitz (in Cloete et al. 2006:247), evaluation discovers the meaning of an activity
for decision making aims. Policy evaluation by and large alludes to the activity of
investigating a public policy and its arrangements in real life, the resources being used,
and the objectives being served. Evaluations are a judging process in comparing both
clear and tacit objectives specifically with real projected results. For the purpose our
study, the monitoring and evaluation of BBBEE on small business is necessary as the
25
systematic value of policy’s results carries uncovered benefits if not monitored and
evaluated against set objectives, whether achieved or not.
2.4.3 Reasons for Evaluation
According to Cloete et al., (2006:248) different reasons have set out in that how policy
assessments or evaluations are conducted and directed. These include:

Estimating and measuring the development towards the fulfilment of policy
objectives.

Taking lessons from the undertaking programme or project with the end goal of
future policy reviews, reformulation or execution of implemented methods.

Inspecting the achievability of a hypothesised theory, guideline, methodology,
proposition, model or logical framework.

Providing political and financial responsibility.

More likely for the promotion of a particular cause.

For advertising and public relations purposes.
In numerous occasions some of these reasons are not unequivocally laid out or
explained in the BBBEE model of monitoring and evaluation especially in the midst of
political sensitivities or hidden individual objectives.
To assess the impact of BBBEE on small business, it is essential to set up a
comprehensive point of view of the requirement for monitoring and evaluation with the
policy process, cycle and framework as these benefits can inherently not be overlooked.
2.4.4 The Benefits of Monitoring and Evaluation
It is well expressed that a very much arranged plan can create in practice and is
accompanied with positive benefits. For the purposes of the study, according to the
South African Policy Framework for Government wide Monitoring & Evaluation System,
there is limited information supporting the successful monitoring of analysis of data on
the impact of BBBEE on small business. The lack of expanded literature suggests that
the diminutive and reported data on inputs, activities, outputs, outcomes, and impact
factors supporting the effective management of BBBEE impact on small business lacks
benefit for positive outcomes. There is also lack of support in terms of long-term
economic growth trends and foreign investment through small business as depicted
below from data drawn by (focus economics, 2019).
26
Proper monitoring and evaluation of the BBBEE policy can help forecast and measure
precisely the nature and level of the effects of BBBEE on small business over a period.
It is also beneficial in outlining the progressions and changes noticed that are not
inadequacies in the policy framework, however where necessary might influence the
variables as indicated in the figure above and research method previously discussed.
Effective monitoring and evaluation will also effectively help recognise those previously
disadvantaged groups that are marginalised from participation in economic
empowerment while eliminating bulging elements of fronting and a few black elites.
The advantages and benefits of evaluation are seen and come to pass from a scope of
a range of models of evaluation illustrated in the following section.
2.4.5 Kinds of Assessed Evaluation
Various kinds of evaluation can be conducted, and these assessments of evaluation can
be separated by specific standards or criteria interacting the stage of the policy process
to which there is an application of evaluation in accordance with the central focus of the
activity or exercise.
For the purposes of the study, these types of evaluation should comprise:

Planning and development state: This is the formative stage applied to conduct
formal evaluations. Already this is clearly outlined in the BBBEE policy in terms
of validity and determining strategies to adopt with one of them being the small
27
business project as an engine for economic growth, development, and job
creation.

Execution stage which includes a consistent or 'interactive evaluation of as well
as the monitoring of the implement process to stay informed concerning the
advancement towards objectives; the time span; and the amount and estimation
value of results. The is a lack of focus here from the government side as the
management required to measure the effectiveness, impact, efficiency, and level
of inclusion as well participation of small business in stimulating growth, creating
jobs, ownership and management is lacking.

The project plan at completion stage will also present validations for evaluation
and assess the achievement of policy goals. The advancements towards
achieving the objectives of the BBBEE policy are lacking as per the small
business responses on the research study especially with regards to challenges
and burdens put on small business in relation to the codes of good practice.

There should be a process of evaluating the value of the policy and its impact on
small business using methods such as focus groups, observations, interviews,
analysis from gathered data, expert judgements, and trials of equipment. As a
result, evaluated outcomes can be used to demonstrate progress if there indeed
is progress and benefit from BBBEE to small businesses.

Evaluations should be conducted over a period with indicators applied from policy
to offer values approximately required using both qualitative results and
quantitative outcomes.
2.4.6 Scope of Evaluations
Evaluations can be formed only for one policy sector for instance the socio-economic
and advancement effect of the BBBEE strategy in South Africa. The formulation of
evaluations can also be formed to centre around the incorporated assessment of various
approach on policy sectors areas simultaneously, for instance the coordinated effect
and impact of the BBBEE strategy in the private sector.
The evaluation will among other things, examine and analyse the BBBEE policy's impact
on small business and its effect and influence on economic growth, reinvestment, and
wealth redistribution. The above area on monitoring and evaluating policy now directs
us to the central idea of this concept of study and that is, principles embedded in
monitoring and evaluation on being solution driven.
28
2.4.7 Monitoring, Evaluation and Assessment
Except if one is capable of monitoring and keeping track to assess chances and
circumstances evolving from ineffective and inefficient policies, problems remain static.
Furthermore, policies pointed toward settling them cannot be seriously formulated in a
meaningful way, executed and reviews unless there is a drive towards solutions causes
and effects of inefficiencies and driving policy. It is fundamental to intermittently monitor
and evaluate causes and effects of policies.
Therefore, in reference to the research study, if and when properly monitored and
evaluated, elements such as inputs, outputs, outcomes, impacts and activities better
support to notion and aim of BBBEE in economic empowerment. Lately, governments
worldwide have been wrestling with internal and external pressures for upgrades and
changes in open public management. The arrangement and ensuring congruence of
these pressures on governments with entities calling for more prominent partner
accountability has caused a worldwide change and shift in perspective in public sector
management.
More and more the public sector is being entrusted or asked to show results, as
stakeholders are increasingly worried about real results and not, at this point solely
concerned or intrigued by outputs and activities. Methods such as the monitoring and
evaluation system built on to assess compliance of small business adhering to the codes
of good practice aims to assess, compliance, and demonstrating the right score as
means of preferential procurement especially where public deals are concerned.
Therefore, a well engaged and executed monitoring and evaluation approach
implemented resounds with the following components:
-
It portrays the issue or cause situation before they happen.
-
It conducts output and activity benchmarks.
-
It groups data on 'information sources, immediate outputs and activities.
-
It deliberately provides details regarding the supply of inputs.
-
It interfaces straightforwardly to a particular action.
Should monitoring and evaluation centre exclusively around aims and activities, there is
no confirmation that the data examined will direct management towards achieving
genuine changes in policy and adherence. Monitoring and Evaluation should stretch
beyond tracking expenditures, bureaucracies, red tape, corruption that continues to
loom and improvements regarding compliance.
29
A working monitoring and evaluation framework gives a constant progression flow of
information that is useful both internally and externally. The inward use becomes
effective as the information from the monitoring and evaluation framework is applied as
a crucial management instrument for general public sector manager in accomplishing
results and meeting set goals. Additionally, the data from a monitoring and evaluation
framework is of striking nature to those external to government, who are anticipating
results, craving obvious effects from public area activity, and anxious to set up trust in a
public sector that is endeavouring to improve the trust with the citizens of the country.
Essentially, the M&E framework helps with 'considering and explaining objectives and
targets'.
In order to build results, recommendations will be made based on Kusek and Rist
(2004:17-23) ten stage model to building an outcomes-based results relating to the
monitoring and evaluation framework.
An assumption can be made based on the perceived views of the sampled population
in the research study that key drives for monitoring and evaluation of the policy to be
enacted is due to cumbersome compliance requirements, funding issues, changes
required in reforming and restructuring of economic empowerment and participation as
well addressing the big question of Who will profit benefits from BBBEE?
The country's present ability to monitor and evaluate if there is capacity building, skills
development, enterprise development, creation of wealth, economic development
should be assessed through existing economic performance data and how much small
business has contributed to the country’s GDP.
When these key performance indicators have been executed and assessed, the
subsequent stage is then to set up data baselines to learn and compare the current
position with future or forecasted position.
2.4.8 Monitoring and Evaluation Principle
The South African Policy Framework which outlines monitoring and evaluation principles
determine these principles should:

Add to governance that is improved, that ensures accountability, transparency,
participation, and inclusion of previously disadvantaged individuals, particularly
blacks.
30

Have a culture that is progressed and entrenched by its comprehensive value
system processes of monitoring and evaluation.

Orientated and emphasised development, while considering the high levels of
poverty, unemployment, and inequality in the country.
The Monitoring and Evaluation principle should exhibit the following result-based
approach to measure the impact of BBBEE on small business as legislated and engaged
in the research study.

Stability and soundness in the methods used to allow pattern investigation and
ensure credibility.

Ensure operational viability and effectiveness with a measure scale reflectant of
its degree and not chance.

Deliberate assessment on social impact especially in addressing the question,
who exactly benefits from BBBEE?

Build a result-based approach to monitoring and evaluation as represented below
in order to appropriately applied to measure and present more evidence on the
framework of the BBBEE policy and its impact on small business in generating
economic growth.
31
Through methods of literature viewed and other sources engaged, there is little
published on the evidence of a monitoring and evaluation framework for BBBEE on
small business in South Africa. This deduction is corroborated by the DTI in collaboration
with the Provincial Monitoring and Evaluation Review document (South African
Development Indicators online). It is therefore paramount the office of monitoring and
evaluation in the Presidency should prioritise among others, monitoring and evaluation
progress of BBBEE towards its goals, outcomes, and impact. There is also an
admittance by the DTI that since the gazetting and amendment of the BBBEE Codes of
Good Practice, focus has been on institutionalising avenues for BBBEE with much less
operational aspects towards monitoring and evaluation framework including a set of
indicators that can be used to measure the impact and progress of BBBEE on small
business since inception. This notion is clearly substantiated in the views of small
business owners found in the research study.
32
It can therefore be deduced that these limitations of measuring, monitoring and
evaluation the progress of BBBEE are also due to the socio-economic developmental
outcomes of the policy on society.
2.5 Shareholder Return
To address whether BBBEE has impact on small business and if it creates and grows
wealth it is essential to consider transactions used in creating the wealth. According to
Jackson et al., (2006:88), a variable called stake was used as the equity percentage in
BBBEE transactions gained by black business shareholders with regards to corporate
control. Small business that is black owned and black managed had a sound foundation
in driving full empowerment as ownership alone can be perceived as narrow in driving
economic growth.
According to Victor Kgomoeswana (2007), the codes of good practices are strong when
aligned to the balanced scorecard which does not carry narrow views of ownership.
Instead, it is more holistic in transformation approach. It also worth noting that these
components of the Broad Based Black Economic Empowerment codes of good practice
adequately corresponds to beneficiaries and measures business a sum of its whole part.
See Table 2.2.
Table 2.2: Broad Based Black Economic Empowerment Scorecard Components
Element
Direct Empowerment
Human Resources
Indirect Empowerment
Beneficiary
Executives
Job Seekers
External Stakeholders
Holders of Equity
Employees
Suppliers
Owners of property
Customers
Managers
Communities
of
economic
resources
Elements
Ownership
Management
Employment
Skills
Preferential
Enterprise
Equity
Development
Procurement
Development
Source: Ballshaw and Goldberg (2005)
33
Residual
2.6 Situational Philosophy
The basis of this section is to address the complexity that though there has been so
much criticism around the BBBEE legislation as mentioned in chapter 2.3.1 under
disadvantages, and who exactly benefits from it, the ANC government still maintain and
believe the policy should carry punitive measures (Jeffrey 2013:101). It is almost definite
to assert that efforts to make the policy work are weak, ineffective, and thin since first
and foremost, there is no timeline on how long the policy of BBBEE will be endorsed
while excluding the white minority born 20 years later after democracy. Secondly,
resources such as capital, entrepreneurship efforts, skills development and enterprise
development remain scarce. BBBEE legislation has left the small business sector
frustrated and pressured to the failure of it becoming the saviour of South African
economy. As an aspect of reverse apartheid,” contribution through BBBEE in
overcoming inequalities of the past remain unseen due to the slow progress of its
implementation and measurement as well as monitoring. What has been measured is
purely estimates within the economy and no evident real value generated to create and
grow wealth in the country.
According to research conducted by Kasuto (2009: 64), research results indicate there
is little evidence on how the BBBEE legislation is monitored and evaluated and the fact
that policy fails due to the unsuccessful formulation, implementation, monitoring,
evaluation, and reporting of the framework. For it to be effective and have impact on
small business, how BBBEE is measured and the indicators used to measure it should
comprise models that easily, efficiently and effectively identify meaningful progress that
has been actually made. The reason black people remain poor, destitute and deprived
is as a result of not having clear indicators that effectively monitor and evaluate the
BBBEE framework and policy.
The implementation of BBBEE even today continues to spark controversy among policy
makers, literature writers, researchers, and the greater society in general. Arguments
continue to loom on whether BBBEE benefits black people or is beneficial to corrupting
the South African economy. What has been identified is the fact that the BBBEE policy
does not have an effect and an impact on profitability, investment, labour, and job
creation or rather employment and instead it had provided adverse impact on investment
and productivity. To date BBBEE impact business negatively due to its high non34
financial cost with compliance. BBBEE critics view it as a corrupt scheme designed to
enrich the elite, comrades and tenderpreneurs, those on the positive side, perceive it as
given time, contributing towards the South African economy where all citizens can
benefit from participating in the economy. Positivists view it as a scheme used in
empowering the previously disadvantaged individuals to have an opportunity to compete
equally with the minority who continue to hold on power on ownership, management
and control of production and in short control of the economy.
2.7 Transformation Plans and Analysis
With the aim of transforming the economy, the ANC government post-Apartheid
government placed crucial and urgent emphasis on equal rights for all. BBBEE is one
example in a form of a policy implemented and aimed at increasing economic
participation and increasing the worth of the country through among other things access
to finance for small business/enterprise, (Esser and Dekker, 2008:78). To date,
socioeconomic issues relating to ownership, procurement, property, control of
production, wealth creation, unemployment, entrepreneurship and high rates of
inequality still exists. According to Pooe (2013:42), the suggestion that in order to selfregulate, government can rely on the citizens of the country for the implementation and
effectiveness of BBBEE as well as its impact on small business is a near miss.
To improve on former near misses, there should be a review and systems in place to
ensure that critical transformation policy and development plans such as the National
Development Plan that are geared in contributing to economic growth and wealth
creation are well implemented, monitored, measured, planned, evaluated and reported.
This will ensure a valid and comprehensive reporting and measurement on exactly who
benefits, has been excluded from economic participation and what impact does this
have on business. As stated previously and cited by Lawrence (2016:8), that some of
the shortcoming of the process of BBBEE relates to issues such as the fact that the
legislated codes of good practice have become a burden on small business, and the
challenges with fronting such that only the few black elite benefit. The study will help
provide an understanding as well as a recommendation on mechanisms that can be put
in place to curb the forming a capitalist class concerned with only enriching themselves
in the business instead.
35
Additionally, an alignment of BBBEE and the National Development Plan of (2030)
target will ensure that not only is funding for small business managed well but also that
accurately
measured,
implementation,
monitoring,
and
efficiently
evaluation.
Additionally, this alignment with the National Development Plan (NDP) will set in
particular a growth path towards economic development while promoting investment
and competitiveness in leading sectors and industries using small business.
Furthermore, the NDP’s priority outcomes is to speed up economic growth and
development using small businesses through skills development, address socio
economic issues and eradicate corruption. One of the methods to carry this out is
through the government’s quick result driven programme known as Operation Phakisa
programme. This programme has clearly set out plans, goals, objectives, targets and
measurement tools in place and was originally developed, adopted and implemented by
the Malaysian government in the 1970’s, (Ferreira, 2007:99). Operation Phakisa will look
to improve cooperation between government programmes such as BBBEE, business
and labour. Similarly, to the process of BBBEE, it aims to place urgency on eliminating
inequality, poverty, and corruption by 2030.
According to the NDP’s development framework, economic inclusion, unemployment,
inequality and learning are priority areas. This is what necessitates a measured
approach in recognising that poverty is not just about income but that it is
multidimensional. It also has as its priority the development of strong small business
leaders who create employment while ensuring people are not living below the poverty
line as seen in figure 2.5 below in which poverty headcount is presented by age, (Stats
S.A., 2019).
36
Additionally, the figure below displays the fact that the South Africa’s economic
empowerment and development through small business has not yet broadly and
sufficiently expanded and widened opportunities of economic participation, job creation
and inclusion for black South Africans, especially those in rural communities, the
disabled, women and the youth in the economy as seen in the figure below,
(Microtrends, 2020). Therefore, based on the real south African economy growth history
below from periods 1960 to 2020 and for BBBEE and its impact on small business to
succeed, external drivers of change should be taken into consideration to transform
economic growth and use small business to create stability, strength to the economy
while contributing and its percentage of more than 30% towards the Gross Domestic
Product (GDP). This graph shows a downward trend since 1960 on the economy and
this is cause for concern especially since BBBEE using the small business project aims
to have at least 34% of small contributing to economic growth.
37
With regards to inequality, as part of redressing the mistakes of the past issues of
inequality, wealth creation and closing of the economic gap when best addressed,
measured, and appropriated contributes to best processes and decision-making
principles on socio economic development thus closing the loop on the crippled
economy. BBBEE when best implemented, measured, monitored, and evaluated can
help address these issues while ensuring not only economic participation but also
ownership, relaxed inequalities, control, and wealth creation. According to the World
Bank’s Gini Co-efficiency / inequality index (2020), South Africa remains the most
unequal country as demonstrated below.
38
In order to achieve this, an applied use of literature review, research study approach
and research methodology, design, limitations of the study and ethical conduct of the
research study will be considered.
Growing the economy is usually a lumpy process and progress that measures the
national gross domestic product (GDP) however misses the varied economic activity
across town, cities and regions as seen in figure 2.8. Stats SA most recent release of
quarterly results on GDP shows that South African real GDP grew by 0.2% in 2019, a
year characterised by a slump in the economy across various industries and most
evident the mining, agriculture, manufacturing, and construction. This is substantiated
by small business views that burdens of BBBEE compliance and regulation especially
in a slumpy economy makes it difficult to thrive and succeed amid the aims by BBBEE
to improve participation and access to funding to facilitate economic growth and
strengthening. Based on this discussion, it can be concluded that the varied intervention
strategies by government aimed at promoting black ownership, skills development,
address existing inequalities should apply mechanisms of strong management,
monitoring and evaluation to pave a successful way to reach these objectives.
39
Figure 2.8: Provincial GDP Growth, Statistic SA: 2019
2.8 Gaps in the Policy
There is little academic literature in depth on the topic of how BBBEE has transformed
the South African economy. The BBBEE policy and framework has many gaps and
challenges, and its success factors are hard to realise and observe (Fauconnier &
Mathur-Helm 2008). While contributing to intense and vibrant debate, BBBEE remains
controversial and while the intend was a good, implementation is effective and bears no
impact on small business.
Post 1994 democratic elections, economic transformation in South Africa is still an idea
in paper for the disadvantaged and a reality for the corrupt officials and the elite. Critics
such as Moeletsi Mbeki (2009:48) view BBBEE “is a drafter and engineer of poverty
which only benefits a few elites while the rest of society remain in adverse poverty.” The
previously disadvantaged still do not benefit from BEE, there remains in South Africa
increased levels of inequality and the economic gap. Moeletsi Mbeki who is brother to
former president Thabo Mbeki who was very instrumental during his tenure between
1998-20080 in legislating and endorsing BBEEE remains adamant and argues that
BBBEE raids a lethal blow against black entrepreneurs’ emergence by creating a small
40
class of unproductive elite, the wealthy black crony capitalists made up of ANC
politicians, who have become strong allies of the economic oligarchy” (Mbeki, 2009: 61).
With its subsidiaries of affirmative action, employment equity and affirmative
procurement, BBBEE has become the material to drive and enrich the black political
elite.
Other literature writes such have expressed concern on the lack of progress BBBEE has
made in redressing and correcting apartheid legacies (Hamann et al., 2008:79). Still
many years later, the challenges of inequality, unemployment, poverty remain or have
even worsened with acute elements of meeting people basic needs such as housing
and water and sanitation contributing to crime and erosion of the South African
economy. BBBEE has achieved little success in creating wealth and ownership, in
increasing employment through small business job creation, fostered economic growth
and eventually eradicating poverty. The black economic empowerment (BEE) impact on
South African business, notwithstanding the wide range of topics addressed in the
agenda of transformation. Despite the criticisms and reviews levelled at it, it may
therefore be argued that there is little research done on more practical issues relating to
the scorecard compliance issues including the potential impact on numerous and
varying dimensions of business performance.
Other challenges of BBBEE’s impact on small business relates to the lack of committed
parties in order for the policy to succeed. The lack of adequate expertise and required
skills to run small business thus, misapplication of the BBBEE codes correctly.
2.9 BBBEE now and beyond
Well beyond the Broad Based Black Economic Empowerment qualifying and
compliance rules organisations are regularly confronted with massive challenges with
regards to financing deals that are Broad Based Black Economic Empowerment in
nature. Since its commencement in 1994 various strategies and techniques were utilised
to structure deals that designed for Broad Based Black Economic Empowerment.
The National Small Business Act of 1996 made provisions and accommodated for the
making of state - owned funding institutions within Department of Trade and Industry.
These institutions were explicitly pointed toward helping small and medium-sized
businesses, yet most of the Broad Based Black Economic Empowerment deals in the
41
1990's during the Apartheid period were centred around empowering the public sector
Government parastatals (BEECom, 2018: 28).
It also appears that numerous transactions relating to Broad Based Black Economic
Empowerment appear to be moving away from the unique purposed structure by tying
Broad Based Black Economic Empowerment funding into the operations and tasks of
the bought assets and along these lines to profit revenue income source. In such
models, profit or income pay is secured until the Broad Based Black Economic
Empowerment funder have essentially resigned their debt and obligation (Radebe,
2006:38). The quest for a definitive designed structure and monetary model to
encourage the financing cycles of BBBEE stays a nonstop excursion of experimentation,
thus accreditation ought to be given to the Government for its endeavours since 1994 in
such manner.
This is however without pitfalls and challenges as BBBEE funding and finance is yet
being seen as exceptionally muddled, complex and to some extend risky and as a result,
consequently the significant South African major commercial business banks remain
wary when participating in engagement having to do with BBBEE. Considering the fact
this policy was legislated almost two decades ago, there continues to be execution and
implementation problems that should be tended to. In doing as such, it is significant that
the short term and long - term government strategic objectives are balanced. (Arendse
et al., 2007: 56). As contended by Jansen, Sefoko, Van Rooyen and Bostyn (2006:
284), Broad Based Black Economic Empowerment has undisguised itself into three
fundamental entanglements.
-
First and foremost, there risk of limited for BEE where the white elite would be
replaced by the black elite.
-
Secondly, the lacked depth on the emergence of empowerment resulting in black
workers depending on the generosity of the managers.
-
Thirdly, the frustration of putting individuals that were previously disadvantaged
to roles and functions without the required skills, expertise, and qualification.
The negative impact on efficient and effective economy on business have prompted
insolvency in other businesses. What is still perceived as an obstacle is the financing of
BBBEE deals for small businesses which in the end hampers the intended goal of the
transformation process. New businesses and small BBBEE businesses experience
issues raising assets and funds as localised financial backers and financial
42
establishments will in general be cognizant of avoiding risk, paying little attention to
flaunting the most developed financial sector (Arendse et al., 2007: 55).
According to Chabane (2003: 7) there’s progress made and certainly lessons learnt
hence he expresses that it is significant policies of BBBEE ought to make and encourage
the sustainability of small businesses as they are a significant tool of development and
economic growth (Chabane, 2003). As indicated by Coetzee (2013: 139), the greater
part and mass of BBBEE initiatives and activities of ownership were funded by
organisations exhibiting a guaranteed commitment to the process of economic
development and generation of growth. This is demonstrated by individuals such as
Dorrington (2006: 24) who has built up a development triangle explicitly for small
businesses with an end goal to help these organizations in the process of
transformation. The triangle shown below indicate a few stages that can be followed to
guarantee that small businesses consent to the requirements of BBBEE considering all
things together, the various fields.
This triangle depicts how organisations, who are effectively attempting BBBEE, are
adding value to the general society where they operate. For instance, organisations are
contributing to society through Corporate Social Investment.
43
These organisations are empowering emerging small businesses through the use of
enterprise development which is also referred to as preferential procurement. This
preferential procurement not only encourages supplier development but also creates
space for diversity at employer levels thus meeting Employee Equity targets.
This triangle portrays how organisations, who are effectively taking up BBBEE can
contribute effectively to skills development and full transformation representation on who
has ownership, management and control.
BBBEE is more applicable now than any time in recent memory. While tending to the
subject of expansive or broad based black economic empowerment (BBBEE), it is
significant that we discover comfort in the preface to our Constitution: "We, individuals
of South Africa, perceive the treacheries and imbalances of our past." BBBEE is an
incorporated and sound socio-economic process that tries to guarantee more extensive
and significant participation in the economy by the individuals who have endured the
shameful acts of our past (generally blacks) to accomplish economical sustainability and
development that flourishes.
A significant part of the story around BBBEE fixates on whether it is yet pertinent and
whether it has neglected to accomplish its expressed objectives and set goals. The short
response is that BBBEE is more important now than any other time. Simultaneously,
while we need to perceive that it is a decent approach, intended to drive genuinely
necessary change and transformation successfully, there have been deficiencies in
favour of its execution. BBBEE has not advanced very well as far as possession of
property and control of management is concerned. This regardless of numerous
organisations professing to have business value arrangements relating to employment
equity, which they probably carefully execute.
A report delivered a year ago by the Black Economic Empowerment Commission
(2020:31) uncovered that black owned businesses on the JSE had gone down by
5.76%, from 32.76% to 27%, while black female owned businesses dropped by 1.9% to
0.9%. General levels of BBBEE of JSE-recorded entities are likewise dropping. In 2016
61% of estimated entities accomplished Level 4 or more BBBEE status. That rate
dropped to 41% in 2017. Generally, this can be followed to the way that public
consciousness of economic and monetary transformation has receded to its most
reduced levels since 1994. The plan for BBBEE began passing on under Thabo Mbeki's
leadership as President of South Africa, before essentially vanishing during Jacob
44
Zuma's administration (SA, 2004:463), (Gumede, 2007:89). Today the change plan is
everything except lost, with numerous organisations regarding it as close to a
consistence matter. However, the requirement for change and transformation in the
economy is a good, moral, and social issue. It is somewhat fortunate that under the
administration of President Cyril Ramaphosa, there is a genuine possibility for the
resurgence of BBBEE as a first concern, top of the agenda for business and there could
be no greater opportunity to hoist consciousness of the requirement for economic
change. The BEE upheaval was begun by Ramaphosa when he was approached to
seat and chair the Black Economic Empowerment Commission (BEECom) and was
delegated the at that point by the Black Management Forum (BMF) appointee president,
the late Gavin Pieterse. The BMF has consistently been at the centre of different
undertakings to change society. In 1997 at its public gathering in Stellenbosch, a goal
was taken to set up the BEECom. The BEECom was given a reasonable command and
crystal mandate, which prompted the BBBEE endorsed legislation. Thus, the ANC
embraced the BMF's position and the command of the BEECom.
It would therefore be attested that a large part of the BBBEE foundation was finished by
our current president, therefore there could be no more excellent individual to direct and
increase present expectations and the bar of transformation in the country's economy.
State owned institutions such as the Public Investment Corporation should keep on
assuming a functioning and active part in driving BBBEE for important change and
economic transformation to happen. With up to R2.084 trillion under its administration,
the PIC was set up to be an impetus for transformation and has gone about as an
extremist among JSE-recorded organisations, where it holds interests (DTI:2020). It
positively utilised its muscle to drive change and has assisted with transforming
responsibility, control, and ownership for many recorded businesses. It is reasonable for
say that, regardless of the Public Investment Corporation's sure positive exhibition and
performance, there have been cases of an absence of oversight and administration.
The undeniable answer for the Public Investment Corporation's issues and challenges
is improved administration, governance, dangerous oversight, controls that are added,
and lawful oversight that will give a more grounded line of safeguard inside the
organisation. This should be combined with the correct controls for workers to forestall
questionable arrangements. The Public Investment Corporation has a major task to
carry out awareness and bringing issues to light about BBBEE. It is additionally the
45
Public Investment Corporation's role to help create black business owners and
entrepreneurs. Business owners and entrepreneurs are the soul of any nation's
development, innovation, development and economic growth, wealth creation, and job
creation. In the end, it is both public and private sectors need to address whether they
are assuming a functioning role in the transformation of South African economy
changing South Africa and need to help support BBBEE with activities and actions.
Additionally, state owned entities or departments of funding institutions such as the
Industrial Development Corporation (IDC) can play a role in financing small business to
recover, speed up economic growth and development in the country through
management and control of black people, ownership transfer and creation of jobs.
On the side of its BBBEE strategy position, the IDC has planned systems with the goal
of adjusting this to the general IDC operational procedure, adjusting the developing BEE
book and supportive network, guaranteeing proprietorship, retention and maintenance
of asset resources BEE parties post-IDC funding, spreading of financing among values
and credits, new and existing BEE organisations, new start-up companies, acquisitions
and expansions, consequently keeping a fair speculation investment portfolio. These
include, but not limited to:

Consolation of the IDC's inclusion in exchanges and transactions which identify
with government incentives.

IDC's involvement of BEE funding in areas of vital and which are significantly by
virtue of strategy focused on by government like agribusiness, the travel industry
and mining.

Support government projects at the local, province and national levels.

Monitor, evaluate, and control where there is engaged and concentrated
structured skills, capabilities transfer to help BEE organisations all through their
tasks and operations.

Proactive consolation of its customers on perspectives identifying with BBE
activities and initiatives.

Opening of correspondence channels with distinguished BEE partners just as
acquiring feedback on activities relating to BEE and other different issues from
outer entities, for example, the dti South Africa's Economic Change and
Transformation: A Strategy and System for Expansive, Broad Black Based
Economic Empowerment.
46

Co-finance with other financing entities the BEE activities. The IDC to continue
staying at the front-line BEE by proceeding to proactively look for promising
opportunities pointed toward establishing, creating an enabling environment, an
empowering climate for the process of economic empowerment in order to yield
high development returns.
Through the developing array of its BEE support activities and initiatives, the IDC will:

Attempt to join forces with other players to encourage, facilitate and strengthening
empowerment inside the Mining sector.

Oversee and dispense the assets funds from the European Venture Bank on
financing for empowerment projects.

Proceed with its role of facilitating, encouraging and financing empowerment
projects in the rural communities.

Go about as the deal arranger for all strategic and essential government deals.
In doing this they would enter varying associations and partnerships with the
private sector.
With possible funding from the above mentioned state owned entities, more probable
and possible towards small business, where the relevance and BBBEE impact becomes
visible is in relation to the statistics released in the fourth quarter of economic growth
statistics publication which provide an indication that the economy is South Africa went
up or developed by 1.4% in the 2018 last quarter adding to general growth rate of 0.9%
for the whole year (Statistics South Africa: 2019, February 19). Statistics further
indicated that the rate of joblessness dropped by 0.4% rate to 27% and that the age of
working populace expanded by one hundred and forty-nine thousand in the 2018 last
quarter of the year as contrasted with the second from last quarter of the very year.
Furthermore, the national state of transformation figures for 2020 delivered by the Broad
Black Based Economic Empowerment Commission (B-BBEE Commission) reveal to us
that we have relapsed from 32.6% to 29% black owned business as far as public listed
businesses on the JSE are concerned and on the main average, organisations are not
meeting the objectives and targets for skills development, control of management,
procurement and the development of suppliers.
It stays a reality that our economy is yet not comprehensive, inclusive and by far most
of the population do not participate in the standard economy, the very scene that the B-
47
BBEE strategy and framework looks to change. This is done through the change of
patterns and designs in ownership, development of skills and suppliers, control of
management by blacks, enterprise development and socioeconomic mediations.
Appraisal of these figures present that the social and inequality gaps continue to
proceed, with less possibility of genuine and significant meaningful development and
growth, and the quantity of jobless people continues to rise – most of them being black
people or black youth. Entities are therefore called upon to give skills and capabilities to
the black youth of the South African country in order for them to be employable and offer
the vital support to black business owners and entrepreneurs to maintain their own
organisations and increment work levels. The genuine growth development of South
Africa's economy will be estimated by its capacity to ingest South Africans of the age of
employability age and finishing the pattern of poverty and cycle of destitution. These
results require dynamic populace through capabilities development, skills improvement
for both work and business ownership for making and maintaining own organisations,
with legitimate access and admittance to business sectors for their merchandised goods
and services.
B-BBEE is a shared benefit for every South African and as win-win for all, it will mean
more noteworthy growth and development in the country since more individuals will be
taking part in the economy. The South African government presented the B-BBEE idea
with the end goal of accomplishing certain targets, as comprehensively illustrated
beneath. In particular, the procedure and strategic intent was in a quest for eleven
targets, as follows:
1) BBBEE as part of a growth strategy requires that comprehensive, new, and
inclusive examples of accumulating wealth should come from both existing and
new economic action. Subsequently there is a need for more significant levels of
speculation produced through economic activity. Simultaneously, patterns and
designs of who has ownership must change.
2) The deracialisation of our economy which is equipped towards upgrading the
economic growth and development of the country. As per this rule, strategy of
BBBEE will be sought after to guarantee that where and ownership and
possession is moved and the returns from the offer of resources such as assets
are reinvested in the South African economy.
48
3) The strengthening and empowering of more people of colour who were previously
disadvantaged in participating in the economy, as owners of property and
business or enterprise. An enterprise that is black owned is that which has or is
characterised with having 51% possession by black individuals, with
considerable administration control and management of the business.
4) Accomplishment of a considerable change in the racial synthesis of
proprietorship, ownership and the structures in management just as in the skilled
occupations of existing and new businesses.
5) Advancement and promoting access to finance to fuel economic empowerment
and strengthening for black individuals.
6) Rural and local communities empowerment networks through empowering
admittance to financial activities, land, foundation, skills and ownership.
7) Human resources development of black individuals that is developed through
temporary jobs, internships, learnerships and mentorship programmes.
8) An expansion of the degree to which networks, laborers, cooperative,
communities and other aggregate endeavours own, manage, and oversee
existing and new businesses, including an increment of their access to activities
in the economy, skills, and framework infrastructures.
9) Formation of a climate that guarantees that black owned businesses profit and
benefit the preferential procurement government policies.
10) Improved monetary capacity, operational capacity, and development capacity of
B-BBEE businesses, particularly small, medium, and large enterprises (SMMEs)
and enterprises that are black owned.
11) An expanded degree to which black women also manage and own productions,
oversee existing and new businesses, and coordinate their access to activities in
the economy, development and skills development.
Tragically, numerous organisations disregarded it however much they could, while
others embraced a mark box approach without valid and important economic change.
That is the motivation behind why the Amendment Act of 2013 condemned fronting as
a criminal act and set up the B-BBEE Commission, which is entrusted with observing,
monitoring and evaluating the gap that existed since 2003 and to ensure that financial
empowerment truly happens and that it benefits South African residents, specifically
black individuals. This is a review component that can help redress and elevate
49
inclusivity as far as promoting of economic participation is concerned, while staying
away from the injustices and treacheries brought about by the past.
The Codes of Good Practice (the Codes) adjusted to the B-BBEE Act set out five areas
of estimation in terms of measure and these are:
- control of management,
- ownership of property,
- development of skills,
- development of enterprises and suppliers,
- development of socioeconomic landscape and turn of events.
The Codes necessitate that all enterprises working in the South African economy make
a meaningful commitment towards the objectives and targets of B-BBEE. The point of
the acquaintance of the Codes was to give a standard system to the estimation, measure
and evaluation of B-BBEE across all areas contributing towards the economy.
Specifically, the codes look to encourage legitimate transformation of the economy, and
if appropriately executed, the responsibility for economy will mirror the socioeconomics
and demographics of the country. That is the reason the B-BBEE Act likewise centers
around changing patterns and designs of ownership.
Genuine economic change will bring about the noticeable, unmistakable incorporation
of black individuals standard economy, across all sectors. Thus, will mean more
prominent economic growth and development that will benefit and profit every single
South African. With sufficient financing and backing from government, especially via
state owned entities or departments of funding, we the country should be able to get to
the next or following level of degree for economic empowerment and in the process
annihilate the deceitful organisations and specialists that make a ridicule of this truly
necessary strengthening and empowerment instrument.
2.10 Conclusion
The part of the research above outlines and explains the South African history and how
policies and interventions such as BBBEE were initiated by the ANC democratic
government to redress the injustices of the past. The study is also used to describe small
50
business views and their perceptions of the impact of BBBEE on small business. While
BBBEE plays a pivotal and strategic role facing South African Inc. particularly small
business, the legislated scorecard and code of good practice is just one of the ways
used as a catalyst to economic growth and creation. South African business cannot
operation in a silo, therefore it is important to recognise the importance of using BBBEE
to reignite the economy, transform and reinvent business. In terms of comparison with
other countries, theories that link the Malaysian NEP’s economic policy to the strategic
drivers of BBBEE in South Africa provides a strong and robust framework linking to a
continued existence for BBBEE policy and lessons learned.
From a South African perspective, BBBEE illustrated a business imperative and conduit
with the state providing a channel to effectively implement an economic policy that
contributes to economic growth and wealth creation. Broad Based Black Economic
Empowerment remains a sensitive and delicate discussion in South Africa and due to
its unique structure and condition, it is difficult to introduce this intervention to other
countries. This is therefore what emphasizes the need for the research study.
This is without recognising that the issue of effectively implementing BBBEE continues
to make it problematic to assess its impact on small business and its sustainability.
Based on the literature reviewed, government should redefine measures informing what
it wants to achieve through BBBEE’s impact on small business. Businesses are
segmented as mentioned above in relation to points on the scorecard and for
procurement purposes, and small business to be considered for business, it must first
be BBBEE compliant. This is one of elements considered as constraints and contributing
to a lack of preferential procurement for small business.
For most companies, the formulation and implementation of BBBEE was felt the most
by procurement, supply changing and any company that chooses to be non-compliant
of the BBBEE scorecard is ill advised as the future planning, management, monitoring,
measurement, evaluation of any business will have been focused on Broad Based Black
Economic Empowerment to thrive and succeed. To overcome such constraints for small
business due to a lack of adequate resources, the South African government released
a framework of support measures to counter these market constraints.
As a result, there should be indicators measuring success and economic sustainability
on how to achieve socio-economic objectives adopted and supported in the several
pieces of legislation targeted at correcting the mistakes and imbalances of the past.
51
Achieving these strategic objectives is in the best interest of the citizens of South Africa
since not only will business thrive but the majority of people will also be economically
connected, content and stable as BBBEE is important especially since it recognises that
transformation is required.
For the black entrepreneurs to fully emerge, skills development becomes a paramount
aspect of the economic development and growth aspect. Several literatures have
demonstrated that skills development and employment creation is most effective way of
dealing with poverty. With this in mind, it could be argued that BBBEE as an explicit
policy of investment in people plays a significant role in fighting poverty, unemployment,
inequality while allowing access to economic development, control, and ownership of
production for a huge part of the South African population, including the black majority.
Particularly for South Africa, concepts regarding economic growth policies should be
attained through a growth-oriented macro and not micro economic policy framework.
This can be achieved through departments of development institution and funding like
the National Empowerment Fund and the Industrial Development Corporation since the
DTI is able to facilitate and promote access to finance through these state-owned
entities. This denotes recognising that with funding of small business equates to poverty
alleviation, job creation, global competitiveness, and growth to the South African
economy through GDP contribution.
All be it cannot be ignored that while there has been an increased in the part of the
previously disadvantaged individual in the economy since 1994, there has also been a
noticeable and evident number of the black elite class rising. The disadvantaged blacks
remain in poverty with employment opportunities limited. The South African society and
economy is still defined and characterised by inequalities, lack of wealth transfer with a
has been thin with the Gini coefficient of up from 0.57 in 2005 to 0.65 in 2015.
There are still gaps existing in the literature on the impact of BBBEE on small business,
hence this research becomes relevant. The research question was addressed in the
literature, BBBEE impact has been dismal in displaying and measuring how much small
business contributes to small business growth and development. More evident however
and what remains is the fact that BBBEE will remain a sensitive issue despite the
commitment by the South African government to structure, transform and the noticeable
will to empower the many previously disadvantaged people.
52
For Broad Based Black Economic Empowerment to have impact on small business, to
be effective and successful, the perceptions and key determinants of small business
development program should be considered in measuring the success and impact of
BBBEE as a program to increase economic participation of blacks owning small
business. Additionally, a coordinated effort and collaboration is required as this will
benefit all. Furthermore, research aimed at narrowing the knowledge gap on the impact
of BBBEE on small business will help establish if there is also a need for government to
consider revising the scorecard with special consideration on skills development thus
contributing broadly towards economic growth and development for small business.
This, therefore leads us to the method of research used which includes the philosophy,
approach, target population, sampling, instruments used, data collected and how data
was analysed.
3 Chapter Three: Proposed Research Methodology
3.1 Introduction
This chapter will present an outline of the research method applied and employed in the
research study. A synopsis of the research methodology is presented, followed by the
research design employed. Further on aspect and details on the population, approach,
sample used, data collection, instruments used will be addressed.
The research methodology focused an empirical study on the impact of BBBEE on small
business. Given its controversies, BBBEE it seemed imperative to conduct research
which would require clarity accuracy of statements in establishing the issues with the
framework and mainly used to diagnose situations, to consider alternatives and
emerging trends. To conduct the research study a sample of individuals including
business owners was used to solicit and gather views and experiences as well as
perceptions on the impact of BBBEE on small business. Based on the current paradigm
and challenges of the COVID-19 pandemic, the qualitative method was chosen also as
influenced by the literature review. The aim being to ascertain the relationship between
variables in a population (independent variable and the dependent variable and
intervention variable). As stated by Creswell & Clark (2017:172), using a qualitative
approach allows the researcher to interpret, explore an unclearly defined concept, helps
53
in understanding the environment and different context of the respondents, describe the
links on what is being researched and interactions of what is being investigated.
The use of a qualitative approach was suited as it provided a better depiction and
representation of small business perceptions of BBBEE and its impact on small
business. It was also suitable for the processes of data collection, data analysis, forms
of interpretations and concluded findings. Since the study applied a questionnaires and
semi structure form of interviewing, the qualitative approach was best in investigating /
researching the where, what, why and how type of questions.
Qualitative research entailed views, opinions, perceptions and was built in with
deductive reasoning reliability purposes used with telephonic interviews and
interpretation of experiences from the research study. Qualitative research allowed indepth understanding and increased knowledge on a related topic of the impact of
BBBEE on small business in South Africa. The method and design of research selected
permitted for the impact and future of BBBEE to be understood in relation to the
perceptions and views of small business. The findings of the research study cannot be
generalised since the make-up of the study is a qualitative one (Kumar, 2012:90).
3.2 Research Design
The research design was used to measure the impact of BBBEE on small business in
the views of society as well as indicators of small contribution to the country’s economy.
Most of the literature reviewed focused on BBBEE ownership and control of
management and the long-term aspect of market share than the BBBEE scores with its
contribution level.
To collect data, the research study was conducted using semi structured interviews as
they allowed for similarities to be identified within the sample unit as any research design
is based on a set of blueprints for the researcher to determine if a study should be
conducted or not. As a research technique, semi structured interviews are best used in
collecting data for qualitative research and they are flexible and provide soft
conversational way of collection data. Semi structured interviews are also useful when
conducting complex or challenging research where little is known about the subject.
They are also able to address the 5W’s (why, what, where, when, which) and H (how)
type of questions from a subjective or experiential perspective.
54
As it would appear later in the analysis of the research study, semi structured interviews
are flexible and allows the researcher to track emerging themes as the interview
progress, address misunderstanding and lack of clarity on questions as well as allows
the researcher to change the pace of the interview process.
The BBBEE balanced scored is what forms the basis of measuring business contribution
level including compliance and those company’s that do comply, their BBE scores
improved including being incentivised. A sample of 30 participants in accordance with
DTI codes of good practice included the following:
-
Small business earning less than R5 million annually. The focus was to
determine how they would be impacted should there be non- compliance of the
codes on their part.
-
Individuals supporting and working for business owners.
3.2.1 Philosophy
The way in which data was gathered analysed and used was based on what is known
to be true, what is believed to be true, reliability and what the positivists view assert.
This is the best approach as it best in understanding people views, perceptions and
opinions in a specific setting and in this case, small business that benefit from BBBEE.
Since research paradigms help guide what is discovered in a study through opinions,
perceptions and assumptions, not only should it be aligned with a deductive model but
should help in findings of the study as well as identifying gaps. The manner in which you
identify structure and process used in research study helps build hypothesis and
identifies variables to manipulate and measure based on exploration and
experimentation. In the end the findings of the study are generally used to inform theory
contribute to literature and therefore strengthen theory.
In general, the primary goal of research paradigms is to generate explanations
associated with causal relationships, hence the data gathered and analysed presented
views based on what is believed to be true, reliable and positivist paradigm of exploring
social reality based on one’s gained understanding of what exists through observation
and reason. According to these sets of paradigms used, what strongly came out from
the research respondents is that true knowledge was based on experiences,
observations and generality. This is what leads to predictions, analysis and
phenomenon rooted in findings and recommendations of the study. Since the study used
55
a qualitative method of research, the following narratives were discovered from the
responses.
-
A clear understanding of the phenomenon of the study,
-
Views explaining the situation by generating a theory,
-
Generating meaning to the study and
-
Participation in the theory of the study.
Through interaction between the researcher and participants, an understanding was
gathered into small business and the impact of BBBEE in relations to small business
accessing and contributing to economic growth now and beyond. The idea was to
understand their views, perceptions, opinions and experiences through reliability and
positivist approach (Goldkuhl, 2018:12, Thanh &Thanh, 2015:23-26).
Figure 3.1 shows the model used in the study and the relationship between the impact
BBBEE has on small business and its implemented success as conduit towards access
to economic development.
Figure 3.1: Independent and Dependent Variables
56
3.2.2 Approach
The research approach as stated by Creswell (2012), is the aspect of research that has
to do with the plan and procedure varying from broad research assumptions to detailed
methods of how the data was collected, analysed, and interpreted. The study will be
performed based on literature review and the data from the responses will be analysed
based on the questionnaire used to measure qualitative findings. These findings will be
used for the sampling of views since the approach is exploratory. The qualitative method
will also be used to gather information based on open ended questions, narratives,
experiences, themes, discourse analysis and comparisons. An interview guide will be
developed in a form of a questionnaire used to gather data.
Information gathered using the qualitative method will be used to analyse the views,
perceptions and opinions of the participants while helping in addressing some of the
question regarding BBBEE, its impact on small business, and its benefit including if it
profitable for wealth generation and economic growth. These views will also confirm
whether certain notions and aspect of BBBEE were used for political patronage
purposes which benefits the elite, the politically connected, and tenderpreneurs. The
research study will also consider variables as attribute to the properties and object of
the study.
3.3 Research Methodology
For primary sources, an interview guide in a form of a self- designed questionnaire was
used to collect data from varying small businesses. It was further used for qualitative
purpose to ensure flexibility, ensure that there is interaction and for it to centre around
participants as well as help in gaining valuable data that is defined by verbal and nonverbal behaviour. The questionnaire was developed to ensure the information from small
businesses dealt with issues relating to the impact and effect of BBBEE on small
enterprises. The other part of the questionnaire and since the research carried a
qualitative use, was used to gather views, opinions and perceptions on whether the
government policy on BBBEE indeed supports small business. The last part of the
questionnaire shows the target population of small enterprises and provided insight into
the type of business, industry and turnover to mention but a few.
57
For secondary sources, data that is gathered from research reports, developed and not
limited to certain institutions such as the NEF, DTI, Africawatch and the JSE will was
used.
3.3.1 Target Population
The target population identified was made up of small business enterprises. It was
important to choose a population whose views make up public opinion. Part of the
population included people who worked for small business / enterprise. Statistically,
most respondents were from the Gauteng province (63%) with the Free State (23%) and
Mpumalanga (7%) and North West (7%) following (See Table 3). The majority of the
respondents owned small business and followed by those who worked for small
enterprises.
Table 3.1 Provincial Breakdown
Province
Frequency
Percentage
Gauteng
19
63
Free State
07
23
Mpumalanga
02
7
North West
02
7
Total
30
100
Added below is study of small business participants based on sector / industry, the
number of employees, BBBEE level status, annual turnover and years of experience
operating.
Table 3.2: Study of Participants
Pseudonym Industry
No.
of BBBEE Business Turnover Operating
Employees Level
Size
Annually
Years
Business 1
Events
5
2
Small
5 million
12 Years
Business 2
Services
90
4
Small
Micro
22 Years
Exempt
Business 3
Training
18
4
Small
3 million
9 Years
Business 4
Construction
6
2
Small
6 million
6 Years
Business 5
Automotive
30
4
Small
5 million
10 Years
58
Business 6
Hospitality
8
Not
Small
3 million
6 Years
Small
Not
7 months
Aware
Business 7
Construction
55
2
stated
Business 8
Electrical
87
1
Small
Not
15 Years
stated
Business 9
Security
45
1
Small
Not
12 Years
stated
Business
Construction
12
4
Small
10
Business
Micro
18 Years
Exempt
Tourism
10
2
Small
5 million
20 Years
Media
12
Not
Small
3 million
7 Years
11
Business
12
Business
Aware
Construction
30
4
Small
6 million
22 Years
Construction
16
4
Small
3 million
8 Years
Services
7
1
Small
2 million
5 Years
Construction
34
1
Small
5 million
8 Years
Manufacturing 24
1
Small
5 million
8 Years
Plumbing
4
Small
Not
6 Years
13
Business
14
Business
15
Business
16
Business
17
Business
3
18
Business
stated
Services
1
1
Small
19
Business
4 Years
stated
Construction
28
1
Small
20
Business
Not
Not
17 Years
stated
Construction
10
1
Small
6 million
14 Years
Training
22
1
Small
5 million
17 Years
21
Business
22
59
Business
Financial
23
Services
Business
Construction
12
2
Small
3 million
10 Years
5
4
Small
Not
18
stated
months
24
Business
Insurance
12
2
Small
4 million
19 Years
Legal
8
2
Small
Not
17 Years
25
Business
26
Business
stated
Manufacturing 36
1
Small
5 million
15 Years
Events
Not
Small
Under 6 16 Years
27
Business
3
28
Business
Aware
Construction
13
4
million
Small
29
Business
Under 5 12 Years
million
Financial
22
1
Small
5 million
11 Years
30
Note: †, Business 6,12, 28 were as excluded from the study due to omissions
Identified on their BBBEE Level.
3.3.2 Sampling Design
A sample size of 30 participants was used and the technique used to get a sample which
represented established facts was the snowballing technique. The sample technique
was also used to generalise findings using close ended questioning. There was a use
of non-probability sampling targeted at getting meaningful views and clear context from
participants. The type of sampling used was snowballing and that is a form of identifying
participants by way of referrals or networking. This sample technique is useful in
identifying patterns, themes and frequencies based on the data that is collected from
the sample size and the sample only considered South African small businesses in
respective regions.
The sample technique will not only represent various types of businesses that have
benefited or not benefited from BBBEE but will contribute to providing findings to the
research study. Since this a qualitative method of research, the sample technique will
be directed at selecting cases and themes that will help deepen the understanding of
60
the impact of BBBEE on small business. It was also important participants were carefully
selected in meeting the criteria of having adequate years of experience and expertise
as a small business owner and having a majority black ownership in the business. In
terms of contact, participants were contacted telephonically and via email and requested
to participate in the study.
3.3.3 Research Instruments
A questionnaire interview guide was developed and used as an instrument to look
further into issues of policy around BBBEE, aim and objectives, benefits and how can
BBBEE be used as a catalyst to close the economic gap and existing inequalities. The
interviews were conducted telephonically due to lock down restrictions as a result of the
COVID-19 pandemic. The use of the interview guide / questionnaire helped structure
interviews, collate data allow for further probing as well as questioning and further
analysis which was based on reliability, validity and uniformity between differing
indicators in the interview guide. The end goal is that after data has been collected and
analysed, this will inform an understanding of whether BBBEE benefits small business
and if it contributes to economic growth.
3.3.4 Data Collection Techniques
The collection of data was collected through disseminated and conducted semistructured interviews with identified small businesses and each timeline met while there
was at the same demonstrated appreciation for them taking part in the study (Darlington
et al., 2002).
Interviews took an average of 45minutes to conduct and there were done either
telephonically due to COVID-19 restrictions and participants were made aware of such
restrictions including the anticipated duration of the interviews prior to participating.
Codes for emerging themes were developed as a form of grounded theory technique
used and significance of issues arising will be classified using these codes (Fauconnier
and Mathur-Helm 2008). There was also the use of descriptive coding for transcripts
highlighting data which is important and that could be used to identify descriptive codes
but mostly importantly to maintain accuracy. These descriptive codes were identified
also using interpretive coding for purposes of clarifying, explaining and application of
interpretation on data sets. Informed consent was verbally read out to participants and
61
confidentiality was guaranteed and this was explicitly outlined in the questionnaire to
ensure commitment especially where the aspect of recording was concerned.
Table 3.3: Study Codes and Themes
Code
Theme
Economic Growth
BBBEE Effects on South Africa
Sustainable Economy
Declining Economy
Equality
BBBEE impact on industries
Funding
Tender Distribution
Industry Growth
BBBEE Monitoring
BBBEE Future
BBBEE Measurement
BBBEE Evaluation
BBBEE Reporting
Note: †, BBBEE: (Broad Based Black Economic Empowerment)
3.3.5 Reliability and Validity
To ensure reliability and validity of the research study, the study was put together in a
manner that the results from the data occurred consistently even when replicated by
another researcher. Validity on the other hand of the qualitative research ensures
credibility and applicability once interviews were conducted telephonically through a
recording, it was determined that the data could stand independently. Reliability and
validity was further achieved in that the study was compiled in a way that captured the
participants attention where information appeared and was perceived to be rich in
forming their own decisions based on the findings (Creswell, 2014).
3.3.6 Data Analysis
Themes generated were used for analysis from selected data since its able to identify
and report on patterns from collected data. The analysis of data was used to bring order
meaning and structure to collated data (Schurink et al.,2011:398-403). For conducting
a qualitative illustrated step for analysis, the researcher used themes and content
62
analysis. Responses from all participants were generated in a (%) format. Coding was
applied and used to ensure anonymity of participants when analysing data. Once data
is collected, analysed, and interpreted, it was presented electronically with a password
protection to ensure that it is not manipulated. The research data not only contributed
towards academic field, but it brought validity to existing research which further
illustrates the reliability of the research study findings.
Additionally, the methods used in the study was innovative through employing of
analysis to understand and evaluate the data. Particularly for this study, qualitative
content was investigated as a suited method to interpret and code data based on theme
and forms. Data collection used semi structured and telephonic interviews as this
approach is controlled, methodical, controlled and analyses text from the questionnaire
without the application of quantification. The interviews gave an allowance for deeper
awareness and understanding of the participants responses and their opinions and
attitudes towards particular and specific questions. Using qualitative research design
method was appropriate in collecting data on perception, views and experiences of the
participants than would a quantitative research method which uses numeric or empirical
data.
According to (Treasure, and Chadwick, 2008:111) using a qualitative approach which is
inductive in nature, ensured the application of thematic analysis. This is one of the most
used form of research as it involves determining categorisation of data, it is essential for
coding and affords the capability to analyse the identified patterns and themes derived
from the report which the researcher endeavours to address. The outcome of analysis
based on the themes and patterns was as a result due to the descriptive approach to
answer question and derive meaning from the research study.
3.3.7 Delimitations
The research study carried limitations and strengths as follows:
The research study’s aim and goal was to make a contributing towards understanding
the impact of BBBEE on small business and the legislated code of good practice on
these businesses. This is a limit on its own due to the fact the topic of BBBEE comprises
a substantial field of research studies and only a single aspect affecting small business
63
formed part of this research study. Therefore, how the results are interpreted should be
with the view in mind that the limitations highlighted below.
Limitations: gaining access to information on how BBBEE is monitored, measured,
and evaluated.
Since the research study used semi-structured interviewing, the
outcome may be mistaken or faulted as being biased.
Reluctance from other business from wanting to participate in the
research study especially where questions of affiliation and wealth are
concerned.
The sample restricted to small businesses only and could appear one
sided and probably providing a biased view and result in a weak
generalisation. Therefore, further research may be required to get
views of others such as small business consultants and parent
organisations or even buying organisation.
Lack of adequate and sufficient supported by literature.
No clear indication of wealth creation findings and small business
contribution to the GDP. The JSE reports differently from other stateowned institutions on small business contribution to the economy of
South Africa.
The topic of BBBEE is controversial and with a sample size of 30
participants, generalisation might prove difficult.
COVID-19 making is difficult and impossible to conduct face to face
interviews.
Difficult to predict development of the topic and future of the impact of
BBBEE on small business might continue until a formal study is
commissioned.
Inadequate measure of study aimed at measuring the impact of
BBBEE in relation to small business and financial performance.
BBBEE policy is vast and for the intent of the study, only particular
aspects influencing small business were studies
The transcription and analysis of data or responses.
Importance placed on the changing aspects of the BBBEE scorecards.
64
Strength
Gaining and in-depth perspective and context on the impact of
BBBEE
on
small
business,
future
benefits,
process,
and
measurement of scorecards.
The use of the questionnaire in gaining more insights on based on the
responses.
Good experiences expressed by participants in the research study.
Profiling socio-economic characteristics, patterns and fixtures used in
understanding BBBE policy and its aim of using small business to
contribute to economic growth, job creation and wealth generation.
Gathering of consistent themes relating to different businesses and
perceptions about radical socio-economic transformation, the
benefits and impact of BBBEE.
Evidence of BBBEE contributing on the economy globally if properly
implemented and monitored, BBBEE.
3.4 Ethical Considerations
Ethical considerations were applied to report honestly and fully according to the
institutional ethical requirements and standards. Since qualitative research is dynamic,
unpredictable and relates to human perceptions as well as attitudes, it was important to
apply ethical consideration. Confidentiality of participants was assured, and they were
requested to sign a consent form which is an important aspect of an appropriate
research study (Pradad, 2013:79). Given the structure of the questionnaire, participants
anonymity was assured. The questionnaire findings from the participating individuals
were treated with confidentiality and individual respondents’ issues raised will be
discussed on an individually with the respective respondent. Respondents were
informed of the purpose of the research study and the participation of the respondents
was voluntary.
To ensure anonymity, data will be preserved in a consistent way which is considerate to
participants consent in a way that prevents any unauthorised person/s to gain access.
Random numbers were assigned to participants so that information about them cannot
be identifiable by other people. There was no physical harm inflicted on the participants.
Ethical considerations will also ensure participants are not coerced and privacy will be
maintained. Avoid putting pressure on participants in providing in-factual information.
65
3.6 Conclusion
This section of the study concentrated on the research method and approaches used
and justifies how small business view, recognise, observe, and perceive the impact of
BBBEE on small business. The research study conducted was made up of 30 small
business and the results of the study are presented in chapter 3. The participants data
was collected through using themes and quotes as using other forms of techniques such
as the Cronbach or Chi-squared instrument would not have been viable due to the size
of the sample. The data was collected using interviews and a questionnaire guide in
order to be able to easily make proposition and recommendations of the study based on
the analysis of the data. The method used in the study was a qualitative one and
research study provided significant results which contributed to addressing the lack of
information available through literature domains on BBBEE and its impact on small
business contributing to South African economy. The participants’ data analysed
showed that BBBEE adding to economic strain and increased tenderpreneurs instead
of contributing to economic inclusion and growth. There was an emphasis for a review
and restructure on BBBEE legislation and model of how it is measured in the future. The
findings were also critical in considering business owners and policy makers used in
long term survival of the BBBEE framework while contributing to economic growth.
BBBEE policy is a sensitive and controversial discussion in South African business
landscape. It is designed with the objective of empowering the previously marginalised
black population with an intend of promoting economic empowerment. It is a unique
structure relevant to the South African conditions due to the context of the injustices of
past under the apartheid regime. What was derived from the findings is the clarity on the
views that the current ANC government needs to reconsider its agenda of transformation
and especially where practices of BBBEE are concerned which currently appear to have
little credible trust and honestly receive little support from those businesses who own
the means of production, who own management and have economic control in South
Africa.
Furthermore, there was a prompting in the findings for future research involving
determining the BBBEE future through small business lenses. The objective for
conducting the research was achieved through qualitative research method followed by
an interpretive approach and exploratory research design. It should also be noted that
66
the majority of the respondents in this research study were black and from previously
disadvantaged groups.
It is also clear from the data collected that participants did consider BBBEE as crucial
and critical towards economic development, eradicating racial marginalisation, skills
development and has top of the agenda the need for economic transformation. Thus,
agencies or state-owned entities such as the IDC, NEF, Development Bank of South
Africa should be considered and factored in funding, development of small business in
order to ensure alignment of governments strategic plan of structured reforms and
initiatives geared towards the promotion of black people in participating in the economy.
While there is a sense that the BBBEE scorecard and adherence as well as compliance
to the Codes of Good Practice is a liability, 100 percent of the participants suggest that
if properly and effectively implemented with revised codes, BBBEE can easily
demonstrated and translate to not only economic growth for the country but also
transformation through small business leading to job creation, poverty reduction,
increased level of productivity, ownership and management. This illustrates that the
respondents and familiar with the components of the codes of good practice and are
fully aware of what the qualifying criteria for small business is.
Since it is accepted across the world that small business is the lifeline of the country in
the development of business, this would on the main, result in the prosperity of the
country, with people living harmoniously, minimised crime, increased rate of
employment, eradicated poverty and balanced relationships across race and gender. In
contrast, this was however without views of other small business respondent who
purport that the lack of emerging black business owners eminently equates to the lack
of impact on small business. However, there was general consensus that skills
development was crucial in equipping and empowering small business, hence the
proposal for policy makers to in proportion review, adjust and revise the BBBEE
scorecard.
BBBEE will also be a sensitive topic given the history of apartheid in the country
however, if properly executed, the benefits and impact BBBEE it can have on small
business and partnership with private business can yield the following benefits:
-
Turnover through a preferential procurement resulting in revenue injections.
67
-
Development of skills. training and mentoring to improve capacity, depth of
adequately running a business and competency level required for small
business.
-
Enterprise development for competitive advantage and dominance in the
market.
-
Networking and collaboration to bring added skill sets benefit everyone.
-
Funding for development and empowerment to attract both local and foreign
investment.
-
Individual development through the organisation’s development programme.
-
Eliminated poverty, alleviated rates of unemployment, contribution to job
creation, ownership of land and property, job promotions, stimulus to
economic participation, growth, and generation of wealth.
4 Chapter Four: Research Findings
The intent of this chapter is to draw the research results from the semi-structured
interviews conducted. The interviews were carried out in English, recorded and
transcribed into text for analysis of data purposes. Themes and patterns were identified
and analysed to substantiate and corroborate the answers to the research question. As
stated by Burnard et al (2008), a thematic analysis of research study has to with
identifying themes and categories of data into emerged themes, thus analysing themes
to what the researcher endeavours to address.
In terms of participants profile, 30 interviews were conducted however only 27
responses were analysed due to the other three respondents not disclosing their BBBEE
level. As mentioned in chapter 1 under point 1.1.1, statistically the data collected
represented 78% males, 22% females, an average age of 46 years (business owners),
100% black owned business and an average of 13.6 years of experience as small
business owners. The study comprised 20 questions based on 10 demographic
information type questions and a questionnaire of 10 text questions. All participants were
of South Africa origin owing to the research focus and companies were based in four
different provinces within South Africa, namely, Gauteng, Mpumalanga, North West, and
the Free State.
Based on the findings, three main themes emerged and were revealed by participants
views and responses and these are:
68
-
BBBEE as a catalyst for economic growth and empowerment.
-
The impact of BBBEE on small businesses.
-
The future of BBBEE on small business now and beyond
There are different approaches to qualitative analysis and below is a six steps thematic
process that was followed in analysing the data collected and measuring the themes
prevalent in the study.
Table 3.4 Thematic data analysis: (Braun and Clarke: 2006)
Familiarity
Going through the data more and more to acquire familiarity. Given
the small sample of the study, the data did not fit the Cronbach nor
the Chi-squared analysis of data. The frequency of the analysed
data was undertaken by segmenting the data into columns to record
variables and percentages from the respondents. Adopted also in
the analysis was the cross-tabulation technique used to compare
data from the independent, dependent and intervention variables.
This analysis considered the cause of the value and its
independence on the effect value which depends on the changes in
the cause value. In research terms this is known as the relationship
between the independent variable and dependent variable. What
was familiar with the data is that it represented the result of the
entire group of respondents.
Theme probing
Collection of data and probing of themes used to recognise and
classify emerging themes. Doing such analysis provided a direct
investigation of the transcripts applied using the qualitative
approach. Insights provided here were historical, social and grants
a specific relationship based on applied codes. Themes probed
were not obtrusive and could interpret as well provide insights into
the perceptions, thoughts and the language used.
Labelling
Direct content analysis as well as codes were subtle and were used
to identify elements that are important, derived directly in the data
and necessary to respond to the research question as a means of
grounding the theory.
69
Theme analysis
Themes were reviewed against the data that is collected in order to
ascertain the evident story line used in answering research
question.
Theme categorisation
Emerging themes were analysed in detail emerging themes with
much attention paid to each theme conveying its own story. This
process included the counting of words that turned to latent
meaning or patterns (Hsieh & Shannon, 2015:1276).
Documentation
This involved consolidating and combining the narrative in the
analysis and relating it to the literature reviewed.
Based on the themes analysed and measured, it can be asserted that there was
credibility in the research as there were forms and patterns of phenomena that are
succinctly described in the research study. This method also cemented that notion that
participation was voluntary and participants were given the prerogative to withdraw from
the study should they wish to. In order to increase the level of participation, the
researcher used clear communication and used probing questions to increase the
credibility of the study. To avoid losing the level of credibility required in the study,
participants were asked to relate their experiences and observations with fear, bias or
unfair treatment.
The data collected from small business was qualitative and in order to achieve the
desired results, was interpreted using analysis of data, coherent themes and views on
the topic of the research study. Although 30 participants participated, only 27
participants data was used and analysed. These representation from findings were
based on the following themes, views, opinions, experiences, and perceptions of
respondents.
A) BBBEE as a catalyst for economic growth and empowerment:
A total of 75% participants revealed a strain, frustration and punitive measures resulting
from scorecard compliance which results in mixed economic progression and outcomes.
The results also revealed that BBBEE was increasing the number of unskilled and
companies that are incompetent as a result skewing the economic progression growth
while promoting tenderpreneurs. While the economy is being skewed due to
tenderprenuers and instead of addressing the social injustices of the past, corruption
continues to be a sticky point in South Africa’s economic development and participation.
70
None-Broad Based Black Economic Empowerment businesses were being awarded
tenders in spite of them not being complaint and meeting the required criteria of
recognised BEE level. Hence 80% the respondent’s views that this operation was in fact
dropping down the economy, creates government suppression which then results in the
closing down of small businesses.
The need for an added number of black women with more ownership and shareholder
value and this comprised an overwhelming 98% of the participants responses.
An average of 56% stated that a lack of funding being a constant constrain for tapping
into economic growth opportunities. Unfortunately, due to the fact banks have reluctance
in extending themselves, small business must rely on state owned funding entities such
as the IDC, PIC and but not limited to, the Development Bank of South Africa.
B) BBBEE impact on small businesses:
An overall 2% of the participants revealed that the main impact BBBEE has on small
business was an increase in tender corruption including incompetence in conducting
assigned projects. There was uncontrolled spending of tender capital which influenced
industry growth. This is based on an analysis of variance based on participants
perception on the impact of BBBEE on small business industries based on different
dimensions and business performance.
Figure 3.2: Financial Performance (return on investment, dividends, share price (2019)
Other suggestions made by a percentage of 18% participants point to the fact there was
a positive BBBEE impact to the previously disadvantaged, in contrast however, BBBEE
in small business presents and negative impact due to the number of employable people
71
required as evidence that companies are upholding the BBBEE guidelines and
regulations.
Other participants averaging 9% perceive that BBBEE somewhat does have an impact
on small business in that it has helped in creating employment for the unemployed
women and the disabled. It has contributed to upskilling and closing the shortage of
skills gap.
Other participants’ (1%) views of those in the construction industry, believed the grading
of small businesses into level nine, a level just below big businesses is an immense
benefit.
C) The future of BBBEE on small business now and beyond:
In conclusion, it became distinguished by the responses from participants that BBBEE
legislation required review and restructuring. Only a few participants indicated that the
policy should remain unchanged. According to the participants, the need to review and
restructure BBBEE policy is to equalise the economy while providing equal opportunities
for all for sustainable economic growth. Since the purpose of the research study was to
explore and gain an understanding on the impact of BBBEE on small business, this
objective was achieved through the lenses of small business participants in the study.
This also resulted in credible, valid, reliable and valuable input and feedback.
Some of the finding indicated a need not to eliminate the BBBEE policy as it has great
potential to contribute toward economic inclusion and growth as prepositioned by the
DTI. This growth will not only benefit the middle class but also the poor and in future
with BBBEE being restructured, cater and include other races as a result contributing
towards reducing corruption and practices of fronting. This would also result in increased
growth of small businesses.
It was also recommended through the findings that small business owners who
implement BBBEE into the business not only stand to be incentivised but could also
pursue and contributing to restricting of policy and strategies on how to implement,
monitor, measure and evaluate the impact of BBBEE on small business in the long run.
The results could also lead to formulating small business forums where business could
share on best practice, experiences of BBBEE and further identify methods and
techniques to overcome the ineffectiveness currently existing. Tap into untapped
external potential using diversification to realise growth.
72
5 Chapter Five: Analysis of Results
The objective of this research study was to explore and understand the impact of BBBEE
on small business. Participants on the research study came from different industries,
background, with different years of experience and level of expertise. The objective of
the research study was accomplished and the results demonstrate credibility and
validity. Based on the findings, three main themes emerged and were revealed by
participants views and responses and these are:
-
BBBEE as a catalyst for economic growth and empowerment.
-
The impact of BBBEE on small businesses.
-
The future of BBBEE on small business now and beyond
It should be noted that without a doubt, the BBBEE indeed does impact the South African
economy and one of those means is through small business. According to the
participants, the legislation on the scorecard and codes of good practice created strain
and burden demonstrating a reoccurrence of the injustices of the past. While BBBEE
impacted the economy, it also on the contrary, influences industries operating in South
Africa. A good illustration would be an expression by the participation that there was a
rise in tender corruption within the different industries, and a rise in incompetent BBBEE
owned businesses. Additionally, the participants felt considering the future of BBBEE on
small business, there should be a review and restructuring of legislation to eradicate
corruption and fronting tendencies so that all individuals can equally benefit from
BBBEE.
There was however validity on the lack of research on such a related research study
and this significantly accentuated the need for more contributions of research studies to
bridge the existing gap on literature. The findings of the study further identified as
illustrated by (Andrews:2007), (Thabe:2010), that while BBBEE was promoting
previously disadvantaged people, legislation surrounding it was restricting growth
economically and development of skills. Therefore, these findings do contribute towards
an increase on data that is empirical on such a related research study. Furthermore,
some participants view and believed there was value extracted from programmes such
as the BBBEE program both from a financial perspective (funds, revenue and grants)
and non - financial perspectives (skills development, training, networking with other
73
partnerships and participation in markets). This was in no way identified as a complete
waste but a plausible opportunity to derive some value from.
Other views from the participants maintain that there were benefit of turnovers through
preferential procurement, training and mentoring which equipped and capacitated
participants especially at business level. The level of skills development and skills
transfer was viewed positively by most participants as it empowered and resulted in
increased competitiveness as well as competency levels required for running small
business. A firm finding and believe from the participants is that all these could result to
having compelling businesses that contribute towards the reduction of unemployment
and subsequently contribute to the national budget.
The research findings from the study provided a novel methodology for analysing
BBBEE impact on small business. The findings further represented the perception of
small business owners on legislation and complete effect of BBBEE on the economy of
South Africa. With small business being the lifeline of economic growth and job creation,
it was critical to appreciate and recognise how the current BBBEE legislation was
impacting them. There was also an identified lack of literature on the impact of BBBEE
on small business especially from a qualitative discipline or technique hence the findings
constitute towards an increased amount of data to be used within the academic domain
on the impact of BBBBE based on the views of small business (Janse van Rensburg &
Roodt: 2005), (Oosthuizen & Naidoo:2010).
The research study was conducted methodologically by the researcher to employ
analysis based on themes to understand and for data evaluation. The thematic analysis
comprised the descriptive coding which comprised going through the transcripts
emphasising and underlining data to identify descriptive codes. The other stage involved
interpretive coding using clustered codes to elucidate and apply interpretive coding to
the entire data set. The last stage comprised overarching themes from which key
themes of the whole data set were developed and assembled to represent the
association of codes. Data was collected using semi-structured interviews which allowed
for a deeper understanding and insight into the participants attitudes, perceptions, and
responses towards each question. In collecting data on the perceptions, attitudes, views
and experiences, using qualitative research design instead of the quantitative technique
was more appropriate.
74
6 Chapter Six: Conclusion and Recommendations
The research study concentrated on exploring the views of small business on the impact
of BBBEE. The selected enterprise had to be small business which is majority black
owned in South Africa. Indicators and recommendations will be made based on the
findings in chapters 2-4 and suggestions for future research will be followed by way of
a summary of the completed research study.
The use of a qualitative research design was appropriate and contributed towards
addressing the lack of literature within the academic domain on the impact of BBBEE
on small business and its effect in using small business towards economic growth and
inclusion. The results show that there were economic burdens and strains experienced
by small business due to challenges of fronting, tender corruption and promotion of a
few black elite. BBBEE as a legislative intervention much as it has promoted small
business development since 2004, it has not had a huge impact on small business
especially on economic growth. Thus, participants stressed that the future model for
BBBEE programs should be reviewed and restructured. The findings further illustrated
implication regarding monitoring, evaluation of data as well as consequences essential
for business owners and makers of policies to regard for long term survival and
economic growth. The objective of the research study was also achieved through an
appropriate qualitative research technique followed by a thematic paradigm and an
exploratory research design.
The themes derived from the study and used to draw conclusions on how and if BBBEE
impact small business and the most notable conclusion derived involves the following:

Most policies and legislated interventions were put in place with a focus on
economic
transformation
and
empowerment,
ownership,
eradicating
unemployment, reducing inequality and economic growth in the country.

Small businesses believe the legislation for compliance with BBBEE is a
challenge as a result the anticipated degree of accomplishment by BBBEE is yet
to be quantified.

Revised scorecards and codes of good practice to ensure aspects of economic
development are attained.
75

Much as preferential procurement is seen as an advantage for small business,
the scoring criteria is a challenge.

A critical threat remains to fulfilling the key elements embedded in BBBEE of skills
development, enterprise development, job creation, economic empowerment,
and wealth creation.

Skills shortage during to the apartheid regime and the perpetuated enrichment of
the black elite, the increased inequality gap results as a disadvantage to BBBEE.
Many people do not have post matric qualifications while other have no skill at all
to even attempt or run a business successfully and efficiently.

The study has revealed an inherent and still an insufficient number of people with
ownership, management, and control.

Complex and time straining implementation process of BBBEE with lack of
literature in measuring the success of the BBBEE process through forms of
monitoring and evaluation.

The challenge with BBBEE is that legislation requires that businesses should
have an annual turnover of R5 million, and these businesses are yet to implement
BBBEE in their businesses. Some small business consists of only one owner but
might have a high turnover due to supply and demand based on different
seasons.
While small business is not directly involved in policy making, it does however play a
crucial role in the economy especially in skills development and job creation.
Recommendation was based on the conducted study, analysis, themes that emerged
and views of participants (small businesses) who presented certain indicators that
should be amended for BBBEE to make a viable contribution to small business.
Specific recommendations were made with this analysis and indicators presented as far
as the role of Government, prospective empowering partners, the Department of Trade
and Industry, State Owned Funding Institutions and small businesses. It is also
postulated that state owned funds can launch distress funds during instances such as
during devastating pandemics and offer equity as well as concessionary loans at lowest
interest rates during periods of disruptions.
For ease of reference the recommendations with be segmented into different categories
as follows:
76
6.1 Government – Broad Based Black Economic Empowerment is a legislated
intervention and ratified by government to ensure intervene and ensure economic
transformation, eradicate racial discrimination, and promote interests of the previously
disadvantaged groups. Among the respondents in the study, 65% revealed BBBEE has
a negative impact on small business and based on this the following recommendations
were made:

Government to consider tax and compliance rebates for small businesses that
contribute to the creation of jobs and skills development. This automatically
becomes a coordinated effort towards addressing the high unemployment rate in
South Africa with an inclusion of expanded training programmes through BBBEE.

Revise the scorecard and compliance which is burdensome and cumbersome.

Since skills development comprises more than 1.5% of the payroll spent on black
people, black people can receive more than 75% of expenditure on skills
development over the periods 2014-2020. This can help people in developing
skills required in running a business and understanding essentials control
inherent in running a business.

Government to put mechanisms in place that can be used to avoid fronting and
tenderpreneuring, thus eradicate a few black elite benefiting from BBBEE.

Government to collaborate effectively with small business as a stimulus to
economic empowerment and wealth creation as well as provide the much needed
assistance and support from Government.

Small businesses should be priorities as far as deal funding is concerned as small
business commands the need for redistribution, future growth and employment.
The relatively high targets have little meaning since it is evident that the
redistribution approached is biased and likely to fall short in relation to
incentivising small business.

Have economic distress funds for small business during disruptions since it is
black businesses who due to the history of the country, struggle the most to have
access to affordable capital and are generally dealt a heavy blow during
disruptions such as drought, recession and pandemics.

Government should have partnerships with private sector and decide on revised
policies on assisting small business gain access to financial funding.
77
6.2 Department of Trade and Industry – As the custodian of BBBEE, the DTI should
ensure that policies are made and evaluated as the means to empower and should have
indicators depicting the success and impact of policy interventions. Therefore, the
following is recommended:

Ensure they have people with the right skills and expertise to advise and support
small businesses on matters relating to BBBEE processes.

Make the implementation of BBBEE less cumbersome and frustrating and
instead have framework that seeks to empower, transfer knowledge and
enterprise development.

Re-evaluate and where necessary repurpose the objectives and goals of BBBEE
as a scorecard used to effectively address socio economic issues.

Constantly assess trends in the changing local and global environments to
ensure the policy is not a redundant dinosaur.

Consider an amendment of the school curriculum with an inclusion of subjects
relating to entrepreneurship and technical subjects as compulsory at high school.
This can easily be carried out as majors at institutions of higher learning who are
already offering courses such as entrepreneurship. This will orientate learning
easily in the world of work and the world of business management and ownership.

Have partnerships with different industries and sectors for experiential training in
the workplace.

Use agencies such as SEDA and the National Empowerment Fund for
mentorship, incubation, and skills development purposes.

Have a target to reach within a particular time frame as it would not make sense
to disadvantage a white minority who was born 30 after democracy from
participating in the empowerment economy.
6.3 Small Business – talent combined with hard work is a plus but even better when
there’s opportunities and platforms available for the promotion of such. For small
business skills development and empowerment are key to the success of economic
growth.

Since the majority of respondents in the study assert the lack of BBBEE impact
on small business, it is recommended that there should at least be a partnership
and BBBEE and small business to look beyond just issues of redistribution and
funding but also embed as part of strategy, plans for foreign and direct investment
78
opportunities, skills development, and education. While it was evident in the
responses from small businesses that BBBEE as a legislation was burdensome,
it was perceived that it is an opportunity for growing business especially through
preferential procurement and skills development. (Esser, 2018:156). This can be
achieved through planning and financial knowledge on aspects of owning a
business as well as depth in how to run business that contributed to economic
growth.

Have an in-depth understanding of being BBBEE complaint and build networks
in related business industry or sector for support.

Acquire knowledge and skill required for small business as a conduit of economic
growth and wealth creation.
6.4 Empowering Partners – this includes both private and strategic public partners.

To ensure a positive contribution towards empowerment and the business, have
a targeted approach in identifying industries familiar to theirs. Retrospectively,
government should seek to have partnerships with private sector since it
constitutes and comprise private business and community based organisations.
Sectoral or industry based partnerships can form part of such partnerships.

Critical for government to have a full assessment of the prospective partner to
avoid business conflict and this can be in a form of charters and scorecards used
to classify avenues through which an industry or sector can be BBBEE complaint
thus promoting BBBEE through voluntary participation in promoting BBBEE the
relevant scorecard.

Insist on honesty from the small business partner.

Have a buddy system between private business and young black business
owners to coach them in how to deal with business principles and constraints that
come with being a business owner.
6.5 Future Research
It would also appear that even after more than two decades of the South African
democracy, BBBEE was unsuccessful in promoting the emergence of black business
owners. Recommendations outline above could be applied as a guide for a more
impactful way of contributing and promoting small business. While there’s still much that
79
is recommended, the following are prepositions supporting future research on the same
study:

The lack of adequate and sufficient literature locally on small business and the
impact of BBBEE necessitates focus and attempts for more research on this
research study.

Recognition and upskilling of small business as capable of managing their own
business and driving it towards economic growth and job creation. The supports
the notion that BBBEE compliance is burden that can easily be relaxed.

More scientific research is needed to assess the impact of Broad Based Black
Economic Empowerment on small businesses is encouraged.

Improved commitment and enhanced monitoring and evaluation system to
assess the successes, pitfall, challenges, and problems of BBBEE. Companies
report without the government taking steps to validate accuracy of data
presented.

Address the challenge of having adequate knowledge and skills required to run
small business programs successfully, especially where the applying of the
BBBEE legislation on scoring and adhering to the code of good practice including
measured contribution to the economy is concerned.

Improved access to funding and grants.

Attention and methods of dealing with the emotional turmoil and the
administrative burden when engaging with BBBEE.
Having said this, there clearly exist elements of trade off and partnerships with private
business to provide a valuable contribution through skills and networking capabilities.
BBBEE alignment with the National Develop Plan will seek to ensure proper monitoring
and evaluation of policy while at the same time, ensure to accomplish the economic
empowerment objectives of redressing the inequalities and injustices cause by the past
regime. This is not only in the best interest of the country, but will through small business
ensure economic stability, growth, job creation and an environment where a huge
proportion of black are included in the economy.
Furthermore, there was a general consensus from the participants to have renewed
commitment between government as significant parent and small business as
beneficiary of the BBBEE program as this relationship is perceived to yield linkages to
reward and cost. This is also indicative of the relevance and of importance of properly
80
implementing the success of small business geared programs. In terms of monitoring
and evaluation, the overall perception from the participants is that the programs are
poorly managed, monitored, measured and evaluated. In conclusion the objectives of
the research study were accomplished and entailed determining future research study
on the impact of BBBEE as viewed by small business
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Annexures:
Code number: Sample of questions used in the questionnaire.
QUESTIONNAIRE:
IMPACT OF BROAD BASED BLACK ECONOMICEMPOWERMENT ON SMALL
BUSINESS ENTERPRISES
Private Bag X6001
Pinehaven Country Estate
Krugersdorp North
CONTACT DETAILS:
Tsholofelo Motloung
Cell: 011 296 0000
E-mail: Tsholofelo.mokele@gmail.com
Ethical Consideration
All information will be treated as STRICTLY CONFIDENTIAL and will only be used for
research study purposes. This is my responsibility as expected according to the
expectations and norms of this discipline.
Personal Data of the researcher
Name: Tsholofelo Motloung
Masters student at Regenesys Business School
Contact: tsholofelo.mokele@gmail.com
Details of the Supervisor
Name: Dr. Spiwe Masarira
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GENERAL INSTRUCTIONS
1. This questionnaire must be completed by the Owner/Director/Member of the
business.
2. Please answer the questions as objectively and honestly as possible.
3. Please answer all the questions, as this will provide sufficient information to the
researcher so that an accurate analysis and interpretation of data can be made.
Annexure A: CONSENT FORM
Dear (Mr, Mrs, Ms)
This is a request for your participation in a research study conducted by Tsholofelo
Motloung. The research study is assessing, understanding, and evaluating the impact
of BBBEE on small business enterprise.
Your participation on the study is voluntary with not compulsion or obligation and
therefore there is no reward in your taking part of the research study.
You are not obligated to answer any questions you might not feel comfortable to answer
and your claim to decline to answer any questions you are no comfortable with remains
your prerogative.
You also have the privilege to terminating participating on the research study at any
phase or time you choose.
Strict confidentiality and anonymity will be adhered to and maintained to protect the
participants. Transcripts will be coded and will be provided to you should you request to
have access to them.
Data will be protected using password protection.
In terms of risk, it is my understanding that the research study will in no way pose any
risk, however, should you have concerns relating to the research study you may contact
either myself or my supervisor.
I ___________________________(name of participant) do herein confirm that a proper
brief and explanation of the research study was done by Tsholofelo Motloung. The
research study was on the impact on the impact of BBBEE on small business.
90
I am cognisant of the fact that my participation is voluntary and that the decision to
withdraw from the research study remains my right if I choose to.
I am aware that I have the privilege right not to answer or respond to any question I may
not be comfortable to answer.
I am mindful and perceive that the findings to the research study will be administered
and managed into a form of a research report.
I am attentive to the fact that any information or responses provided by myself will be
maintained in the strictest manner by the researcher.
I have been notified that a code and fictitious name will be used in reference to all the
information shared by myself during the research study so that confidentiality and
protected may be provided for my sake and the sake of the research study.
Annexure B: DEMOGRAPHIC INFORMATION
The following information is required to help in analysing data for comparison among
different businesses. All your responses will be treated confidentially and privately.
Mark the applicable block with a (X) and complete the information applicable.
A1 Which age group do you belong?
≤ 29 – 30
39 – 40
49 - 50
59 - 60+
A2 What is your gender? Male Female
Male
Female
A3 Are you a qualified and registered business owner? Yes No
Yes
No
91
If Yes; what is your trade:
A4 Is your business white or black-owned? Yes No
Yes
No
A5 Percentage shares that you own in the business? %
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
A6 How many permanent employees are employed by the business?
1–5
6 - 10
11 - 25
26
-
51 - 100
101
50
-
201
200
-
500+
500
A7 What is the turnover of the business per year?
<R1m
R1 – R5
R 5 – R 10
R 10 – R 35
R 35 – R 100
m
m
m
m
> R 100 m
A8 What is the legal status of the business?
Proprietorship
Partnership
Company
Close
Co-
Other
Company
(public)
Corporation
operative
combination
Business
(specify):
(private)
Trust
Franchise
A9 How long have you been running this business (years)? Specify:
0
–11
1 – 5 years
6 – 10
11 - 15
months
92
16 - 20
21 - 25
25+
or
A10 What does your business do?
Construction
Services
Training
Events
Financial
Legal
Electrical
Plumbing
Other
Financial
Electrical
Other
A11 Which associations does your business belong to?
Manufacturing
Construction
Services
Security
Automotive
Annexure C: Questionnaire of Text Questions
What is your understanding of Black Economic Empowerment and Broad Based Black
Economic Empowerment?
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
____________________________________________________
Who in your understanding is a BBBEE beneficiary?
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
____________________________________________________
Does BBBEE generate wealth in the South African economy?
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
____________________________________________________
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Does BBBEE to small business growth and economic participation?
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
____________________________________________________
Does BBBEE scoring and qualifying level complicates meeting BBBEE scoring criteria?
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
____________________________________________________
Do you think other social (none ACI) groupings should also be beneficiaries of BBBEE,
explain why?
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
____________________________________________________
In your understanding, can BBBEE be effectively used to close the economic gap and
imbalances existing in South Africa?
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
____________________________________________________
In your view, is the process and policy of BBBEE rigorously evaluated, managed,
monitored by government?
94
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
____________________________________________________
In your opinion, is BBBEE efficiently implemented, and does it have an impact on small
business enterprise?
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
____________________________________________________
Does BBBEE promote corruption, explain why?
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
____________________________________________________
95