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

Bosman, Estelle (2005-12)

Thesis (MBA)--Stellenbosch University, 2005.

Thesis

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

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

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