BBBEE – Social engineering which has broadly succeeded

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Dr Ivor Blumenthal | CEO | ArkKonsult | mail me


This article may appear counter-intuitive, given the huge amount of rhetoric and conjecture which abounds outside of workplaces where Broad Based Black Economic Empowerment (BBBEE) has been mindfully implemented. There is a huge amount of negativity which exists where BBBEE has failed to be successfully implemented, and even more fake news from owners in those companies which have failed to, or where they have simply refused to, implement any kind of BBBEE solution at all.

The reality is that BBBEE has been hijacked by so many ‘Consultants’ and ‘Lawyers’ intent on pushing mechanisms designed to convince their clients that they should do everything to avoid implementing BBBEE properly, that those unknowing and often unsuspecting clients end up wasting money and a perfect opportunity to increase their turnover.

This article is not about the ‘how’ to implement BBBEE but about the ‘why’?

There are now FIVE ELEMENTS which are key to a successful implementation of BBBEE. Each is well designed and sufficiently tested to bring about positive empowerment where they are properly and thoughtfully pursued. Where the Founders and Shareholders who decide to implement a solution understand both the financial consequences and mechanisms involved and the reason they are necessary.

Ownership

What is the purpose of Ownership being a compulsory focus for companies wanting to implement a BBBEE solution? Simply-put, to be BBBEE-rated requires a commitment from Shareholders, who would traditionally be White, to SHARE the benefit of a fair Economic Dividend earned in the course of a year, with the Black workforce of the company.

In a large company defined as doing more than R50 Million in turnover in a year, nothing in-excess of 26% of shared ownership is required, to earn the maximum points available on the Ownership Element.

I am of the opinion that anything more than 26% (for the wrong reasons) is simply bad advice. In the wrong situation, selling or giving away 51% of Ownership in a situation which transfers the balance of power away from the traditional shareholders, is simply stupid. This is either in a Large business, or in a Small or Exempt one.

In the wrong circumstances, a 51% empowerment deal simply means discounting the true value of your business by 49%.

There are many ways of implementing either a 26%, 51% or 100% solution for purposes of an Ownership deal. The safest and most practical ways are by-way of implementing either an Employee Participation solution, or a Black Beneficiary solution.

The intent to Socially Engineer, when it comes to the Ownership Element, in the case of an Employee Ownership Trust or a Beneficiary Trust, has never been to transfer the actual shares of the business to any particular worker, or to any individual beneficiary.

The true Benefit deriving from this element of Social Engineering is Economic

The percentage of shares which is affected with either solution, is held in a Trust and only the proceeds of Dividends declared, from the Net Profit realized by the company, on conclusion of each year’s Annual Financial Statements, is the actual gain or benefit derived from such a scheme.

Socially, it is the economic enrichment resulting from the share split in favor of the beneficiaries, either as Black Employee’s or as identified Black Beneficiaries, which is intended to have a permanent and positive effect on social transformation amongst the worker communities and their extended families, or amongst the beneficiaries directly.

Should an employee leave the company, their entitlement would fall away and indeed the company is able to and often do, establish criteria which apply to beneficiaries in such a way which makes sense of performance and behavioral management in the company.

Management control

Whereas most Shareholders are worried about surrendering Ownership, this is the element which should give cause for concern. The targets set with this element are high given that the majority of companies do not have anything close to 50% of senior Black Managers and certainly very few of them have


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Read this article by Dr Ivor Blumenthal, CEO, Arkkonsult, as well as a host of other topical management articles written by professionals, consultants and academics in the February/March 2019 edition of BusinessBrief.


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