When you stand at the Johannesburg Stock Exchange (JSE) to discuss transformation, something clarifies. Not because the room is clever, although it often is. Instead, the building reflects the behaviour of markets. Capital gets priced there every day. Narratives do not move tickers; performance does. When performance disappoints, the market responds immediately. It marks you down and moves on.
That context explains why the venue mattered. We launched new research on Broad-Based Black Economic Empowerment (B-BBEE) and business performance in South Africa. It reinforced the gap between the intent of B-BBEE and lived outcomes.
The study received support from Standard Bank and Brand South Africa. Researchers surveyed 527 managers. They also conducted ten in-depth interviews. They asked a direct question: how do managers perceive the relationship between B-BBEE and business performance?
What the data says about B-BBEE
The findings are nuanced. Managers rated B-BBEE’s impact below neutral across most dimensions. On a five-point scale, three represents neutrality. Business processes scored 2.37. Competitiveness scored 2.38. Financial performance scored 2.42. Even the highest scores remained below neutral. Market access reached 2.82, and human development reached 2.65.
These results invite predictable interpretations. Some will argue that B-BBEE does not work. Others will dismiss the findings as resistance. However, both views oversimplify the issue. They overlook the critical gap between the intent of B-BBEE and lived outcomes.
The most valuable insight lies in the variation. Perceptions improve significantly in highly compliant firms. They also improve among historically disadvantaged managers. This difference is not marginal. Instead, it is substantial. Importantly, firm size and sector do not explain the variation. Instead, implementation quality and lived economic position drive it.
Where organisations apply B-BBEE with genuine intent, perceptions improve. They integrate it into the strategy. They apply it rigorously. They verify it against real outcomes. In contrast, where firms treat it as a compliance exercise, perceptions decline. This divergence highlights the tension between the intent of B-BBEE and lived outcomes.
The scorecard fallacy
A key issue lies in how organisations treat the scorecard. Many treat it as the outcome rather than a tool. However, points do not equal productivity. A higher compliance score does not guarantee capable suppliers or strong leadership.
In high-trust systems, compliance and performance may align. However, in tick-box systems, they diverge. When organisations prioritise compliance over capability, the system weakens. This misalignment deepens the gap between the intent of B-BBEE and lived outcomes.
Practices such as fronting worsen the problem. When ownership exists only on paper, transformation fails. Moreover, the signal becomes distorted. Weak verification processes also contribute. Procurement decisions often rely on certificates rather than capability. As a result, organisations waste resources and undermine credibility.
These failures create real costs. Businesses lose contracts. Capable enterprises get excluded. The system becomes harder to defend. Managers also report administrative burdens. At the same time, they see limited performance benefits. This disconnect reinforces concerns about the intent of B-BBEE and lived outcomes.
Shifting geopolitics makes it more urgent
Global dynamics increase the urgency. The international environment has become less forgiving. Supply chains now reflect geopolitical priorities. Technology accelerates competition. Capital flows more cautiously. Importantly, global markets do not consider domestic transformation debates. They focus on performance. Therefore, South Africa must align transformation with competitiveness.
This does not reduce the need for transformation. Instead, it increases the urgency to get it right. South Africa still faces structural inequality. Access to capital, networks and ownership remains uneven. B-BBEE was designed to address these realities.
The key question is not whether transformation should continue. Instead, we must ask whether the current implementation delivers results. Specifically, does it produce firms that compete globally? This question sits at the core of the intent of B-BBEE and lived outcomes.
A reset of B-BBEE – stop confusing instruments with outcomes
The strategic lesson is clear. We must not abandon B-BBEE. Instead, we must separate instruments from outcomes. If implementation drives legitimacy, then reform becomes necessary.
First, organisations must shift from scorecards to outcomes. A compliance score does not guarantee productivity. Instead, we must measure supplier growth, leadership depth and operational performance.
Second, organisations must shift from entitlement to excellence. Empowerment must enable competition in demanding markets. This requires strong skills development. It also requires rigorous governance and effective procurement processes.
Third, organisations must move from suspicion to shared responsibility. The government must strengthen enforcement. It must improve verification, especially in procurement. At the same time, businesses must integrate transformation into strategy. It cannot remain a compliance function.
Organisations must combine discipline with flexibility. They need strong verification systems and clear consequences for fronting. At the same time, they need practical pathways for supplier development. This balanced approach helps align the intent of B-BBEE and lived outcomes.
What’s at stake?
Africa has significant strengths. These include growing markets, young populations, and resilient entrepreneurs. It also includes globally competitive executives. However, transformation must unlock these advantages.
If transformation expands access to capital and opportunity, it strengthens the economy. It reduces risk and improves investment attractiveness. However, this depends on aligning the intent of B-BBEE and lived outcomes. The research provides a clear framework. Managers accept the purpose of transformation. However, they question its effectiveness. This gap defines the real debate.
Ultimately, transformation must build competitive capability. If it does, it will endure. It will not rely on political protection. Instead, it will rest on economic value. As markets demonstrate, performance remains the final measure.
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| Jon Foster-Pedley | Dean and Director | Henley Business School Africa | mail me | | Monde Ndlovu | Managing Director | Black Management Forum (BMF) | mail me | |
