Effect of Black Economic Empowerment on profit and competitiveness of firms in South Africa

Abstract

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

Reflecting on compliance with Broad-Based Black Economic Empowerment codes of good practice: Trends and suggestions

“…Companies were classified in terms of the Industry Classification Benchmark. In line with previous B-BBEE researchers such as Acemoglu et al (2007), Chipeta and Vokwana (2011), Kleynhans and Kruger (2014) and Mathura (2009), no industries were excluded. There were no companies listed in the utilities industry over the duration of the study period.…”

“…Previous authors focussed on the beneficiaries of B-BBEE (Hoffman, 2008;Patel & Graham, 2012). Others explored the relationship between B-BBEE scores and share market performance (Chipeta & Vokwana, 2011;De Villiers & Ferreira, 2011;Jackson, Allesandri, & Black, 2005;Mehta & Ward, 2017;Strydom, Christison, & Matias, 2009;Van der Merwe & Ferreira, 2014;Ward & Muller, 2010;Wolmarans & Sartorius, 2009) and other financial performance measures (Acemoglu et al, 2007;Kleynhans & Kruger, 2014;Mathura, 2009;Morris, 2018). As far as it could be established, no authors empirically investigated trends in B-BBEE compliance by accounting for changes in the total B-BBEE and element scores.…”

“…The scores for years prior to 2007 were allocated based on the 2004 Codes, which were comparable to the 2007 Codes. Whilst B-BBEE researchers such asKleynhans and Kruger (2014),Mathura (2009) andAcemoglu et al (2007) used short timeframes spanning 1-3 years, the authors of this study evaluated B-BBEE compliance of JSE-listed companies over more than a decade by accounting for total and per element B-BBEE scores.…”

Colorectal Cancer Incidence and Mortality Trends by Sex and Population Group in South Africa: 2002-2014.

“…This may be explained by the rapid transition of the Black population group's socioeconomic status and change in lifestyle. [56,57] The increased adoption of western lifestyles and consequently, dietary changes as well as other risk factors for CRC may have led to an increase in CRC incidence among Black South Africans. This phenomenon is also observed by other African countries experiencing rapid westernisation.…”

Business rights and ethnic exclusion in sub-Saharan Africa: Addressing group-based inequality through business rights reform

“…According to Kleynhans and Kruger (2014), it is commonly believed that South African BEE 'encourages disinvestment from foreign investors'. In fact, this trope was disproven in 2004 through research that 'indicated that regulatory and restrictive incentives implemented by countries via the framework of their economic policies had little effect on levels of foreign investments… [Furthermore], in South Africa specifically, the volatility of the South African rand has a stronger effect on FDI than BEE'.…”