November 6, 2012

BBBEE is supposed to be a force for integrating the black community into the economy and helping South Africa realize its full economic potential, but its scorecard is reserved for larger businesses. Alain Ndedi led a Black Forum Conference in Pretoria on the importance of entrepreneurship and drew some striking resemblances between post 1960s United States and the current state of affairs in South Africa. He points out how MIT researcher David Birch surprised all politicians, researchers and business world that the new and growing smaller firms created 81.5 percent of the net new jobs in America from 1969 till 1976. In order to fully realize its potential, South Africa must incorporate its black populace into the economy, and giving black owned corporations billions of Rand loans doesn't seem to be the answer.

I think the biggest problem stems from the transition away from the Reconstruction and Development Program towards the Growth, Employment and Redistribution strategy. The first focused more on development goals such as reducing poverty, decreasing the unemployment rate and increasing human resources through repairing a divided society. GEAR on the other hand was more of a macroeconomic policy focused on market flexibility, economic stability and increasing foreign direct investment. By trying to change the economy instead of who participated in it, unemployment has since risen and jobs been lost.

This has been addressed in the current BEE through the design of Human Resources Development; a sub sector of the BEE strategy. Its main purpose is to cultivate human skills and expertise in order to increase productivity. However, most training is done by corporations on the job. The obstacle is incorporating the population in the informal market into these training programs. A focus on entrepreneurship would not only lead to more job creation but also help lift the malady of poverty. This focus can be administered through easier access to financing for small companies as well as tax incentives.

Breakdown of BBBEE scorecard

Ultimately the informal market must shrink in order for South Africa to reach its full potential. Skills must be developed and the only way that will happen if the job market is more accommodating to the multitude of underprivileged blacks with no access to cities, education or skill development.