A bird’s eye view: Transactional vs transformational B-BBEE

By Yuneal Padayachy, Member Support Executive, BEE Chamber

Yuneal Padayachy (MBA) is the Member Support Executive at the BEE Chamber. He previously served as the Accreditation Manager for the B-BBEE Programme at the South African National Accreditation System (SANAS)

I have had what I believe is the privilege of working in the B-BBEE space for 12 years. My unique experience in this space stems from working within the B-BBEE verification industry whereby I would engage with organisations and facilitate the B-BBEE verification process. Learnings within the B-BBEE verification industry was an eye-opener for me. I have dealt with many organisations that support transformation and then there are those that see this process as a compliance exercise. I later moved on to the B-BBEE Policy Unit at the Department of Trade Industry and Competition (DTIC) whereby I started to understand what the government is trying to achieve for our country – inclusivity by allowing black people to participate in the mainstream economy. I moved onto the South African National Accreditation System (SANAS) as the Accreditation Manager for B-BBEE in which I had many fruitful engagements with B-BBEE rating agencies. 

In the past year and a half, I have fulfilled a support role at the BEE Chamber as the Member Support Executive. Hence, I have had a bird’s eye view of how organisations approach B-BBEE since the implementation of the Codes of Good Practice (Codes). Over the years, I have seen many organisations moving from the transactional approach to the transformational one in implementing their B-BBEE strategy. However, more attention still needs to be paid to moving more organisations to embark on the transformational approach when developing or evaluating their B-BBEE strategy. 

In my experience working in the B-BBEE arena, I have witnessed various B-BBEE approaches undertaken by organisations. Some are impressive – entirely transformational. Others are short-sighted – a mix of transformational and transactional – and of course, there are the ones that simply boggle the mind – totally transactional – as they do not benefit the organisation or black people. A good indication of whether an organisation will implement a B-BBEE strategy that is transformational or transactional is its initial approach to developing a B-BBEE strategy. My birds-eye view of the initial process, more often than not, provides two scenarios:

1) “Let’s get this done quickly; where do we find the points and people to make this happen”; and

2) “If we’re gonna do this, let’s do it sustainably, so we yield a long-term return on our investment”. 

The initial scenario indicates whether an organisation is going to throw money at their B-BBEE strategy and create an illusion of transformation or if they are going to meaningfully contribute to a transforming South Africa. Although these approaches are at separate ends of the scale, they do have one common denominator: each organisation believes their approach makes good business sense. However, each scenario establishes whether they are gearing towards a transformational or transactional approach. 

The idiom ‘penny-wise, pound-foolish’ pops to mind when comparing a transformational and transactional approach to B-BBEE.

Transformational Approach

Applying a transformational approach to B-BBEE initiatives means an organisation’s focus is on changing its internal DNA. Consideration should be on what a transformed organisational DNA will mean for the business and the economy at large. 

Based on the desired outcome, an organisation must evaluate the scorecard they are measured on then decide what initiatives will support the end goal. Using the B-BBEE scorecard as a benchmark of transformation, as opposed to the end goal itself – the points on a B-BBEE scorecard will organically lead to a transformational approach. 

Four questions to consider when developing or evaluating a B-BBEE strategy that will yield long-term results: 

1) What sustainable internal changes must take place to realise the points offered on the B-BBEE scorecard?

2) How will this impact business over five years?

3) How can we use the indicators in the B-BBEE scorecard to optimise performance and productivity?

4) Is the B-BBEE strategy robust enough to be sustainable in the long term?

Transactional Approach

Applying a transactional approach means an organisation focuses on the points they can earn, not considering what the impact it will have on its internal DNA.

More often than not, an ill-considered transactional approach is at arms-length. The focus is on circumvention, a minimal investment in people and quick-fix solutions. Thus, it creates an illusion of transformation with no long-term benefit.

Organisations applying this approach generally return to the B-BBEE drawing board annually to rehash another transactional approach with no tangible return on their investment.

Four questions to consider when developing or rehashing a B-BBEE strategy that yields quick fix results:  

1) How much money do we have to spend to get the points?

2) What are the cheapest points available on the B-BBEE scorecard we are measured on?

3) How do we claim the points using as few resources as possible?

4) Can we recoup the money we spend?

The above got me thinking. Suppose there was no B-BBEE framework in place. Would organisations consider who owns a business before procuring from them? Would they have processes in place to ensure fair representation of employees in their workforce? Would they invest in skills development and training? Would their preferred suppliers be representative of our national demographics? Would they develop small black-owned businesses? Would they participate in income-generating activities to develop black beneficiaries? Perhaps they would, marginally, but not to the extent necessary to include more black people in the economy and balance out the deficit of wealth facing our country. B-BBEE legislation may not be the perfect solution. Still, it is the chosen policy to transform the country. 

 Granted, B-BBEE has garnered reputational damage over the years as tenderpreneurs, profit-driven joint venture agreements, and questionable ownership schemes drive the transactional approach to B-BBEE. Unfortunately, they have outshone the meaningful and sustainable impact it has had on organisations and black people alike. However, regardless of which approach organisations take, one must remember that B-BBEE legislation guides organisations. Still, people of all races and genders either embrace it or circumvent it.

It is essential to accept that B-BBEE is an economic policy that aims to invite more people into the economy. By design, it creates a synergy between all South Africans as it is an unworkable policy without the buy-in of white-owned businesses or the participation of black people. South Africa’s B-BBEE legislation globally is unique. However, we have to remember that the foundation for B-BBEE began when the Native Land Act of 1913 was promulgated. 

Earlier this year, I was part of a discussion whereby a white-owned family business did not want to change their ownership structure as they wished the business to be passed down in the family. The answer is simple, as B-BBEE compliance is not a legal requirement, they should not go the route of B-BBEE. However, if choosing to implement B-BBEE, it must be done within the legal parameters and spirit of the Codes. Such an organisation would have to measure the pros and cons of not transforming. However, such an organisation must bear in mind that if they choose not to have a B-BBEE certificate and its clients have chosen the transformation route; there may well be a challenge to gain and retain business. It is essential to further understand how the white-owned family business was established during the Apartheid era. 

Over my years of experience within the B-BBEE industry, there has also been a negative message associated with B-BBEE. A comment around B-BBEE that I have heard many times is: “A black-owned entity has won a tender, this must have not been correct, and corruption has taken place.” What many do not understand is that corruption has no colour – People act or engage in corrupt activities. Therefore, associating this concept of corruption with B-BBEE is nonsensical and is not needed for our country. 

From my bird’s eye view, like it or not, a B-BBEE certificate is key to conducting business in South Africa. If an organisation chooses the B-BBEE route, do it in its intended spirit. Over the years, I have seen more organisations choose the penny-wise, pound-foolish approach to B-BBEE that commands financial output, little resources and instant gratification that benefits nobody. Remember, the bigger picture, sustainable B-BBEE, invites more people into the economy, allowing government coffers to invest in the national infrastructure to benefit all.