The impact of broad-based black economic empowerment (BBBEE) on family businesses

Abstract

The South African history and the issue of apartheid lead partially to the exclusion of South Africa from the global economy due to sanctions from first world countries. In an effort to become part of the global economy South Africa needed to restructure its economy. Prior to 1994 the economy of South Africa was characterized by the participation of a small number of actively contributing citizens. The first democratic election in 1994 was won by the African National Congress (ANC) who made their intentions of transformation very clear right from the start. In an attempt to transform the economy to include the majority of South Africans the Government developed a number strategies and programs. The most controversial legislation passed was the Broad-Based Black Economic Empowerment Act (53/2003). This Act aims to include previously disadvantages individuals to the economy and laid down certain requirements for all business with an annual turnover of R5 million and more. These requirements entail the participation of previously disadvantaged individuals in management and ownership structures. Preferential procurement and skills development are also part of the legislation. Family businesses have made a positive contribution towards the South African economy for hundreds of years. The composition of a family business is complex and involves the balancing of work related issues and home related issues. The greatest reward for family business owners is the knowing that they will leave behind a legacy. The primary objective of this study is to assess the impact of Broad-Based Black Economic Empowerment on small and medium-sized family businesses in South Africa, and to make recommendations to family businesses relating to the management of this issue. The research was conducted by means of a literature and empirical study. The literature study was divided into two sections. The first section studied family businesses to gain insight into family businesses and topics include: the definition of a family business, the family business system, communication and conflict and the succession process. The second part of the literature study dealt with Broad-Based Black Economic Empowerment and highlighted aspects like: the South African history, the fostering years and the implementation of an idea and the legislative framework. The literature study formed the basis for the assessment of the impact of Broad-Based Black Economic Empowerment on family businesses. Specific indicators were empirically tested in practice by means of a developed questionnaire where-after the results were assessed. Based on the findings of the empirical study, it was concluded that the majority of family business owners do not believe that Broad-Based Black Economic Empowerment are successfully addressing the critical issues that could lead to the achievement of Government's goals.