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Impact of the Amended Broad-Based Black Economic Empowerment

  • ID: 3734421
  • Report
  • May 2016
  • Region: Global
  • 60 Pages
  • Frost & Sullivan
Expectations see Extensive Changes in the QSES Market Structure in the Form of Mergers and Acquisitions


  • Access Bank
  • ARM
  • Barclay Bank Plc
  • Central Bank of Nigeria
  • Citibank Nigeria Ltd
  • Fidelity Bank Plc
  • MORE
Broad-Based Black Economic Empowerment (B-BBEE) is a specific government policy aimed at addressing the legacy of Apartheid by enhancing the participation of Black people in the South African economy. This transformation and legislative framework was first introduced in 2003 as the Broad-Based Black Economic Empowerment Act (No. 53 of 2003) and has since undergone various iterations. The study investigates the most recent amendments to understand what changes have been made to the B-BBEE framework and how these impact the chemicals industry in South Africa.

- South Africa’s Codes for assessing a company’s contribution to Broad-Based Black Economic Empowerment (B-BBEE) have been revised. Although obtaining a B-BBEE rating is not compulsory in general, it is a requirement for doing any business with the government, including applying for many kinds of licences and authorisations.

- The new Codes place far stronger emphasis on the Ownership element - the mandatory portion of the pillars - and Enterprise and Supplier Development.

- Under the old Codes, South Africa’s listed chemicals companies had an average B-BBEE recognition of (where 1 is the strongest possible, and 8 the weakest). Under the new Codes, the average is expected to drop to Level 6.

- This will have a greater impact on industries where a competitive B-BBEE score is important, than in those where the issue is compliance versus non-compliance.

- It's expected to see the emergence of high-performing Enterprise and Supplier Development (ESD) capabilities within large companies. It is also possible that specialist ESD companies will emerge to which ESD activities might be subcontracted.

- It's expected to see extensive changes in the Qualifying Small Enterprises (QSEs) market structure in the form of mergers and acquisitions, and a high demand for Black shareholders, as many of these companies will seek to maintain or improve their scores.

- Previously, QSEs were scored on out of elements. They now have to be scored against all the current elements (a total of ), which will make scoring of ownership inevitable.

- The new Codes bring significant growth opportunities to Black-owned enterprises and Black-women owned enterprises. Procurement spend could rise by as much as X% on Black-owned suppliers and X% on Black women-owned suppliers.

- If a company’s score remains unchanged, its B-BBEE level will still be downgraded under the new Codes, and this means that a lower percent of procurement spend will count towards its customers’ score. This in turn will further reduce the score of customers who will already be expecting a level downgrade making remediation of levels an urgent matter in sectors where strong B-BBEE levels are preferred.

- Companies that procure high-value raw materials from foreign suppliers (for which B-BBEE scores will not be obtainable) will need to work harder to achieve procurement targets through the careful allocation of funds for local procurement. As a result, the suppliers to these companies may be under even more pressure to achieve good scores, and high-scoring suppliers may be able to charge premiums.

- Companies for whom certain low-scoring suppliers are indispensable, may consider backward integration as a way of reducing low-scoring procurement. However, high scores are available for assigning procurement spend to exempted micro enterprise or EMEs (defined as those businesses with an annual turnover of less than R million.

- It's expected that companies which spend significantly on ESD among their smaller suppliers will try to lock in the suppliers as a way of sustaining the return on the ESD investment.
Note: Product cover images may vary from those shown


  • Access Bank
  • ARM
  • Barclay Bank Plc
  • Central Bank of Nigeria
  • Citibank Nigeria Ltd
  • Fidelity Bank Plc
  • MORE
1. Executive Summary
  • Key Findings
2. Study Overview
  • Introduction
  • Market Definitions
  • Abbreviations and Acronyms
3. Amendments to the B-BBEE Codes
  • Amendments to the B-BBEE Act
  • Emphasis on Priority Pillars
  • Emphasis on Priority Pillars - Ownership
  • Emphasis on Priority Pillars - Enterprise and Supplier Development Element
  • Reducing the Number of Scorecard Elements
  • Scorecard Point Reallocation
  • Other Amendments
  • Compliance Remains Voluntary
  • Generic versus Sector Codes
4. A Closer Look at QSEs and the Amended Codes
  • Highlighted Changes to QSE Elements
5. Industry Insights into the Amended Codes
  • The Companies of Interest
  • B-BBEE Scorecards for the 6 Listed SA Chemicals Companies
  • Current versus Anticipated B-BBEE Status
  • Maintaining B-BBEE Status - Empowering Suppliers
  • Maintaining B-BBEE Status - 51% Black Owned and 30% Black Women Owned Companies
  • Growth Challenges - Supplier Perspective
  • What is the Value of a High B-BBEE Accreditation?
6. Preferential Procurement - Old versus Amended Codes: Case Study Approach
  • Preferential Procurement Scorecard - Old Codes
  • Enterprise Development Beneficiaries and Value-Adding Suppliers - Old Codes
  • Preferential Procurement Scorecard - Amended Codes
  • Estimation of the Procurement Targets - Old versus Amended Codes
7. Conclusions and Strategic Insights
  • B-BBEE - A Potential Competitive Advantage
  • Enterprise and Supplier Development is Key to Attaining Attractive B-BBEE Scores
  • B-BBEE Downgrades Compounded by Supplier Downgrades
  • Enterprise and Supplier Development - Opportunities for Supply Chain Alignment or Integration
  • Legal Disclaimer
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A selection of companies mentioned in this report includes:

- Access Bank
- Barclay Bank Plc
- BridgePoint Asset Management Ltd
- Central Bank of Nigeria
- Citibank Nigeria Ltd
- Fidelity Bank Plc
- First Bank of Nigeria
- Standard Chartered Bank Nigeria
- Zenith Bank

Note: Product cover images may vary from those shown