The administrative impact of Black Economic Empowerment certification on tourism enterprises in South Africa
Date
2012-09-12
Authors
Ngcobo, Makhosazana Nomcebo
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Abstract
The Broad-Based Black Economic Empowerment (B-BBEE) Act 53 of 2003 sought to redress the socioeconomic
imbalances caused by South Africa’s apartheid laws. The Act included different strategies to
give preference to previously disadvantaged individuals on such aspects as ownership, management,
employment, enterprise development, preferential procurement, skills development and socio-economic
development. This thesis does not explore the plausibility of the regulations but rather the possible gap
between intended benefits and the impact of B-BBEE. It is intended to establish the administrative impact
of Black Economic Empowerment (BEE) certification,1 using a case study of a medium-sized tourism
enterprise. The findings of this administrative impact are juxtaposed with the policy intentions as
established through policymakers. The primary question is ‘What is the administrative impact of BEE
certification on tourism enterprises in South Africa?’ The main propositions are that the administrative
costs of BEE certification have had a significant negative impact on the profitability and competitiveness
of medium-sized tourism enterprises; that tourism enterprises are not aware of the full extent of the
administrative costs of BEE certification; and that policymakers are not aware of the unintended impacts
caused by BEE certification on tourism enterprises. The research was undertaken through two interrelated
phases, the first of which was exploratory in nature and sought to establish the administrative impact of
BEE certification through the case study organization. The second phase sought to present the findings
regarding the administrative impact of BEE certification to policymakers, with the aim of establishing
policymakers’ awareness of the gap between policy intentions and policy impacts. Multiple methods have
been used in order to gather data that informs this thesis. Primary data was obtained through semistructured
interviews. The thesis focused on a case of one medium-sized organization, which was selected
using convenience sampling. An in-depth interview was conducted with the Head of Administration and
Finance in the organization, as the key person responsible for overseeing the process of BEE certification.
Since the thesis focuses on a single entity, the data pool was too small to allow for the generalization of
findings, but sufficient for a series of in-depth explorations and assessments of the topic. Secondary data
was obtained from various sources such as journals, periodicals, and reports, particularly in relation to
regulatory impact assessments as well as on certification issues in the tourism sector. The main findings
are that the administrative costs of BEE certification have had a minimal impact on the profitability and
competitiveness of medium-sized tourism enterprises, especially from the second year of conducting the
annual audits as the systems are already in place for oncoming audits. It is only about 0.01% of turnover.
1 An activity that stems from one of the regulations linked to B-BBEE Act. It is an annual certification to demonstrate the companies’
achievement as far as B-BBEE is concerned, and entails an audit process executed by South African National Accreditation System (SANAS)
registered agencies.
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However, the psychological burden associated with the stress of administrative preparations for audits
makes it seem more costly. The tourism enterprises are unaware of the extent of the administrative costs
of BEE certification in that they overestimate the cost implications by at least 75%. The policymakers are
unaware of the unintended impacts caused by BEE certification on tourism enterprises, especially as they
relate to the administrative costs. In conclusion, the administrative impact of BEE certification on
medium-sized enterprises is minimal as far as costs are concerned; however the psychological burden,
although not measurable, is substantial. Moreover, the policymakers are oblivious to any possible impacts
that might have been caused by BEE certification on enterprises, thus making the gap between policy
intentions and the policy impact more than it could have been had they had the awareness. Awareness at
the least gives an option to rectify where possible, thus ignorance of situation can to a certain extent
exacerbate the situation.
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Keywords
Tourism, BEE certification, Black Economic Empowerment, South Africa