Creating Consumers While Supporting Development

Originally posted at www.afribiz.net

While Africa has tremendous business opportunities, it also has significant social challenges, including poverty and unemployment. For many business people, this can be a turn-off, but more are finding it to be an opportunity and competitive advantage. We hear a lot about social entrepreneurs who are constructing enterprises, both non-profit and for-profit, to address social issues. There are also companies who are building inclusive business models like SABMiller, Coca-Cola, and Cadbury.

In addition to private sector approaches, governments have legislated regulations guiding businesses on corporate social responsibility and sharing in the wealth. This has not been a popular approach with business. Zimbabwe’s indigenous ownership law is an example.

However, amidst the furor, there are solutions arising both regulatory and in the private sector that can help drive profits and productivity for businesses while dealing with people and planet issues. Surprisingly, the South African Broad-Based Black Economic Empowerment (BBBEE) codes have transformed into a framework that is progressive and conducive to business, if understood. In fact, the framework can serve as a strategy that can be applied not only to South Africa, but to other developing countries. We like to call the strategy, “Creating Consumers and Capacity.”

Jonathan Goldberg, Chief Executive Officer of Global Business Solutions and a leading expert on the BBBEE codes, shared several insights with us on the matter. First, he indicated that the codes have been revised from the original inception, which drew a lot of criticism because it focused on ownership as the way to achieve inclusive transformation in South Africa. Now, the BBBEE codes incorporate seven dimensions for achieving this.

Second, there was a misperception that foreign and local firms had to “give away” ownership to indigenous populations. In actuality, firms had many ways of achieving the requirements. One hotel chain built a supply chain around local small businesses instead of shedding a certain percentage of ownership. Microsoft has followed a similar path by creating a program to empower local small ICT firms.

Third, BBBEE only applies to firms supplying products or services to the government and their supply chains. However, as Goldberg pointed out, even retail chains are increasingly coming into the government sphere, so BBBEE will apply to more of them.

Goldberg also pointed out that at some point it will also be an issue for consumers who want to know that those firms they use have a social conscience. And, as we have noted, it is just good business. If firms help empower people and it leads to economic empowerment, they create more consumers with more disposable income.

The seven dimensions of the BBBEE codes include social development, enterprise development, procurement, skills development, employment equity, management control, and ownership. Goldberg suggests that a firm takes a bottom-up approach while focusing on strengthening a firm’s strategy. For example, skilled workers is an issue in many sectors. One firm can establish a math/science academy for high school students, then provide bursaries/grants for college to the best students. These same students can become interns, and eventually employees and managers, in the firm. Over a period of five to six years, a firm can “grow” its own people capacity by using the BBBEE framework and achieve a good scorecard.

To learn more about this inclusive approach and to listen to the interview, click here.

Views: 31

Tags: africa, business, commerce, inclusive, investment, trade

Comment by Jan Goossenaerts on July 26, 2010 at 16:27
Lauri,
Thanks for your contribution.
I have included a reference and citation in the Actor Atlas, at: http://www.actor-atlas.info/initiative:za-bbbee , with more to follow.

Jan
Comment by LABAN MAWUNGWE on August 5, 2010 at 12:29
Dear Lauri,
Thanks for sharing this rich aricle with us about BBBEE, i think this is one of the best approaches for empowering SMEs in developing countries.

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