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The codes recognise that the application of broad-based BEE initiatives is intended to accelerate the transformation process in the economy. The cascade effect of broad-based BEE will be felt throughout the business supply chain. It will result in most businesses becoming drivers of broad-based BEE in their own businesses, in their suppliers and in other stakeholders.

An example of the cascade effect would be a multinational motor vehicle manufacturer with a production plant in South Africa. The manufacturing entity will not be fined or penalised directly through legislation for not implementing the Act. They do, however, conduct business with the government insofar as the sale of vehicles and trucks is concerned and further rely on government incentives for their exports. It is in this regard that when government deals with them, it applies the legislation to impose direct pressure on the manufacturing entity to comply with broad-based BEE regulations. We expect Government to exert pressure on all entities. This will result in pressure further down the supply chain a consultancy wanting to do business with the manufacturing entity will be required to comply with the Amended Codes because the manufacturing entity would like to score procurement points to contribute towards their broad-based BEE score. A motor manufacturer is limited in the area of procurement as the majority of components are imported from international businesses that are not in a position to comply or be measured with the Amended Codes. This will translate into even more pressure being imposed on local suppliers to comply with the legislation and Codes of Good Practice.

This knock-on effect is illustrated by the consultancy firm now having to get its empowerment credentials up to speed. It would be forced to look at its own procurement. Here let’s assume that one of the major expense items is travel. The consultancy will put pressure on its travel agent to become broad-based BEE compliant. The travel agent, whose quest, in time, is to have a good broad-based BEE rating, now looks at its suppliers, and so on.

The cascade effect of broad-based BEE will be experienced throughout most industries’ supply chains – any business that ignores it will be ill-advised. The future strategic orientation of businesses clearly needs to be around BEE ownership and the cost of implementation versus non-compliance.