Evaluating Economic Empowerment Policies and Firm Performance: Insights from South Africa's Broad-Based Black Economic Empowerment Policy

This thesis investigates how economic empowerment policies impact firm performance and address racial inequality, through the lens of South Africa’s Broad-Based Black Economic Empowerment policy. Central to understanding the need for such policies is South Africa's legacy of racial inequality, rooted in its apartheid history. The focus is on the persistent racial inequality within the corporate sector, despite the implementation of B-BBEE more than thirty years ago, which was aimed at redressing the socio-economic inequalities from apartheid. This thesis consists of three studies, each examining a different yet related component of the B-BBEE policy and its impact on South African firms.

In the first study I explore how the South African government has used accounting technologies to manage the pervasive issue of racial inequality. Premised on Foucault’s notion of governmentality, I conduct a qualitative case study using publicly available archival data to determine the extent to which accounting techniques have helped to shape policy responses to racial inequality. I show that accounting techniques and calculations give visibility to the problems of government and help design a programme to solve racial inequality. The lived experiences and impacts of racism in the workplace have been problematised, turned into statistics, and used to rationalise the need for ongoing government intervention in solving the problem. These processes underpin the development of the scorecard system, which measures the contributions firms have made towards minimising racial inequalities. This study augments the existing body of Foucauldian literature by illustrating how power dynamics can be counteracted. I further show that in governmental processes, accounting can exhibit a dual role, and these roles are not always subordinate to the analysis of political realities. The case of B-BBEE reveals the unintended consequences of utilising accounting to control the conduct of individuals or groups.

In the second study, I evaluate the B-BBEE policy’s effectiveness in reducing racial inequality by examining the compliance of firms in different sectors over a span of 13 years. Using quantitative analysis, I investigate the strategic choices that firms make when deciding between generic and sector-specific scorecards. I also analyse how various sectors have adapted to the changing B-BBEE criteria. The results show that there was a general improvement in compliance after 2013, however there are still unique issues in certain sectors. This study offers important insights into the differences in compliance across sectors, emphasising the significance of customised strategies in the execution of policies.

In the third study, I examine the relationship between B-BBEE compliance and firm performance, considering both financial and non-financial performance. I apply cross-sectional OLS regression analysis and find a positive relationship between compliance and financial performance, especially within highly competitive sectors. I further find that the 2013 B-BBEE Act amendment has varying effects on different sectors, with a stronger impact in certain sectors and less in others. Moreover, I find that B-BBEE compliance improves value within the ESG framework, implying that the policy can be a valuable strategic resource for business. This study contributes to the existing literature by integrating financial and non-financial performance, showing how B-BBEE compliance can improve both business performance and sustainable competitive advantage.

This thesis advances theory and offers practical implications for policymakers and management. This thesis contributes to the broader discussion on the interlinkages between the compliance costs, financial performance and social accountability. The findings emphasise the significance of adaptable and industry-specific solutions for ensuring compliance, while also demonstrating a positive business case for B-BBEE policy.