Telkom eyes procurement as black ownership lags
Af rica’s l argest f i xed-l i ne telephone group Telkom, which is yet to fully comply with South Africa’s broad based black economic empowerment (BBBEE) regulations, is focusing on boosting suppliers as it aims to improve its BBBEE rating.
When measu r e d a g a i ns t t he ownership pillar index, Telkom is not f ully compliant with empowerment reg ulations. Its move towards an alternative empowerment model is perhaps best exemplified by its plan to invest more than R100m in enterprise and supplier development with the launch of its FutureMakers programme, which it announced on 7 May.
“We want to enable, empower and inspire entrepreneurs to stretch t hei r a mbitions a nd make t hei r business visions a reality,” said Telkom CEO Sipho Maseko. “By growing entrepreneurial opportunities within ICT [information and communications t echnolog y], we can c r eate j obs, i mprove access to technolog y and develop a stable and competitive supply chain.”
Tel kom l ost i t s empowerment ownership credentials in 2010, when the politically connected Elephant Consortium unbundled its stake in the company. Elephant’s shareholders i ncluded former-ANC spokesman Smuts Ngonyama, former directorgenera l of t he c ommunications depa r t ment Andile Ngcaba a nd businesswoman Gloria Serobe.
The group is majority-owned by government, which holds more than 52% of its shares – nearly 40% through direct ownership and the rest through the Public Investment Corporation.
Under the leadership of Maseko, Telkom seems to be taking a different route towards empowering poor South Africans.
Maseko is obviously keen to align the company with the government’s new strategy aimed at creating black industrialists, rather than just ticking boxes of the ownership pillar index as prescribed in the BBBEE codes.
“There are a whole lot of things we are thinking about in that space. Whether it is in the area of enterprise development […] we really want to find something that is impactful in our society,” Maseko said last July.
Addressing the parastatal ’s black ownership requirements seems to have taken a back seat, with spokesperson Jacqui O’Sullivan having said that concluding BEE deals was not a priority for Telkom at this stage.
“We are focusing on enterprise development as an empowerment tool and therefore the FutureMakers programme has been designed to s t i mulate t he establ i s hment a nd growth of small businesses, which Telkom believes is essential for long term economic stabilit y,” she said. “Enterprise development is a far more eff icient method of empowerment in the current environment of unstable f i nancia l markets a nd a weaker economy.”
Telkom is one of SA’s big spending companies that support black-owned f irms. During the 2014 f inancial year, the company procured R4.3bn worth of goods and services from black-owned companies.
It will be “foolish” for Telkom to sell an empowerment stake to black investors while they are still engaged in a process to turn around the company, said one telecoms analyst. “What will be a point of concluding a BBBEE deal? Will it help them to regain lost ground as a telco or will it provide new revenue streams?
“Telkom should focus on f ixing the business and forget about seeking to do another BBBEE deal. It is a good thing that they are helping black- owned f irms. In short, what Telkom is doing with its FutureMakers programme is to contribute towards the development of smaller black industrialists… this is good for the growth of our economy.”
“ENTERPRISE DEVELOPMENT IS A FAR MORE EFFICIENT METHOD OF EMPOWERMENT IN THE CURRENT ENVIRONMENT OF UNSTABLE FINANCIAL MARKETS AND A WEAKER ECONOMY.”