Strong BEE scores mask dispiriting doldrums
Real picture is far less encouraging, say panel debating latest stats
● New research into broad-based BEE shows strong transformation scores, but industry commentators say there is a mismatch between what’s on paper and the reality in companies in SA.
The top-scoring sector is tourism, with an overall score of 99.5% on the BBBEE scorecard. Manufacturing and retail, which do not have sectoral BEE charters, scored the lowest, at 77.7% each.
This is according to the Sanlam Gauge report, published this week and discussed in an online conference on Thursday.
Sanlam Gauge, in partnership with the Sunday Times’s Business Times, provides a national and sectoral score on transformation in the South African economy. The research and report were carried out by Intellidex.
The report accounts for all elements of BBBEE and includes data received from the scorecards of 3,154 businesses. As per the department of trade, industry & competition’s BBBEE classification, the Sanlam Gauge included ownership, management control, skills development, enterprise and supplier development, and socioeconomic development.
Despite the scorecards showing strong figures, industry commentators at the Sanlam Gauge conference said BEE is a “boxticking” exercise for companies and does not represent underlying transformation in the economy.
Lindiwe Madonsela, head of compliance at the BBBEE Commission at the department of trade, industry & competition, questioned whether companies are focused on just achieving BBBEE scores, or are engaged in meaningful transformation.
The ownership scores present strongly at 85.56%, but this figure, too, is misleading.
Andile Khumalo, CEO of KhumaloCo and co-founder of Sanlam Gauge, said the figure in fact shows the slow pace of transformation 27 years into democracy. The BBBEE scorecard requires 25% to 30% of a company to be black-owned. Khumalo said this translates to black people owning less than 30% of the economy and this is not representative of SA’s demographics.
Other misleading figures, according to the panel, include enterprise supplier development and skills development.
Enterprise and supplier development received a score of 85.1%. The small business sector is considered crucial for transformation, but the report said some companies are putting pressure on existing suppliers to change ownership and are not procuring from small black-owned enterprises.
John Dludlu, CEO of the Small Business Institute, said another factor that is preventing small suppliers from growing is the imposition of exclusivity agreements by the companies they supply, which prevents them from being able to sell to other companies and grow their businesses. The effectiveness of skills development — with a score of 76.1% — was also questioned. Mary Bombela, the CEO of the Mineworkers Investment Company, said skills development initiatives look good on paper but the impact is not filtering down to the right people and it still has “a long way to go”.
Donald Khumalo, the human resources director of the JSE, said that the figure is a “nice dial-up”, but this is not translating to “meaningful” results. Khumalo said that the money spent on skills is not supporting the growth of “people occupying strategic positions or a growth path to the C-suite level”. These concerns are reflected in the lowest-performing category of the report. The score for management control — 57.4% — shows the dearth of black people in management and control positions. Khumalo said there is “not a feeder or a pipeline of talent that is moving from middle to senior and then top manage- ment”. This is why the management control score is as low as it is, he said. And for those who do reach top-level positions, the “environment is not conducive for growth”.
Khumalo said that in some instances companies have brought black people into top-level management, but the structure below them is “completely untransformed”. This leads to these executives not being able to flourish, and leaving the business in 12-18 months, he said.
The issue of management control is increasingly coming under the spotlight. The report says the Employment Equity Commission has warned that “a bigstick approach is coming which will yield the desired results” when it comes to transforming management control in business.
Karl Socikwa, group executive for market development at Sanlam, said that “whilst targets have been set, we shouldn’t be fooled into thinking that hitting numerical targets” is “meaningful transformation”.
Socikwa said that fundamental transformation of the sort that the regulations, incentives and measurement in scorecards attempt to achieve needs to benefit everyone in SA. “Unless we go down that route,” he said, “our society is doomed.”
‘Spending on skills development doesn’t support growth path to the C-suite’