Sunday Times

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’

 ??  ??
 ??  ?? Lindiwe Madonsela head of compliance at the BBBEE Commission at the department of trade, industry & competitio­n
Lindiwe Madonsela head of compliance at the BBBEE Commission at the department of trade, industry & competitio­n
 ??  ?? Karl Socikwa, group executive for market developmen­t at Sanlam
Karl Socikwa, group executive for market developmen­t at Sanlam
 ??  ?? John Dludlu, CEO of the Small Business Institute
John Dludlu, CEO of the Small Business Institute

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