BEE’s ups and downs

2014-07-27 15:00

Employment equity is still the most challenging part of black economic empowerment (BEE) to implement. This was according to a survey conducted by consulting and auditing services firm KPMG.

The survey, now in its eighth year, speaks to 2?000 respondents and looks at how legislation is faring and how well it is being implemented.

The most recent survey found that black representation at the senior management level is only 28%, against a target of 60% set out in the BEE codes of good practice.

KPMG director Boitumelo Ngutshane, who was involved in the research, said respondents attributed the poor results to the lack of skills available to plug the gaping transformation holes at the top.

“Twenty years down the line, we expected better,” she said.

At board level, the survey found only 31% black representation against a target of 50%.

The survey showed the average score obtained in the most recent survey was 52.53 from the previous year’s 63.95 – resulting in a general drop in the BEE status from level five to level six for the companies surveyed.

Of the seven sectors surveyed, the construction sector fared best. “There are many infrastructure projects done by government and to even bid for a tender, you need to show that you are level-four compliant,” said Ngutshane.

Tumi Dlamini, the CEO of Master Builders SA, said while they welcomed the findings, for a more comprehensive view the survey should have included built environment professionals (such as architects and quantity surveyors) and, if they had been included, the results might have been different.

“In the construction sector, we have about 12 big companies, but over 70% of the construction sector is small companies,” she said.

She said compliance among the bigger companies was better as they had the skills and usually won big government infrastructure projects.

She also said it was a concern that the levels of compliance regarding employment equity and skills development were so low, particularly as government identified these as priority elements.

But she said her association was lobbying the industry to begin to take bold steps.

The financial services sector, which gazetted the financial services charter about a year ago, performed poorly on the skills development component of the BEE codes.

Tryphosa Ramano, the president of the Association of Black Securities and Investment Professionals, agreed with the findings.

According to Ramano, 20 years was not enough to build an adequate skills pipeline, and the building of the pipeline in the financial services industry had been left to other sectors.

She said there would be an upcoming review of the financial services charter in December, “where companies will have to respond to how they performed relative to the codes”.

The worst-performing sector was the mining industry.

“It’s been ranked as noncompliant under the current codes,” said Ngutshane.

This, according to her, was because the mining charter had placed a focus on ownership at the expense of the other elements of BEE such as supplier enterprise development, preferential procurement, skills development and others.

“Even within ownership, because of the structure, there is an issue of how much value has actually been created for black people. No real value has passed, through, and that’s one thing that ownership measures – how much value has been created.”

The manufacturing sector did not perform well under management control and skills development, and under the revised codes, it will look even worse.

“The dismal performance of the manufacturing sector reflected in the 2013 BEE survey is a matter of great concern,” said Kaizer Nyatsumba, the CEO of the Steel and Engineering Industries Federation of SA, a national employer federation representing the metal and engineering industry.

“With the sector as it stands at the moment, it will not be able to play the kind of strategic role that it should play in the country’s ambitious infrastructure development programme and will not benefit fully from the government’s commendable drive to stimulate manufacturing and drive local procurement,” said Nyatsumba.

The property management sector didn’t even meet the minimum on skills development, according to the survey. It also did poorly on economic development. But the industry has been trying to recover from the global recession and has seen many estate agents shut their doors.

Property owners fared much better, particularly on ownership and preferential procurement.

The information, communications and technology industry performed well on enterprise development, but did not do well on skills development, achieving a score of four points out of a possible 17.

The retail and pharmaceutical industry did particularly well on socioeconomic development, which is not surprising because the industries are consumer-facing. But both fell short of employment equity targets.

Ownership has been the main focus of the implementation since it was introduced, and the survey found that a 33% black shareholding was achieved on the ownership element by surveyed companies based on BEE codes.

“Although companies achieved a score above the 25% required target on black shareholding, only 8%

of the 33% is in the hands of black women. This marginally low percentage of black women participation in ownership shareholding is anticipated to be transformed in the near future by the rapid increase of inclusive and broader BEE ownership structures that are to be implemented by companies

in the market,” said the survey.

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