Changing Perceptions of BEE
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The recent merger between two black accounting firms, SizweNtsaluba VSP and Gobodo Inc. is an illustration of economic transformation that goes way beyond BEE as currently conceived. In itself it redefines the accounting market which has up until now been dominated by the “big four”. The merged entity, to be known as SizweNtsaluba & Gobodo, will boast a staff complement of more than 800 and annual fees of more than R400m, making it the fifth largest accounting firm in the country. This merger is important in that it may mark the beginning of a change in perception about BEE. Luc de Brabandere in his book, “the Forgotten Half of Change” reflects on the French saying “Plus ça change, plus c’est la même chose” - it sounds better in French but means “the more something changes, the more it becomes the same!” He is referring to “perception” which he argues is the 2nd vital component of change, the 1st being the reality of the change itself. Different people respond to change depending on their viewpoint. For example if in the early 19th Century a person standing on a cliff saw a sailing ship with a funnel they might have considered the advantage of having a steam engine if the wind failed. Some years later after having seen dozens of steam ships the same vessel might be seen as having the small advantage of being able to use the wind if the engine failed. Another example might be the attitude of a student towards the study of French, before he meets a stunning French girl. The 2nd change – that of perception of the possibilities of the language in the new relationship completely redefines the actuality of learning the grammar and pronunciation. The big difference between a change in reality and a change in perception is that a change in perception can take an instant whereas the reality of change grinds on at its own pace. A change in reality requires action whereas a change in perception requires thinking. But for true change to take place, both these changes are required – the actuality and the perception. The media coverage of BEE, which so affects our perception,
centres around the reality of such subjects as the % of black ownership or the unwinding of BEE transactions, the ineffectiveness of the BEE Codes of Good Practice in addressing mass unemployment and poverty and the enrichment of the few who are politically connected. What is rarely touched on is how we and the outside world view transformation or indeed what transformation really is or could be. It is usually seen as a way of distributing the wealth of the nation more broadly (under the euphemism of sustainability – or avoidance of revolution) and rarely if ever is represented as the process whereby South Africans of all cultures and races join together to form winning teams? Public perception is that BEE is a method of enriching ANC “fat cats”! The idea that a South African rainbow company has unique advantages is rarely considered. Is SizweNtsaluba & Gobodo a transformation success story or is it just another culturally narrow organisation (albeit primarily black) that is likely to miss the advantages of a truly diverse and representative South African organisation? I raise these issues as a BEE practitioner who very rarely meets anyone who is truly passionate or even vaguely excited about BEE. And this is because the perception of transformation is generally negative and backward looking. Few
see any real advantage in a truly representative South African organisation that is able to out-manoeuvre equivalently sized rivals from Europe, China or the USA because it is better equipped to comprehend the multi-cultural and fast changing international market in which it operates. Transformation has been labelled “Black” Economic Empowerment” whereas a more embracive and forward looking idea such as “Team SA Winning Together” (the recent World Cup success being an emblem) could modify perceptions with a more positive acronym perhaps suggesting a concept such as SA Inc. or Team SA. Luc de Brabandere tells us that “the process of change in perception is discontinuous and is fuelled by questions, surprises and strange and incomplete ideas”. It is human to hold onto the certainties of the past but we in South Africa don’t have the time - the pace of change on every front is so great. For example how does the current concept of BEE fit in with South Africa being part of the BRICS group of nations and could we present it in a positive light to these other four emerging giants. And if we are a model of democracy in Africa, a model that that so many are dying for in North Africa, how does BEE and democracy intersect and how does it benefit the model?
If anyone wishes to test the relevance of BEE to the segments where transformation is a reality, take a look at the Taxi Sub-Sector B-BBEE Charter – it epitomises a lack of vision and out-dated perceptions about the new South Africa that we all saw so clearly for an instant during the 2010 World Cup! I must end by suggesting that SizweNtsaluba & Gobodo probably does not see
itself so much as a BEE company but more as a successful company that can take on the best of their rivals because they are a winning team. We need markers in the development of a new perception about South African rainbow companies that disturb past stereotypes. Let’s find a replacement for BEE that expresses a more modern South African ideal and that leads to a future that we can all believe in and perhaps a Code of Good Practice that companies such as SizweNtsaluba & Gobodo would feel truly proud and challenging to measure themselves against.
Alasdair Yuill
Friday, April 22, 2011
Friday, April 1, 2011
President's Advisory Council and Finance Charter
BEE Brief April 2011
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Highlights from Friday 1st April President’s Advisory Council: One of the key issues raised at the Black Economic Empowerment Advisory Council meeting, chaired by President Jacob Zuma, was the over-emphasis on diversity of ownership and senior management. An unintended consequence of this over-emphasis is ''fronting'' and tender abuse and the Council spoke out strongly against this seeing it as one of the major obstacles to the implementation of B-BBEE. Fronting is when black people are listed as directors of companies, but do not take part in the decision-making process or ownership of the business. Participants agreed that fronting needed to be eradicated and effective mechanisms, including possible punitive measures against those guilty of fronting practices, needed to be implemented to stamp it out.
According to the Presidency, there was special emphasis on the implementation of the government's New Growth Path programme and the role of Broad-Based Black Economic Empowerment (BBBEE) in creating jobs at the meeting. In particular, the meeting stressed that BBBEE was not just about big business deals for a few individuals in society but also had to have a hand in empowering ordinary people. The Council called for the consistent implementation of broad-based BEE in all sectors of the economy, to ensure that the policy touches the lives of more people. This included ownership by communities and workers, increased skills development and career-pathing for all working people and support for small enterprise and cooperatives, as well as a new emphasis on procurement from local producers in order to support employment creation.
The meeting also pointed out that to contribute to job creation, BBBEE has to, amongst others, promote new enterprise development, encourage local procurement and enhance skills development and employment equity.
It was agreed that government, with the support of the BBBEE Advisory Council, would ensure a revision of the BBBEE Codes to promote employment creation, investment in small business and co-operatives, broad-based ownership and employment equity. The Council also recommended that government should urgently ensure proper monitoring and evaluation of the implementation of the BBBEE Act.
What we can deduce is that the Codes are not static and that there will be continuing change in the years ahead.
Tourism Sector Code: Following on from the comments in the last BEE Brief regarding companies having to use the relevant Sector Code if 50%+ of their revenue is derived from that Sector, it is interesting to know that on 22nd March 2011 NERA was severely embarrassed when they were forced to withdraw their DTi COGP BEE certificate for City Lodge. This happening after a somewhat self-righteous company called EconoBEE complained to the Minister of the DTi that the Tourism Sector Code applied to City Lodge and also that NERA was not accredited for the Tourism Charter. In this case, whilst living up to their irritating reputation, EconoBEE have actually helped to clarify and highlight an issue that has been undermining the various Sector Charters for some time.
BEE Suppliers
Eleven of the country's biggest companies have launched a "diversity council" to help businesses find black empowerment suppliers, in order to avoid falling foul of BEE legislation. The companies, which include ABSA, Barloworld, De Beers, Rand Water, SASOL, and Unilever, say the non-profit SA Supplier Diversity Council will help develop black businesses, so that they can compete commercially.
The council's interim-head, Matthew Govender, says they have set up a growing database which now includes 800 black suppliers, that have gone through an assessment and certification process.
Finance Charter (Will it ever see the light of day?)
Black business and professional organisations are up in arms over proposals in the financial services charter to permit financial institutes to use equity equivalents in their BEE ownership calculation. Equity Equivalents are a way of scoring ownership points by making equivalent valued contributions under other Elements, usually via Enterprise Development, and have in the past been restricted to multinationals.
The charter was announced as long ago as October 2003. The first phase of the charter was finally gazetted last November by Trade and Industry Minister Rob Davies for public consultation and has introduced equity equivalents as an option to reach ownership targets. Financial institutions will have an option to address the direct requirements by either achieving a total of 15% ownership or a minimum of 10% direct ownership and a maximum of 5% equity equivalents in the direct ownership requirement. Equity equivalents can be in the form of loans to black people or entities.
This is favoured by the banks who argue that there are not enough black investors who could hold a 15% ownership stake in a major financial institution without incurring substantial debt. The 15% Target is in itself highly controversial with many black business and professional organisations saying this is in conflict with the Codes of Good Practice which requires 25.1% direct black ownership. The Banks have also raised concerns that increasing the direct black ownership target will lead to then introduction of under-capitalised shareholders in mainstream banks.
The Confederation of Black Business Organisations (CBBO), the Black Management Forum, and Black Lite Consulting have all written to Davies to voice their objections.
One sometimes wonders whether the Banks are content to have the their Charter under continuing discussion!
DTI training programme for B-BBEE
The Department of Trade and Industry (dti), together with three universities (Unisa School of Business Leadership, Wits Enterprise and UFS Centre for Business Dynamics), is finalising the development of a Standardised National Training Programme for BEE verification. This is intended to apply to SANAS accredited verification analysts and IRBA registered auditors. A recent report back to stakeholders elicited a sharp response from ABVA complaining that:-
1. No hard copy of any material was distributed during the report back.
2. The Joint Venture Universities did not approach to ABVA for input into the curriculum requirements and an ABVA suggested curriculum was not considered.
3. The curriculum appeared to focus on theoretical concepts which will not equip the industry with the necessary technical skills for the correct calculation of BEE scores.
4. The fast-track option for current BEE industry practitioners and registered Auditors with 3 years of BEE experience should mean 3 years of BEE Verification Experience.
5. The suggestion that Auditors can complete the 5-day course and then be in a position to issue certificates for all Codes including Sector Codes both present and future ones is unrealistic and unfair to the ABVA VAs who are working under a vastly tighter regime.
6. The cost of R15,000 for the 5 day course is high.
Alasdair Yuill
(click here to view a print friendly version)
Highlights from Friday 1st April President’s Advisory Council: One of the key issues raised at the Black Economic Empowerment Advisory Council meeting, chaired by President Jacob Zuma, was the over-emphasis on diversity of ownership and senior management. An unintended consequence of this over-emphasis is ''fronting'' and tender abuse and the Council spoke out strongly against this seeing it as one of the major obstacles to the implementation of B-BBEE. Fronting is when black people are listed as directors of companies, but do not take part in the decision-making process or ownership of the business. Participants agreed that fronting needed to be eradicated and effective mechanisms, including possible punitive measures against those guilty of fronting practices, needed to be implemented to stamp it out.
According to the Presidency, there was special emphasis on the implementation of the government's New Growth Path programme and the role of Broad-Based Black Economic Empowerment (BBBEE) in creating jobs at the meeting. In particular, the meeting stressed that BBBEE was not just about big business deals for a few individuals in society but also had to have a hand in empowering ordinary people. The Council called for the consistent implementation of broad-based BEE in all sectors of the economy, to ensure that the policy touches the lives of more people. This included ownership by communities and workers, increased skills development and career-pathing for all working people and support for small enterprise and cooperatives, as well as a new emphasis on procurement from local producers in order to support employment creation.
The meeting also pointed out that to contribute to job creation, BBBEE has to, amongst others, promote new enterprise development, encourage local procurement and enhance skills development and employment equity.
It was agreed that government, with the support of the BBBEE Advisory Council, would ensure a revision of the BBBEE Codes to promote employment creation, investment in small business and co-operatives, broad-based ownership and employment equity. The Council also recommended that government should urgently ensure proper monitoring and evaluation of the implementation of the BBBEE Act.
What we can deduce is that the Codes are not static and that there will be continuing change in the years ahead.
Tourism Sector Code: Following on from the comments in the last BEE Brief regarding companies having to use the relevant Sector Code if 50%+ of their revenue is derived from that Sector, it is interesting to know that on 22nd March 2011 NERA was severely embarrassed when they were forced to withdraw their DTi COGP BEE certificate for City Lodge. This happening after a somewhat self-righteous company called EconoBEE complained to the Minister of the DTi that the Tourism Sector Code applied to City Lodge and also that NERA was not accredited for the Tourism Charter. In this case, whilst living up to their irritating reputation, EconoBEE have actually helped to clarify and highlight an issue that has been undermining the various Sector Charters for some time.
BEE Suppliers
Eleven of the country's biggest companies have launched a "diversity council" to help businesses find black empowerment suppliers, in order to avoid falling foul of BEE legislation. The companies, which include ABSA, Barloworld, De Beers, Rand Water, SASOL, and Unilever, say the non-profit SA Supplier Diversity Council will help develop black businesses, so that they can compete commercially.
The council's interim-head, Matthew Govender, says they have set up a growing database which now includes 800 black suppliers, that have gone through an assessment and certification process.
Finance Charter (Will it ever see the light of day?)
Black business and professional organisations are up in arms over proposals in the financial services charter to permit financial institutes to use equity equivalents in their BEE ownership calculation. Equity Equivalents are a way of scoring ownership points by making equivalent valued contributions under other Elements, usually via Enterprise Development, and have in the past been restricted to multinationals.
The charter was announced as long ago as October 2003. The first phase of the charter was finally gazetted last November by Trade and Industry Minister Rob Davies for public consultation and has introduced equity equivalents as an option to reach ownership targets. Financial institutions will have an option to address the direct requirements by either achieving a total of 15% ownership or a minimum of 10% direct ownership and a maximum of 5% equity equivalents in the direct ownership requirement. Equity equivalents can be in the form of loans to black people or entities.
This is favoured by the banks who argue that there are not enough black investors who could hold a 15% ownership stake in a major financial institution without incurring substantial debt. The 15% Target is in itself highly controversial with many black business and professional organisations saying this is in conflict with the Codes of Good Practice which requires 25.1% direct black ownership. The Banks have also raised concerns that increasing the direct black ownership target will lead to then introduction of under-capitalised shareholders in mainstream banks.
The Confederation of Black Business Organisations (CBBO), the Black Management Forum, and Black Lite Consulting have all written to Davies to voice their objections.
One sometimes wonders whether the Banks are content to have the their Charter under continuing discussion!
DTI training programme for B-BBEE
The Department of Trade and Industry (dti), together with three universities (Unisa School of Business Leadership, Wits Enterprise and UFS Centre for Business Dynamics), is finalising the development of a Standardised National Training Programme for BEE verification. This is intended to apply to SANAS accredited verification analysts and IRBA registered auditors. A recent report back to stakeholders elicited a sharp response from ABVA complaining that:-
1. No hard copy of any material was distributed during the report back.
2. The Joint Venture Universities did not approach to ABVA for input into the curriculum requirements and an ABVA suggested curriculum was not considered.
3. The curriculum appeared to focus on theoretical concepts which will not equip the industry with the necessary technical skills for the correct calculation of BEE scores.
4. The fast-track option for current BEE industry practitioners and registered Auditors with 3 years of BEE experience should mean 3 years of BEE Verification Experience.
5. The suggestion that Auditors can complete the 5-day course and then be in a position to issue certificates for all Codes including Sector Codes both present and future ones is unrealistic and unfair to the ABVA VAs who are working under a vastly tighter regime.
6. The cost of R15,000 for the 5 day course is high.
Alasdair Yuill
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