The working group for the black economic empowerment (BEE) charter for the information and communications technology (ICT) sector has released its second working draft following consultative and research processes during March and April.
The second draft was released on Tuesday after taking into account informed comments elicited during a national roadshow and research conducted by the group and its partners, EmpowerDEX and Forge Ahead. The first draft was released in March and a final draft is expected after World Telecommunications Day on May 17.
The roadshow presentations and workshops were attended by individuals and formations such as small, micro and medium enterprises, government structures, institutions of learning institutions and industry associations.
ICT working group chairperson Advocate Dali Mpofu said: “We’ve had extremely positive responses to the workshops, thereby showcasing the levels of interest and legitimacy of the entire process and vindicating our decision to take the process to the people.”
The group said challenges that emerged from the working sessions include concerns regarding access to funding by black businesses to acquire equity in ICT enterprises. Venture capital markets available for investment should be broadened to include prospective, entrepreneurial, black-controlled enterprises.
Issues that will be redressed in the final charter — due for release on or before June 25 — include a lack of access to funding and unfavourable dividend policies, preferential procurement, management control, skills development and enterprise development.
Indirect ownership emerged as a serious challenge. Its role needs to be clarified as it is allegedly open to abuse. Outstanding issues included “window-dressing”. The group continues to research ways to address this. The practice involves firms that set up front companies — backed and owned by white entities — falsely to boost their BEE credentials.
Barnard Jacobs Mellet co-CEO Andile Mazwai is of the view that while ownership is important, there are other issues that need to be addressed. He said skills development and employment equity are equally vital and noted that there is a need to be scientific in terms of figures and targets.
“Move black people to where they have been excluded, move them up, let transformation take place at all levels … and not just in one area,” Mazwai said, adding that there has been presumption that everyone wants a piece of equity, when in fact some people would opt for other aspects of empowerment — such as skills development and others.
The mining charter is not specific on the issue of multinational firms, but the target is for each company to achieve 26% BEE ownership.
The financial charter makes specific provision for foreign banking groups. They are, similar to domestic financial institutions, subject to the target of a minimum of 25% black ownership.
Standard Bank economist Elna Moolman acknowledged “sufficient pressure” on companies not to do window-dressing and added: “I don’t think there is a significant danger that companies will abuse any flexibility to evade the objectives of the charters.
“My suggestion is therefore that, similar to the treatment of South African companies in the financial charter, the South African operations of foreign companies should be subject to the targets.”
The core operations of the mining and financial institutions take place in South Africa while in the case of the ICT institutions the core operations of foreign firms take place outside South Africa and are only distributed in South Africa. This is the main difference between the ICT and other sectors, Moolman said, noting, however, that this is obviously a gross generalisation and not applicable to all firms.
The second draft noted that certain foreign companies, mainly United States-based, proposed equity equivalents or alternatives to black equity and the matter will only be resolved after extensive consultations with industry stakeholders.
It also noted that one of the points advanced is that: “Multinationals have in other countries been prepared to take local shareholders be it in response to foreign limitations or for strategic reasons.” — I-Net Bridge