Despite the obvious benefits of black economic empowerment (BEE) corporate South Africa has not been actively engaging in the process of transforming the ownership, control and management of South Africa Inc.
As a result it has become necessary to draw-up empowerment charters to ensure that change does happen — even though any system of coercion is not ideal.
Unfortunately the result, in the financial services sector at least, has been an affliction best described as ”scorecard obsession”, driven by the misplaced belief that compliance with the Financial Services Charter on its own is the elixir for success. At best this obsession will lead to short-term business retention as clients reward compliance with charter objectives. The real opportunity for those companies that consider themselves ”compliant” rests in their ability to position themselves to draw business from financial services’ fastest growing market segment: the black middle class.
For many operating in this segment it is like doing business in a foreign country. Brand awareness counts, but an inability to grasp the nuances of culture and language effectively compromise their growth prospects. This threat is heightened in the face of a number of competitors who prospective clients can relate to more authentically.
Companies whose workforce, suppliers and networks are demographically and culturally representative will probably be best positioned to tap into the opportunities in this market.
When engaging ground troops in financial services companies it becomes apparent that the spirit of empowerment is far from entrenched in their psyche. Rather, they view the the charter like tax — it has to be paid and paid quickly. Few individuals and companies take time to consider black empowerment beyond this ”need to” paradigm. More time is spent thinking up innovative ways to tally up charter points on the scorecard than on internalising the significance of this process. In so doing, they are effectively missing an opportunity.
Corporate leaders have spent a disproportionate amount of time recently promoting high-profile ownership deals. The reality is this is the easy part — it is the cleanest, least disruptive category to address.
On the back of this, black individuals who have been positioned to participate in these deals have been widely criticised on the grounds of enrichment. But, is this not a requisite of successful empowerment? We need black millionaires and billionaires. These individuals are defining the aspirations of our youth and the value of their contribution to empowerment cannot be overlooked.
The leadership of companies ”may” have made the leap to understanding the motivation for BEE in championing these ownership transactions, but the real challenge for maximising the commercial value is in their post-deal transformation. Alignment of the organisations’ culture and values with BEE aspirations is critical to the transformational and commercial success. Their leadership must have the vision to drive sensitivity to empowerment down to the grassroots, so that in the shortest time possible their company is positioned to operate effectively in this high growth ”foreign” market.
Leaders who have not internalised the spirit of empowerment will undoubtedly be challenged. The type of focused commitment needed to transform their companies can only stem from individuals who believe in the process. An effective measure of this commitment is the response to one question: What is your leadership succession plan? The answer to this question will be a good indicator of the leader’s willingness to transform.
The appointment of black non-executive board members and tallying of the ”blackness” of the shareholder register through every insidious means of accounting for direct and ”indirect” shareholding will probably not achieve this. Effective internal transformation is impossible if existing staff are not ”brought along”. They will remain ”silent assassins” whose actions erode the value of the new owners and impede transformation.
Within the framework of the charter’s employment equity, skills development, enterprise development and procurement need to be considered with passion. These create opportunities to tap into the fresh minds that will drive the new economy, to engage the leaders and influencers of tomorrow, to engage your new target market and transform your company to meet their needs.
In reading a recent highly publicised rating of companies one feels particularly disillusioned by the number of ”not applicable” responses on critical factors such as employment equity numbers and affirmative procurement. It is an area where very little analysis is undertaken to test the authenticity of the submissions. The task is particularly challenging in financial services companies with complicated organisational structures and diverse business functions and activities.
Data may always be advantageously manipulated, but a visit to a merchant bank treasury, large financial securities firms’ trading desks, or an asset management dealing room or analyst convention will suggest that some of the employment equity numbers being produced are not reflective of the reality. Cynically, the lack of representation is in specialised services where the margins are highest and remuneration is greatest. When questioned about their lack of black staff, these companies actively poach from developing black competitors, expressing that it was really just in the nature of the market. Apart from denting the stability of small black companies, this approach clearly demonstrates very little commitment to identifying and nurturing black talent at a grassroots level and a failure to act in the spirit of BEE.
The little-acknowledged black entrepreneurs working to establish sustainable businesses while simultaneously driving transformation are potentially the engines of growth for our economy.
Their legacy will be the creation of fertile ground for the next generation and, in some cases, the building of empires based on their ability to navigate the new economy.
Many in the financial services sector seem to find increasingly creative ways to stall the provision of consistent and sustainable support for young black professional companies. In a sector where big business dominates, deep relationships have been nurtured over decades and aggressive tactics are rife, black entrepreneurs are loathe to publicly air their experiences. The leaders and captains that can guide us to the next level are being systematically muzzled.
In the highly technical disciplines there is limited recourse to charters for black professionals. Decision- makers effectively use knowledge as a barrier and actively attempt to bamboozle even their leadership in accounting for the lack of support for black specialised service providers.
Unless the government, pension fund trustees, trade unions and parastatals aggressively monitor private sector transformation initiatives and support for small black businesses, BEE may be compromised.
Unless our corporations seriously internalise the spirit of empowerment and ensure the next generation of leaders and managers possess the requisite sensitivities, they may forgo the tremendous opportunities that this period of transformation offers, and in the long term wealth will be eroded for all shareholders in SA Inc.
Devon Pather is an executive director at Tri-Linear, an asset management company