The working group for the black economic empowerment (BEE) charter on information and communications technology (ICT) has released its fourth and last working draft, about six months ahead of its planned implementation.
The charter, which comes into effect on March 1 2005, proposes that all ICT companies in the country should be 45% to 50% charter-compliant by February 2006. All ICT firms should be 100% compliant by or before February 2010.
Black people should own a minimum of 35% of ICT companies and control or manage at least 60% of the sector by 2015.
The fourth draft, released on Wednesday, puts some emphasis on corporate social investment, employment equity, enterprise development and access to ICTs. These aspects account for 33% of the total weighting in the empowerment scorecard.
The weightings for the ownership indicator have been lowered to 15%, with 5% distributed to increase the government’s scorecard for preferential procurement, enterprise development and access to ICTs.
The Department of Trade and Industry is — on behalf on the government — in charge of the empowerment charter and broad-based BEE processes towards economic transformation.
“The target ranges released in May have been moderated in line with some of the submissions received and vigorous debate within our task team, a body made up of the key industry leadership of our sector,” said ICT charter working group chairperson Advocate Dali Mpofu.
“Once again we hope that the careful thought that has gone into this section will be reflected in the product. One of the most creative symbolic suggestions received was of actually converting the scorecard and presenting it ‘upside down’ in order to emphasise the importance of the indicators that have an impact on wider society, on job-creation, on women [and] on rural communities.”
In terms of the fourth draft, qualifying multinational and other companies will be exempted from selling their equity to BEE entities. The working group said qualifying firms will have applied and gone through the processes of the yet-to-be-formed ICT BEE Council.
The council may grant a certificate of permitted non-compliance to an entity that is wholly state-held or a small, medium or micro enterprise.
The other qualifying criterion is proof that selling a stake to empowerment entities might “pose injurious harm to the applicant”.
Persisting challenges highlighted
The fourth draft highlights some of the persisting challenges. These include difficulties black people have in accessing funding, the highly inflated cost of BEE transactions, restrictive mechanisms and fronting or falsified empowerment credentials.
In addressing these challenges, the working group suggested that state-funded development finance institutions should fund the development of BEE enterprises as opposed to just giving guarantees. These institutions include the R2-billion-funded National Empowerment Fund and the R1-billion-funded Umsobomvu Youth Fund.
“The procedures of acquiring these finances should be made favourable for black entrepreneurs. In addition the visibility of these organisations needs to be improved by mass advertising campaigns and a presence in mainly black areas,” the fourth draft notes.
“A special BEE fund must be established to finance the acquisition of equity from established companies in the ICT industry. For example, the R15-billion earmarked by Treasury for BEE could be apportioned per sector. The ICT sector’s portion must then be ring-fenced for financing in the sector.”
Ahead of its implementation next year, the charter will be finalised and submitted to Business Unity South Africa for review later this year. The final document will be handed over to the Cabinet on September 30. The charter will be officially launched at a gala dinner at the end of October. — I-Net Bridge