Old Mutual, South Africa’s largest financial-services group, made good progress in the area of black economic empowerment (BEE) last year, it has emerged from the company’s 2004 Old Mutual Corporate Citizenship Report, released on Thursday.
According to Old Mutual, during 2004 the group facilitated empowerment deals worth R500-million, while channelling 38% of its total “influenceable spending” with black-empowered companies.
At the same time, the company said, more than 50% of the group’s 2004 revenue was generated under the leadership of black executives, and 58% of its total workforce is now black.
Old Mutual also pointed out in the report that, by the end of 2004, it managed R4,93-billion-worth of infrastructure assets, making it the largest private-sector manager of infrastructure investments in the country.
Commenting on the release of the report this week, Old Mutual South Africa MD Roddy Sparks said Old Mutual is committed to contributing to social development in a manner also good for shareholders and clients.
“At Old Mutual, we believe that corporate citizenship must play a central role in business decision-making,” said Sparks. “Stronger still, we believe that being a good corporate citizen is directly good for business.”
This principle was clearly demonstrated in the group’s choice of strategic black business partners and the inclusion of a large staff component in its R7,1-billion BEE deal. It was also evident in all other areas of the group’s empowerment initiatives.
“Our basic principle is that strategic investments into BEE companies must add value for all our stakeholders,” elaborated Sparks. “If they don’t, they’re not worth doing, either for ourselves or for the empowerment company.”
To date, Old Mutual has facilitated empowerment deals through either direct investments or structured financing worth a total cost of R1,7-billion. In 2004, the group facilitated empowerment deals worth R500-million, which included investments into established companies such as Metcash, Pepkor, Brait and Foodcorp.
Sparks added that sound business principles were also evident in the group’s infrastructure-investment strategy.
“The performance of Old Mutual’s infrastructure investments demonstrates that, in addition to contributing to the upliftment of the country as a whole, the investments are also rewarding for Old Mutual investors.”
By the end of last year, Old Mutual’s Infrastructure, Developmental and Environmental Assets fund had returned 15,8% a year since its inception in 1999, outperforming its inflation plus 7% target by 4% per year. The fund comprises toll roads, toll bridges, railways, telecoms, airport, prisons, power and housing.
In 2004, the infrastructure assets managed by Old Mutual grew to R4,9-billion, up from R3,2-billion in 2003 and R2-billion in 2002. Commitments and direct investments into infrastructure by the company in 2004 totalled R2,5-billion.
But Sparks reckons that more can be done.
“I would like to see government and the private sector working closer together to create more deal flow that would be beneficial for both investors and the country as a whole,” he observed.
In the area of employment equity, the MD said this is where Old Mutual has “really excelled” in applying its transformation principles. Approximately 45% of its junior management and 58% of the total workforce is now black, and more than 50% of 2004 group revenue was generated by divisions under the leadership of black executives.
Sparks added that Old Mutual is very much aware that true transformation is only possible through the hearts and minds of its people.
“Transformation isn’t easy and won’t happen just because the company policy says it must. Like South Africa as a whole, Old Mutual and its employees are on a journey of change. Although we have already come a long way, we understand that there is still a long road ahead.”
More than half of Old Mutual employees have already been through diversity workshops.
“Through these courses run by the Old Mutual Business School, employees are assisted in getting to grips with and enjoying the huge benefits to be had through embracing the richness of diversity.”
The MD believes empowerment procurement to be one of the most important, yet challenging, areas of transformation.
“When Old Mutual sources suppliers — be they black or white — it expects to receive a quality service at the best possible price. So while empowerment credentials are important, there are no free lunches,” he observed.
In 2004, 38% of Old Mutual’s total “influenceable” spend — procurement spending from non-monopolies and long-term contracted suppliers — was with empowered companies.
According to Sparks, unlike many other companies, Old Mutual is committed to procuring core services from black suppliers, particularly small and medium enterprises. This is where a company the size of Old Mutual — with 3 000 suppliers — can play a massive part in empowering the previously disadvantaged, he believes.
For example, Old Mutual already procures a sizeable portion of its accounting and legal services from black service providers.
A key focus for the group for the future is meeting the changing needs of its customers.
“As demonstrated with the release of our Max Investments product range in 2004, we are committed to providing products and services that meet the needs and expectations of our clients. And what is good for clients is good for Old Mutual,” Sparks said.
Going forward, Old Mutual will continue to follow its path of business-led corporate citizenship for the genuine benefit of all stakeholders, customers, employees, shareholders and a rapidly transforming South Africa. — I-Net Bridge