Employment equity, skills development and management control are vital indicators of broad-based empowerment, but they are also areas of low BEE progress. Equity transfer is still king, though this must change if BEE is going to be broad-based. This has emerged from the two baseline studies into BEE.
‘The greatest proportion of all respondents find the implementation of management control challenging, with 23% of the respondents listing this element as the most challenging to implement,” according to the KPMG study.
Of the companies surveyed (1 000 in total), employment equity and skills development are listed among the top priorities. KPMG says: ‘This is a clear indication of the challenges faced by most industries in securing skilled resources closely linked to the perceived ineffectiveness of the Setas [sectoral education and training authorities].”
The Black Business Working Group study makes an opposite finding: because there is a cash-back value to training, skills development scored better than other areas. Businesses can claim refunds on the training tax levied to fund the Seta system.
Equity and skills development were devised as vital elements of broad-based empowerment because they help black South Africans break through the poverty and skills barriers.
KPMG says progress on equity and skills development is good while the Black Business Group has found that industry in general is laggardly in these two areas. Almost four in 10 companies surveyed by the group did not have a skills development plan in place, a factor which the researchers believe has a direct bearing on the slow pace of employment equity.
General compliance with employment equity (filing reports with the employment equity commission and having a plan to meet legal targets) was very low among the 2 000 companies surveyed.
Though the Black Business Working Group disputes that a skills shortage is causing the black advancement problems, data on skills shortages compiled by state agencies suggest this is a real crunch.
Industries under specific strain include engineering, IT, financial services and project management, all of which are growth sectors.
Black Management Forum president Jimmy Manyi’s views that the skills shortage can be a chimera has clearly influenced the group’s thinking. Researchers found that the top three hurdles to progress were the high turnover of black people in business, the skills shortage and the perception that BEE benefited only the usual suspects.
Business organisations often aver that the economy is over-regulated, but respondents said the three key laws guiding BEE are progressive contributory factors. The three are the Constitution, the Employment Equity Act and the Broad-Based Black Economic Empowerment Act.
To enhance BEE’s positives, the Black Business Working Group says the codes must be ‘widely communicated and promoted” to all sizes of businesses. ‘A general lack of understanding and knowledge was clearly identified, especially among small enterprises.”
Constraints to bee
- Direct and indirect fronting practices
- Indirect cost of time that managers spend on dealing with compliance issues
- The lack of a common definition and understanding of what is meant by black economic empowerment
- Inadequate financial support for broad-based BEE to organisations
- Lack of support and development of black-owned enterprises
- The complexity of the codes
- The lack of clarification on issues in the generic scorecard
- The lack of leadership by government departments and the public sector with regard to compliance to the broad-based empowerment elements of the codes
Source: Black Business Working Group Baseline Report 2007
Changing perceptions
- Black business believes communication problems should be addressed by changing the following perceptions:
- The view that employment equity and skills development will not drive job creation
- The view that BEE is only necessary to secure government contracts
- Fears about BEE among white business owners
- The perception that BEE disregards the economic flow-through principle
- The real fears of fronting and fronting practices
- The complexity of the codes
Source: Black Business Working Group Baseline Report 2007
Comments from respondents to the KPMG survey on the challenges facing the successful implementation of BEE.
Ownership
‘Being a listed entity limits the amount of ownership within the BEE framework.”
Management control, employment equity and skills development
‘The availability of a skills pool …”
‘Recruiting skilled black women.”
‘Finding appropriate and affordable black talent.”
‘The country has a small pool of skilled labour, of which the majority is white. It will take decades of investment in education for this to be remedied.”
‘The shortage of numerically qualified people with work experience. In our business we need actuaries, chartered accountants, engineers and doctorates in maths and science.”
‘It is the normal course of business that it is difficult to retain top management. Not just black, but all top management — and this is likely to continue in a competitive labour market.”
Preferential procurement
‘Too few suppliers.”
‘Getting some of our smaller suppliers to buy into broad-based BEE.”
‘Most suppliers have not been accredited and it is sometimes a challenge to find BEE suppliers in IT, travel and tourism sectors and others …”
Enterprise development
‘Very little is known about enterprise development generally.”
General challenges
‘Broad-based BEE legislation: its tardiness in being finalised and the expectation that it will be amended.”
‘Company too small.”
‘Unwillingness of some key people.”
Source: KPMG BEE survey, 2007