Leaving aside the fortunes of Health Minister Manto Tshabalala-Msimang, another battle is brewing. This is the battle of the BEE baseline studies. Now that the legislation and its codes have been finalised, the emphasis is shifting to monitoring and implementation.
Until now, there has been little more than anecdotal evidence to reveal the success (or failure) of the policies to bring the black majority into the economic mainstream. Two reports released in the past month show up radically different scenarios.
A KPMG survey suggests the news is good. Its survey of a representative sampling of 1Â 000 companies shows the private sector is increasingly linking the implementation of BEE to growth rather than to compliance.
Implementation of strategy is being dealt with at the most senior levels of corporations rather than only as human resource or corporate affairs responsibilities. This is important because it means that BEE is not regarded only as a box-ticking exercise.
At the same time, the Presidential Black Business Group has designed an official BEE baseline survey in which the news is not so great. Its representative survey of more than 2Â 000 companies shows that compliance levels are low. Just less than four in 10 companies surveyed had no BEE plan and had made no progress toward drawing one up. Only two in 10 companies had an approved plan.
The KPMG study found that over nine in 10 of the companies it surveyed had a BEE compliance strategy in place with higher levels of compliance among big companies than small ones. More than 80% of the respondents told KPMG that BEE was a growth strategy and not one of compliance alone.
“This is an encouraging observation, as it shows that business no longer views BEE as merely a formality, but as something that is imperative for the growth of their business in the South African economy.
“BEE seems to have changed from a board-level strategy, monitored and managed by a member of the board of directors, to an operational strategy implemented and driven by senior management and key decision makers,” says Sandile Hlophe, director of BEE services at KPMG.
Contrast this with the conclusion of the Black Business Working Group study, led by businessman Peter Vundla, which finds “across the board low levels of progress for targeted business entities”.
One reason for the different conclusions may be the nature of the surveys: businessman Thami Mazwai of the Black Business Working Group says the KPMG survey is qualitative, which allows optimism and planning to be encapsulated in the survey findings. The working group’s survey is hard fact and requires that words be matched by action.
Read both surveys and what you will also detect is a difference in tone. The KPMG survey’s tone is a determined, glass-is-half-full approach. Its method is to be persuasive and encouraging. It dangles the carrot of growth before the perceived stick of BEE.
The tone of the Black Business Working Group survey and of Mazwai’s article (see page 33) indicates they are aghast at the lack of progress. Black business is clearly angry at what it perceives to be the establishment’s intransigence on transformation. For this, it will seek to ensure that the forthcoming black business council will have regulatory rather than advisory powers. Its view appears to be that it has had enough of carrots and wants to bring out the stick.
Analysts should read beyond these seemingly substantial findings to see a range of similar results in both surveys. Black ownership, which is one of seven factors to consider in assessing BEE, is the only measure recording progress in both surveys.
All businesses are struggling with employment equity and its twin imperative, skills development. Enterprise development and preferential procurement are becoming also-rans in the BEE race.
The surveys, read together, provide a coherent first baseline study of BEE compliance. They are exhaustive in setting out challenges and recommendations to ensure the next measures show substantial progress in the transformation of the economy.
Although the legislation has now been passed, education is key. The presidential working group says businesses across the economy, from large to small, need an exhaustive education campaign. It is no longer good enough, they add, for businesses to adopt a wait-and-see approach.
The message from the KPMG survey is that, although business has “embraced” BEE, it is essential to take a medium-term to long-term view. It has committed itself to measuring at least until 2015.
Three types of empowerment
Three main areas of broad-based BEE include:
- Direct empowerment including black ownership and management control
- Human resource empowerment including employment equity and skills development
- Indirect empowerment including preferential procurement, enterprise development and socio-economic development
Source: Black Business Working Group Baseline Report 2007