/ 12 November 2012

New empowerment codes cause unhappiness

Sue Brandt
Sue Brandt

Sue Brandt

  The one thing that has kept the government and the mining industry apart on transformation is the ambiguity of black economic empowerment (BEE) targets, including conflicting objectives and requirements from various government departments.

Although the industry is still settling following the department of mineral resources' recent changes to the Mining Charter legislation, as well as the amended regulations around social and labour plans, another spanner has been thrown in the works with the recent publication of the proposed amendments to the department of trade and industry's broad-based black economic empowerment (broad-based BEE) legislation.

Specifics are still to be determined, but the initial response from industry is plagued with questions and uncertainty. The debate is likely to continue for several months around specific targets and the resultant implications on company scores. Of critical concern among the proponents of transformation in mining at Managing Transformation Solutions is the impact these changes will have on actual delivery and sustainable change.

The renewed focus on targets and scores emanating from the BBBEE revisions will detract from the core analysis of cost-effective and sustainable delivery in favour of bean counting.

It has been our experience that substantial progress is being made in many corners of industry with critical resource re-alignment, realistic business-orientated budget planning and increased awareness of the need for implementation to be realised to achieve transformation.

The first annual Transformation Indaba 2011, themed "Mining Beyond Compliance", called the industry to focus on the need to move beyond the tick-box approach to transformation and instead focus on delivery. In line with the drive for greater focus on tangible change on the ground, this year's Transformation Indaba, themed "Collaboration for Change", continues efforts to identify solutions for effective delivery, particularly from a cross-industry collaborative stand point.

However, to achieve the depth and breadth of change required within our mining communities, these processes require greater entrenchment and more time.

It remains our hope therefore that change realised in industry mind-sets in recent months, will stand firm and optimise the amended legislative stick (broad-based BEE codes) to continue the transition the industry so desperately needs. Only time will tell.

The Mining Charter will need to be revised to align with the amendments. Suggestions that the new codes will lead to the demise of the Mining Charter scorecard are unlikely to be realised.

Certainly such an opportunity for alignment will remove the much-criticised ambiguity and contradictions of recent years. From a transformation perspective, the key priorities within the amended codes continue to be the core objectives of the associated legislation in the mining sector. These include ownership, skills development, and enterprise and supplier development and align to the national development framework of driving job creation, economic development and poverty alleviation.

Should such a coherent approach from the government and its respective agencies be appropriately entrenched in the respective legislation (and the implementation of it thereafter) the opportunities for sustainable development may be far-reaching.

The merging of several of the elements of the codes, reducing the number of elements from 7 to 5, may further drive a more effective, integrated approach to transformation in certain areas.

Although the implications of the proposed amendments to the BEE codes are not only applicable to the mining sector, mining is unlikely to be at the forefront of transformation success when compared to other industries in certain elements of the codes.

The industry claims that substantial change has taken place at executive decision-making levels (the management control element) and middle management levels (the employment equity element). The previous separation of scoring of these areas would have enhanced this standpoint, but the merging of these two elements will likely result in the dilution of results achieved.

This is particularly true of several mining companies who have already been negatively impacted by the current higher "Year 6" targets of the 10-year charter targets.

The merging of the procurement and enterprise development elements of the codes will further drive the critically required focus on supplier development, as opposed to the small and medium enterprise development plans that are currently part of mines' local economic development programmes.

The focus going forward must be to develop broad mining industry suppliers for sustainable, value-add inputs to the industry, such as maintenance services and high value products.

Initial reactions continue to focus on the negative implications the codes may have on the scoring of companies, particularly around the merging of the management control and equity elements.

This topic will be in the spotlight at the 2012 Transformation Indaba on November 14 and 15 at the Innovation Hub in Pretoria.


Sue Brandt is the chief executive of Managing Transformation Solutions, a consultancy that specialises in the management and implementation of transformation