The art and science of measuring empowerment

The overall aim of the M&G Most Empowered Companies research is to measure objectively the contributions made to broad-based black economic empowerment (BEE) by companies listed on the JSE.

The research and assessment were undertaken by Empowerdex. The survey considered all the companies listed on the JSE, other than those on the venture capital and development boards. Each company was assessed on each of the seven elements of BEE.

This month we publish the top 100 companies overall and briefly discuss each of the seven elements of BEE. In future, monthly, editions we will publish the top companies in each industry sector.

Scoring methodology
Participants were invited to submit a BEE rating certificate (see table) or a completed submission form supplying relevant data, which enabled Empowerdex to calculate scores for the companies. Where Empowerdex was provided with details breaking down the calculations of scores under each element, those are disclosed in the tables. Where it was given only high-level scores for each factor, and not a breakdown of how each factor was calculated, it is marked as n/a.

All the scores are derived from actual verification certificates supplied to Empowerdex by the companies concerned and published with their consent. These scores were taken to be accurate by the Empowerdex research team if they were completed by a South African National Accreditation System-accredited broad-based BEE verification agency or by an approved member of the Association of BEE Verification Agencies.

Although Empowerdex recognises the progress made by certain sectors in terms of the development of sector charters, to facilitate meaningful comparisons between various sectors, all companies were scored according to the methodology prescribed in the broad-based BEE codes of good practice, except where they were scored against a gazetted sector code that carries the same legal standing as the generic codes.

The ownership rights that are in the hands of black individuals, black women, black designated groups (youth, unemployed and rural dwellers), broad-based schemes, black new entrants, employee schemes and co-operatives are taken into consideration here. This is subject to the strict maxim of "substance over legal form" which pervades the codes. For example, if preference shares that are similar in nature to debt issues by a company are issued to black investors, these would not be taken as part of black ownership.

Management control
Here the top management structure of the measured entity is tested for black participation, using the adjusted recognition for gender to provide enhanced recognition to companies that position black women in such roles. Points are scored for representation at board level, in the top executive structure (usually chief executive, chief financial officer and so on) and other top management levels.

Employment equity
Black representation at senior, middle and junior management levels is tested under this element. This excludes those recognised under the management control element. Participation in the workforce of the measured entity by black disabled people is also tested. Representation is adjusted for gender.

Skills development
Skills development contributions for the benefit of black people are scored here. Measured entities are scored for their overall skills development contributions, adjusted for gender; their contributions in favour of black disabled people, also adjusted for gender; and the participation of black employees in categories B, C and D learning programmes or learnerships, also on a gender-adjusted basis. Such learning programmes are typically in the form of learnerships that are registered with the relevant sector education and training authority or on-the-job training with a formally assessed outcome.

Preferential procurement
This element assesses the financial impact on broad-based BEE-compliant firms through business with the measured entity. Total procurement from compliant entities, procurement from compliant small businesses and procurement from black-owned (50% or more) and black women-owned (30% or more) enterprises are analysed. This allows firms to score under more than one indicator for this element and provides an incentive to procure goods and services from small, black-owned businesses.

Enterprise development
This element determines the impact of a measured entity on the development of financial and operational sustainability of qualifying enterprise development beneficiaries through monetary or quantifiable non-monetary support. Common forms of support include interest-free loans, management skills transfer and the provision of preferential credit facilities.

Socioeconomic development
This looks at the social impact of contributions by companies on black beneficiaries. This differs from standard corporate social investment in that it is largely directed at infrastructure, educational, community and health-care development.

Qualifying small enterprises
Certain companies choose to assess themselves purely at the holding company level, rather than group-wide level. Usually in such cases the legal entity concerned has a turnover of less than R35-million, which entitles them to be classified as "qualifying small enterprises" (QSEs), for which there is a special dispensation under the empowerment codes.

QSEs complete a different scorecard with different weights and targets for the empowerment factors, which makes it impossible to compare their scores with larger companies that complete the generic score card. Often the decision on whether to assess the QSE-qualifying holding company or the group as a whole sits with management. In our view, group-wide assessments are a better reflection of the substance of empowerment at a company.

For that reason, we have separated the QSE rankings in the overall table (page 8). In addition, we have included the qualifying small enterprises's scores under each empowerment factor table, where they can be more reasonably compared to the other companies in each table.

Although this article has been made possible by the Mail & Guardian's advertisers, content and photographs were sourced independently by the M&G supplements editorial team. It forms part of a larger M&G Most Empowered Companies supplement.

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