Chantyl Mulder, senior executive for transformation and youth at the South African Institute of Chartered Accountants. (Photo: ICA)
Although broad-based black economic empowerment (B-BBEE) is often the topic of heated conversations between ordinary South Africans and business people, the country’s transformation policy is also often ill understood.
After 19 years of affirmative action and 10 years of official black economic empowerment, experts agree that the implementation of B-BBEE still leaves a lot to be desired.
However, Chantyl Mulder, senior executive for transformation and youth at the South African Institute of Chartered Accountants (Saica) and member of the B-BBEE Advisory Council, says: “There is also a tremendous amount of good stories that desperately need to be told. Small pockets of excellence have been created, women have been empowered and black people’s careers have been developed.”
Nicholas Maweni, outgoing managing director of the Black Management Forum (BMF), agrees: “B-BBEE has not been a failure.
"Nowadays, employers can score B-BBEE points when they meet requirements in a wide range of fields from black ownership, management and control, employment equity, skills development and preferential procurement to enterprise development and socioeconomic development. The policy aims to redress historical inequality, creating a better life for South Africans.”
Maweni says the positive effects of the policy are often disregarded by not only white, but also black South Africans.
“It is important for people to acknowledge that they have benefited from the policy, because we are looking for success stories.
“Often people feel like they have achieved everything through their own efforts and their success has nothing to do with BEE, but that is not correct.”
Faizal Bassa, transformation and HR executive at law firm Edward Nathan Sonnenbergs (ENS), says transformation is “an absolute imperative for all businesses that want to survive”.
He has noted, though, that not everybody embraces the spirit of empowering previously disadvantaged South Africans. “However, as ENS, we really believe in transformation and we have made it a core value.”
Maweni says there has been “some form of affirmative action since 1993” and the BMF started advocating BEE in 1997.
“The question was and is: how do we bring the black majority into the mainstream economy?” In 2003 BEE became law, but was soon regarded as too narrow and too focused on ownership.
“A few individuals were benefiting through their political connections,” says Maweni.
“Around 2007 the policy became broad-based and started to concentrate more on employee schemes, community development and minorities like the disabled.”
White domination continues
Implementation is guided by generic codes of good practice, but many sectors have crafted charters with industry specific codes.
The BMF feels that companies are “hiding behind these charters” and wants the government to enforce a more stringent adherence to the generic codes.
Mulder disagrees: “It took a long time to finalise our accountancy charter because it was an emotional process, especially around ownership.
"Now our ownership targets are the highest of any sector, 32.5 %, and we have aligned ourselves as closely as possible to the generic codes.”
Although facts and figures are hard to come by — especially for the broader goals of B-BBEE — the picture is still fairly sombre. According to Statistics South Africa the unemployment rate for black people is still four times that of white people, for example.
The Commission for Employment Equity (CEE) presented damning statistics in this year’s annual report, describing “an unexpected trend” where the percentage of black people at the top management level actually declined from 13.6% in 2008 to 12.7% in 2010, while the representation of white people increased from 72.8% to 73.1%.
However, there has been success in employment equity at the professionally qualified level, where black people have doubled their representation between 2002 (16.2%) and 2012 (34%).
“Generally for the past 10 years we have not shaken the stubborn domination of the white people substantially in the private sector compared to the public sector,” the CEE concludes. “The spirit and ethos of employment equity needs to be revived.”
According to Mulder “nobody can argue with the principles”, but “the implementation has been poor”.
For most firms B-BBEE is just a tickbox exercise, she says. “Everybody can hold up a certificate — level 1, 2, 3, 4 — but what does it mean?”
Her view is echoed by Bassa, who speaks energetically about his drive to recruit, train and integrate black and coloured legal talent.
At the same time ENS wants to improve from B-BBEE level 3 to level 2 and for that it needs to stick to the letter of the codes. “Unfortunately that means we have to play the numbers game, even though that might not be in the spirit of transformation.”
Mulder says that the problem is with people who are looking for ways around it and don’t embrace the need for transformation.
She adds that the biggest problem is that government departments are not leading by example and use their own set of empowerment rules, which often look more like the old ownership-focused BEE rules.
“My expectation from the government, which is the country’s biggest employer, is to lead. Yes, they give contracts to small black entrepreneurs, but then they don’t pay them and these companies are going down the tubes; it is sacrilege. These are not tenderpreneurs, but young black businesses that suffer due to government treatment. And no heads are rolling,” she says.
One of the practical problems with B-BBEE has been “fronting”, a deliberate circumvention of the codes, for example by appointing black people to certain positions as a token — only to “score points”.
“At the BMF we don’t like that term; it is just plain fraud and we need commercial courts to deal with it,” says Maweni. “Fronting is fraudulent behaviour and we want similar sanctions to those that the competition commission can hand out for collusion — up to 10% of a company’s turnover.”
Changing the tide
Currently parliament is debating another round of adaptations to B-BBEE, to improve compliance and root out fronting. For HR executives like Bassa these changes can be frustrating.
“We are in it for the long haul, so we try to concentrate on our own internal accelerated transformation processes, but the points do matter.
“Of the graduate attorneys we have recruited for next year 65 % are black and 40% of our current associates are black. We are very fortunate that we are the largest law firm in Africa and we’re managing to get the word into the market that ENS is the place to be.”
Bassa emphasises that South African firms will have to mirror the country’s demographics as soon as possible.
“That also means we need to look at outstanding white talent,” he says. “It is wrong to bring in black people without meaningful jobs. That is extremely demotivating for white talent, who feel they have to carry the burden. At ENS we have never lost one outstanding white practitioner for this reason and we’re very proud of that.”
Bassa says affirmative action will be needed as long as there are corporates “who are not driving transformation for the right reasons”.
Phasing out the policy through a so-called sunset clause is not opportune yet, agrees Mulder.
Maweni also feels strongly about this: “If we don’t bring people into the mainstream of the economy, history is going to judge us. To those who want a sunset clause I always say: the sun has not risen yet, first it needs to shine.”