BY ANDILE KHUMALO, CO-FOUNDER, SANLAM TRANSFORMATION GAUGE
Having been part of the team that launched and developed the Sanlam Transformation Gauge over the past three years, I have seen just how complex the world of measuring something as sensitive as black economic empowerment can be. I always thought I was adequately learned about B-BBEE and the issues that dominate the policy, but the more I dug, the more I realised that these are much bigger and inevitably more emotive than I had initially thought.
The amount of feedback I have received has mirrored this policy’s importance and its relevance to the prospects of our nation. However, the responses have also shown me that we may be missing a trick here. We may be focusing our attention on the wrong things. We may be spending lots of energy having the wrong debate.
The overwhelming response to this year’s Gauge report has centred around the question of whether or not B-BBEE policy should continue to exist.
Very few topics are as polarising as B-BBEE is in South Africa – everyone has a different opinion on its impact, how it ought to be implemented and its relevance.
Let us consider what the data tells us.
Over the past three years, the Sanlam Transformation Gauge tells us that all B-BBEE sector codes, including the generic codes, have failed to meet any of their target elements other than for socioeconomic development.
Furthermore, many of these targets do not even reflect the demographics of the country, yet remain unattained. Consider the black ownership targets of 25% or black senior management targets of 60%, in a country where black people make up more than 80% of the population, according to figures from Stats SA.
More than half of the B-BBEE verification agencies that responded to the Gauge survey attributed racism as the main reason behind resistance by corporate South Africa to appoint black people to management positions.
It is possible that this lived experience of a resistance to transformation by captains of industry is what drives many to increasingly call for more stringent punitive measures for companies that fail to meet B-BBEE targets, including fines and possibly jail time.
Unfortunately, a ‘more stick, less carrot’ approach may not be the magic wand required. Compliance does not always drive impact.
Take enterprise and supplier development (ESD) for instance.
The prospect of being included in the supply chain of major JSE-listed and multinational corporations has given a glimmer of hope to many small and medium-sized entrepreneurs. However, these hopes have been dashed by the many companies which still prefer to procure from legacy suppliers.
In measuring compliance for ESD, B-BBEE points on the generic scorecard are awarded on the basis of the percentage of net profit after tax. In other words, if a company makes a profit of R100m in a year and spends R3m on activities that qualify as ESD, in terms of the relevant sector or generic codes it earns full points on this element. So compliance is based on an input called spend. There is no need to assess the impact of any of the ESD initiatives to earn full points.
This could be the reason why companies score the points, but the impact is not felt by the broader target beneficiaries.
This is only one element of the five in the generic scorecard. There are equally complex issues with ownership, management control and skills development.
I am therefore in agreement with Sanlam chairman Elias Masilela who cautions us not to “throw the baby out with the bath water”. That is exactly what those opposed to economic justice want to see. On the contrary, we need to be sober in our assessment and be guided by empirical evidence and well thought out solutions that are practical in implementation and impactful in outcome.
To download your copy of the 2023 Sanlam Transformation Gauge, click here https://sanlamtransformationgauge.co.za/report-2023/
If you missed the event, you can watch it here https://youtu.be/O6trpe1nEvo
Image source: supplied