Archive for October, 2009
When a company receives a scorecard from a supplier, be sceptical about it! Look at it and analyse it to satisfy yourself that it is produced accurately. It is not the company’s job to double check all the data, but a certain amount of vigilance is required.
If you know that the scorecard given to you by your supplier is wrong then you stand a good chance of your own scorecard being invalidated. The last thing anyone wants in BEE is to be accused of fronting, i.e. misrepresenting their score, and this can happen if you are not vigilant.
We have seen far too many scorecards that are wrong, or at least need to be checked upon. It could be an innocent mistake, and in many cases we have seen it was an innocent mistake, or a mistake based on lack of knowledge.
In one instance the scorecard was produced this year, based on the draft codes of 2006. In another case of a generic company the employment equity score was 19 points (the maximum available is 15 plus 3 bonus).
In a third case, the company’s website states that they have been operating for 24 years, but the scorecard showed them as being registered in 2006. As a result they classified themselves as an EME (the codes allow startups to be an EME for the first year of operation). The codes also clearly states that “a startup enterprise does not include any newly constituted enterprise which (is) merely a continuation of a per-existing enterprise. However they “got” away with it. The following year the same company produced a scorecard as a generic showing zero points for ownership, 9.5 for management and 14 for employment equity. This is also unusual. We more often see a big black ownership score with zero management. In this case the white owners have taken on at least 50% black and black female directors, top managers, senior managers. Fronting? Not necessarily. Unusual? Certainly – definitely cause for concern and wanting to double check, in particular considering the strange situation of the previous year where the company re-registered themselves and continued operating as normal.
An article in the Business Report discusses how Charles Pillai has slammed the lack of transformation in the financial services sector.
He is of course correct in saying that “while certain opportunities in the financial services sector might have been created for political elites through black economic empowerment (BEE) transactions, not much had changed for the ordinary citizens.”
He lays the blame squarely at the hands of the industry and states “the financial services industry remained largely in the hands of white males, and he was disappointed by this state of affairs.”
Agaion he is correct in his observation but where he is completely wrong and should take much of the blame itself is in ONLY blaming the industry.
Let’s give a bit of background first: The measurement of B-BBEE compliance is via the B-BBEE codes of good practice. There is no other objective form of measurement. The codes cover all areas of interest and would include his criticism of the state of affairs.
Now the financial sector has been very slow in adopting the B-BBEE codes, whch is quite possibly the reason for the lack of transformation. They have spoken for years about the “Financial Sector Charter” (FSC), and tried to use that as a substitute for the B-BBEE codes of good practice. The FCS has never been gazetted and to all intents and purposes does not exist other than as a discussion document.
Some financial institutions have chosen to follow the codes, e.g Nedbank, while Standard Bank and ABSA have never published a valid B-BBEE scorecard (Correction, ABSA has a scorecard based on the codes of good practice – level 4). At no stage has the Financial Services Board (FSB) ever publicly condemned them or any other financial services provider, refused to renew their licenses, or even publicly asked them to produce the correct scorecard. In effect the financial industy has been declared exempt from B-BBEE by the FSB.
Now the reason why Charles Pillai is as much to blame. As the ombud for the industry he should have demanded that the FSB follow the law (section 10 of the B-BBEE act) makes it obligatory to take into account the BEE status of all organisations to which they may award a license). They have never done so. I repeat here that the ONLY measurement of the BEE status is a scorecard prpared in terms of the B-BBEE Codes of Good Practice. Whatever other methods the FSB ever used may be admirable, but not sufficient.
In terms of the law, the only way that the FSB could ensure that they did not act contrary to the constitution is to accecpt that all financial services companies have indeed a BEE status of zero. This would of course satisfy the requirements of the act. However section 10 of the B-BBEE act says that in addition they must “as far as is reasonably possible apply any relevant code of good practice in determinign qualification criteriafor the issuing of license, concessions or other authorisations in terms of any law”.
It is obvious that the FSB does not bother to do this, especially with the banks. It is further obvious that Charles Pillai also did not bother. I understand that he has never criticised or condemned nor fined any financial services company for never submitting thie BEE status. Worse, neither he nor the FSB have displayed their own BEE status publicly.
Charles Pillai, rightfully criticises the industry – what has he ever done in any of his rulings or discussions with the FSB to rectify the situation?
It makes no sense from the way it sounds but it does exist, there are blacks that are literally regarded as non-blacks in Broad-Based Black Economic Empowerment. A black person as defined in the Codes of Good Practice includes Africans, Coloureds, Indians and Chinese. Such a person should be a South African citizen by birth or descent, by naturalization before the 27th April 1994 or if the person became a citizen after 27th April 1994, but who because of the Apartheid Policy in place at the time, would have been entitled to acquire citizenship by naturalization prior to that date.
This is particularly important to note when calculating points for Ownership, Management Control, Employment Equity, Skills Development, Enterprise Development and Socio-Economic Development. Therefore in calculating BEE points, a measured entity may not claim points for a black person who does not qualify under the definition given in the first paragraph.
To put this in perspective, a measured entity that donates food, blankets or provides health care support in some way to black people who are foreigners in a refugee camp can not claim such an initiative to score Socio-Economic Development points. It also goes to an enterprise that is 100% black foreign owned, it couldn’t be used as an Enterprise Development beneficiary from a BEE viewpoint and it applies to Employment Equity as well as Skills Development.
This is an important aspect of BEE to take note of. Not all black people are black.
This year’s Procurement & enterprise Development Conference at Gallagher Estate proved to be a great success. How long has it been running, I wonder? Still it doesn’t mean I can’t confirm that it was a resounding success. The conference started with Keith Levenstein, EconoBEE’s CEO, welcoming all the delegates and hitting a hard-surfaced ground straight away.
It certainly started on a high note as the presenter dished out a spiral of theory, which immediately triggered interesting arguments from an actively involved audience. If the theory was anything to motivate active involvement, then the practical part of the conference was way too much to handle. With Case Studies such as the one for Mabuya Glass – EconoBEE’s Enterprise Development beneficiary, it left me without a shade of doubt that the true and genuine objectives of Broad-Based Black Economic Empowerment were being realized amongst the delegates.
I’m glad that I am not the only one who enjoyed the presentation, the delegates expressed their satisfaction too and it’s inspiring. I take my hat off to the EconoBEE team for such a magnificent job; you guys are up there amongst the best – WELL DONE. I enjoyed the food toooooo.
For the next conference, click on the link below
in may cases one person is appointed to handle all B-BBEE activities in a company. This is often a recipe for failure. To properly implement BEE, and earn the maximum points requires a multi-disciplinary approach. Usually it is the HR person who is allocated the job. HR is affected on the BEE scorecard via employment equity and in some cases skills development. The other elements need as much attention and different skill sets are required. Procurement needs buy-in from the financial director/manager/accountant/creditors clerks. Without this assistance a company will not be able to calculate their procurement spend or get the support of their suppliers.
it is almost unfair to expect an HR expert to be able to be able to extract relevant information from the general ledger. It is actually quite a difficult task for even the accounts staff to extract the correct information, so their buy-in and assistance the job will not get done properly.
Similarly with the other elements: Skills development may be managed by the skills development facilitator,but training takes places in all levels and divisions of an organisation. Buy-in from all managers is crucial to succeed in gathering all the required data. Enterprise development takes many forms – discounts to customers – the responsibility of the sales manager, to investments in ED projects – the responsibility of the CEO or FD, to professional services rendered, to shorter payment periods to suppliers – the responsibility of the creditors staff and FD.
Socio economic development can even have an element of marketing associated to it. Donations to a favourite charity can earn the company extra marketing collateral.
In general to properly implement B-BBEE properly requires many people in the organisation to provide support.
I our experience the companies that have consistently earned the highest scores are those that have included as many people in the process as possible. They have ensured that all members of staff understand why they want to implement B-BBEE, how the whole company ca benefit and given them comprehensive training on all aspects of B-BBEE. Their staff understand what is expected of them and recognise that each one will at some time be called upon to provide assistance or information to the person responsible for implementing B-BBEE. That person knows that he will get the support of the rest of the company.
Contrast this with the approach used by some companies that call in a verification agency or consultant and ask them to “make us B-BBEE compliant/give us a certificate” without being prepared to do the ground work themselves. This is sure recipe for wasting money and not succeeding.