The Tragedy Is That We're Standing Still On Broad-based BEE
Updated: Oct 13, 2019
A few weeks ago, the Broad-Based BEE Commission released its second report on the status of BBBEE, and there were some notable trends worth reflecting on. The commission monitors compliance with the BBBEE Act. Since its inception in 2016, it has worked through a number of BEE fronting cases and showed its muscle in dealing with this scourge. In recent times it has clamped down on what appears to be sophisticated forms of fronting, such as trusts with beneficiaries that never exercise any voting rights and get the crumbs in economic interest.
The trends report showcases the monitoring part of the commission's mandate. Thanks to a bout of insomnia last week, I got a chance to read this year's report.
Being the apex regulatory body, the commission receives BBBEE compliance reports from JSE-listed companies, the government, public entities and organs of state and even sectoral training authorities. The commission also receives BBBEE certificates from accredited verification agencies captured via South African National Accreditation Systems. In other words, every single company that gets a BBBEE certificate is reported to the commission. The only companies not caught by the commission's net are the 51% to 100% small black-owned entities that don't need verification, as a sworn affidavit is enough for them to keep their black card.
On JSE-listed companies, the picture is rather bleak.
"Black ownership of JSE-listed entities leaves a lot to be desired with an average of 50% of listed entities that reported with black ownership of less than 25%," says the report. To make matters worse, only 43% of the listed entities submitted their BBBEE reports to the commission.
What about management control? "There was no noticeable movement on board representation of JSE-listed entities, remaining at a 61.61% majority for white people and foreign nationals, and 38% for black males and black females respectively," says the report.
These numbers are exactly the same as they were a year ago. One could potentially excuse listed companies, as boards don't materially change from year to year, but for there to be no change whatsoever means white board members who resign are not replaced by black, and especially black female, board members.
In a country where black people constitute more than 90% of the population, this is a tragedy.
Interestingly, the commission is not able to quantify the number of young people who are in senior management or serve on boards, due to inadequate disclosure of demographic information. Now there is a glaring omission, especially if we claim to care about youth empowerment.
In general, it appears that skills development is doing well, with year-on-year improvement across the board. However, as the report notes, "an impact assessment study is required to determine if the increase in skills development translates to an increased number of skilled people that access the job market". In other words, are we giving our people the skills that are demanded by the market? The short answer is we don't know yet.
Unfortunately, empowerment has become a theme that many in business are loath to talk about as they see it as a grudge purchase and a cost of doing business in SA. The fact of the matter is that BBBEE is a business imperative that should be welcomed and even encouraged by business as it helps create a stable society, reduces income inequality and builds a conducive environment in which to do business.
Someday, I hope, we will all see that.
This article first appeared in the Business Times section of The Sunday Times on 28 July 2019.