The Sanlam Gauge report into the moderately tough topic of transformation of the SA economy has discovered that lots has been achieved to increase possession of property and participation in native companies. The authors of the report say that sure features of transformation are nevertheless not shifting ahead quick sufficient.
Researched by Intellidex in conjunction with Sunday Times Business Times, KhumaloCo and Arena Holdings, the newest report claims to be a greater yardstick than most in measuring transformation of the economy.
Sanlam CEO Paul Hanratty notes in the foreword that it is very important precisely and meaningfully measure transformation to see what works and what doesn’t.
“This is the first aspect of the work we are doing in the Gauge. The research house Intellidex has worked tirelessly to expand the database and deepen the research at all levels. And then we have to use the findings to improve how we are doing this important transformative work in society. To kick-start dialogue, but far more importantly, to catalyse more impactful and urgent strategies and approaches,” he says.
Hanratty attracts consideration to the proven fact that the analysis base has expanded considerably since the first Gauge report printed final yr. This yr, Intellidex obtained enter from greater than 10 000 companies in comparison with barely 3 000 respondents in 2021.
Yardstick
The authors say it turned clear over the previous two years that there’s a particular want for a reputable and efficient nationwide measurement course of for black empowerment.
“We believe that this year we have taken major steps towards providing the foundation for that to happen for two reasons: fruitful collaboration with sector charter councils and the big jump in the sample size of this year’s Sanlam Gauge, which more than trebled from 3 154 companies to 10 336 – by far the most comprehensive independent research study on B-BBEE,” based on the authors who offered the outcomes of the analysis at a operate in Johannesburg on Wednesday morning.
“This supplies a robust platform [on which] to construct a nationwide database that really displays the progress of transformation, which we imagine is a prerequisite for producing insurance policies that serve to speed up each transformation and financial progress.
“In the short term, the survey findings and the comments from industry participants highlight numerous problem areas that require immediate attention which the newly formed Presidential B-BBEE Advisory Council is well placed to address,” notes the report and referred to by a number of of the audio system at the occasion.
Hanratty says that whereas Sanlam sponsors the analysis and publication of the report, the analysis is completed independently by Intellidex and the opinions expressed are due to this fact not these of the sponsors.
‘Informative and challenging’
“The findings are informative and challenging, highlighting some strong progress, but also placing a spotlight on the work the various sectors of our economy still need to do as we collectively journey towards a truly inclusive, diverse society and economy,” says Hanratty outlining the causes Sanlam thought it essential to sponsor the analysis.
“We share a deep ardour for our nation and continent and we all know that for us to attain our frequent targets – a thriving, inclusive, equal and sturdy economy – we should efficiently rework and embody. Not for a scorecard, not for a certificates, however for the sustainability of our nation.
“We must do it for all these individuals nonetheless struggling to make ends meet, nonetheless dwelling in casual housing, nonetheless fetching their very own water. For these unthinkably excessive numbers of unemployed in our nation.
“The inequality in our society cannot be overlooked; we urgently need to address this as corporate SA,” he provides.
“Sanlam as an organization is embedded deeply in the DNA of the African continent. This is the place we will make the most significant affect, working in the direction of monetary inclusion – which for us means entry to these monetary devices which permit individuals to guard themselves and construct monetary resilience – throughout Africa.
“Last year, we created the largest black-owned asset manager in South Africa. Asset management is one of the most effective ways to drive inclusion and growth in a country, and so this is a pivotal part of our impact journey too.”
Tensions
The authors of Sanlam Gauge specifically famous criticism by individuals in the analysis.
“With South Africa emerging from the devastating effects of the Covid pandemic, B-BBEE sector councils are working hard to get transformation initiatives that had been stalled by the lockdown restrictions back on track,” they are saying.
“Similarly, sector-wide financial rejuvenation methods are being applied throughout the economy and these are sometimes being built-in with transformation aims.
“There is a few rigidity between the two, with some perceiving that transformation comes at the expense of restoration. However, most sector councils are usually constructive that the two usually are not mutually unique.
“The quest to combine transformation with economic growth is one that will be top of mind for the newly appointed Presidential Broad-Based Black Economic Empowerment (B-BBEE) Advisory Council, established in July by President Cyril Ramaphosa with councillors representing government, business, labour, the youth and other stakeholders,” add the researchers.
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“The council’s main mandate is to handle the points raised by lots of the individuals we interviewed: that transformation is occurring too slowly, that it’s not significant significantly at the administration and possession ranges and that after 28 years of democracy it’s time we reassess the B-BBEE framework and tackle areas that aren’t working.
“A strong belief persists that the overall B-BBEE strategy needs to be adapted, or possibly overhauled completely, so that it better reflects transformation on the ground. In any such assessment, it’s important to also look at the elements that are working.”
‘Fronting’
The report quotes Black Business Council CEO Kganki Matabane as responding to the survey by saying that every sector’s administration management rating ought to correlate with its possession rating if there isn’t any fronting as a result of “owners usually appoint people who look like them”.
“There are only a few firms owned by white individuals who appoint black individuals and girls in positions of affect – in core enterprise operations as an alternative of human assets and company affairs – therefore my rivalry that the possession figures from the firms are ‘cooked’.
“In real life you would expect a correlation between ownership of a business and its management control, but we don’t see this, especially when black-owned trusts are involved. They look good on paper, but when we interrogate them, we cannot trace a shareholder who is black,” says Matabane.
“They make it look like the company is fulfilling its B-BBEE obligations but they have no intention of transferring ownership to black people.”
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However, Sanlam Gauge co-founder Andile Khumalo says this doesn’t have in mind the creation of black-owned funding firms.
“By their very nature, BEE funding firms don’t usually include their very own administration groups into the offers they do, so administration in the investee firms wouldn’t be black in a single day.
“You can fairly simply have a majority white managed firm that’s black majority owned. Unlike a founder-managed enterprise or a household enterprise the place certainly the race, tradition, language and even the faith of the founder is prone to affect instantly who [they hire] over time, these black homeowners usually are not concerned in the day-to-day administration of the enterprise.
“What we should be doing is holding the black investment companies to account when it comes to transformation once they are shareholders over a period of time, especially at management level,” says Khumalo.
“But I don’t think it’s fair to conclude that just because management of a company is not majority black, it therefore means the black shareholding numbers are not true.”
The analysis reveals that BEE initiatives are gaining traction, with sure sectors in the economy attaining excessive general scores relative to targets.
BEE scores by sector
Source: Sanlam Gauge
However, the report notes that socioeconomic improvement stands out as one in every of the areas the place firms are doing very nicely. The 10 336 firms in the database exceeded targets by a median of 160%.
With varied bonus factors allotted for sure sectors and qualifying small enterprises, in addition to extra parts the place sure sub-sectors can attain additional factors, it’s attainable to attain greater than the scorecard weighting.
“It’s easy to sniff at the high scores for socio-economic development and accuse companies of throwing money at a problem so that they can tick it off on the scorecard, and indications are that too many companies do so,” say the authors.
“But most of the bigger companies, particularly those in the public eye, do put in a lot of effort to ensure their contributions make a meaningful impact on the beneficiaries,” the researchers add, indicating that firms are driving BEE possession and never selecting delicate choices to make up for underachievement in black possession.
Management
Management stays a priority. “The core problem is reflected by the Commission for Employment Equity in its latest workplace transformation report which found that more than a quarter of private sector employers are not investing in meaningful training and development, and more than 20% do not have clear succession plans for the advancement of African, coloured and female employees to top, senior and middle-management levels,” based on the Gauge report.
“White males accounted for 63.2% in top management positions, down from 64.7% a year earlier, Africans occupied 17% compared with 15.8% in 2020; Indians accounted for 10.9% from 10.6% in 2020; and coloured people made up 5.9% from 5.7% in 2020,” based on the report.
It notes that there’s a perception that the actuality on the floor is way worse than the scorecards recommend, “none more so than with ownership – at 74.8% of target, the best performer after socio-economic development”.
‘Avoiding’ fairness offers
Nigel Adriaanse, CEO of the Enterprise Development Property Fund, says firms typically concentrate on constructing factors in the different scorecard parts to keep away from fairness offers.
“For occasion, they’ll concentrate on enterprise and provider improvement (ESD) by supporting entrepreneurs eager to turn out to be suppliers and so they get 39 factors as a result of they’ve achieved their ESD.
“Yet, on the ownership side there’s very little being done as there are ways to reach a good B-BBEE level without having to change your ownership structure,” he says, including that “if you want to transform any industry, you’ve got to look at the ownership side of things”.
However, the figures in the Sanlam Gauge report dispel this.
It lists no fewer than 36 black financial empowerment transactions throughout 2021 and 2022, the largest the R33 billion sale of 26% of Northam Platinum to a BEE consortium.
Other notable transactions embody the BEE part of the unbundling and separate itemizing of Thungela Resources out of Anglo American (practically R3 billion), the placement of R1 billion value of Capitec shares and the R6.5 billion African Rainbow Energy transaction.
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Listen as Fifi Peters chats to Capitec co-founder and CFO Andre du Plessis about the financial institution’s BEE deal (or learn the transcript right here):
