Published by: Business Day - 2010

 

Most South African business owners (61%) believe that black economic empowerment (BEE) is vital for winning new business, according to a report issued by Grant Thornton yesterday. This figure has remained fairly constant since 2008 (59%) and is just 2% down since last year (63%).

Tony Balshaw, managing partner at Grant Thornton East London, says: "The past 36 months have seen a similar level of attention on broad-based BEE implementation, with most privately held business owners citing the issue as important.

"However, we believe that surviving the tough economic conditions was the primary focus in most companies over the past 18 months, rather than businesses giving specific attention to the broad-based BEE codes."

The study, carried out between October and November last year, received 300 responses from South African businesses.

Although there was a scorecard in 2003, there were no criteria for scoring. In early 2007, the codes of good practice were gazetted by the government. The scorecard is based upon the Black Economic Empowerment Act. The scorecard is designed for companies with an annual turnover of R35m. Companies with an annual turnover below R5m are exempt. The scorecard contains seven elements against which a company is rated. These include ownership, management, employment equity, skills development, preferential procurement, enterprise development, and social development.

The Grant Thornton report discloses that empowerment tends to be far less of an issue for entities in KwaZulu-Natal (53%) in terms of winning business, while the Eastern Cape (66%), Gauteng (65%) and the Western Cape (61%) rank empowerment higher. When asked to rank the importance of each element of the broad- based BEE scorecard to their business, skills development (48%), employment equity (39%) and management (36%) were ranked the highest. The elements of ownership (35%) and socioeconomic development (34%) followed close behind, with preferential procurement (31%) and enterprise development (27%) being cited as the least important factors in the scorecard.

Balshaw says: "While the broad- based BEE codes have been operational for more than three years, the public sector hae yet to harmonise their procurement policies, contained in the Preferential Procurement Policy Framework Act, with the broad-based BEE codes of good practice.

"We think that the broad-based scorecard is more important, going forward, to attaining effective empowerment in our nation, than the narrow-based elements of ownership and management."

In order to achieve empowerment targets, businesses believed that developing people internally (77%) and fast-tracking key employees (61%) were the most beneficial strategies to implement.

"Privately held business owners also turn to socioeconomic development initiatives (58%) in an effort to improve their broad-based BEE score," Balshaw says.

Martin Westcott, MD of P-E Corporate Services, says employment equity is still a priority for South African companies. However, it has taken a back seat to the shortage of critical skills issue, he says. "Companies are aware of the need for employment equity candidates.

"However, the new scorecard has definitely made compliance with empowerment much easier and less pressurising for companies," Westcott says.

"Empowerment is taking place, but at a much slower place than anticipated. Even the government has adopted a more tolerant attitude towards empowerment."

Madge Gibson, a partner at Jack Hammer Executive Headhunters, says during the recession employment equity slipped from the priority list for many companies. "However, empowerment was far from over," she says. "A company's empowerment status remains important with regard to attracting and winning new business."

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