BY: EPHRAIM KUNGWIMBA
Transformation is seen as a key factor for businesses in terms of survival in this current legal framework. The difficulty often arises when companies have to implement their BEE targets and goals for that all important BEE certificate rating.
Section 2 of the Employment Equity Act states that its purpose is to achieve equity in the work-place by promoting equal opportunity and fair treatment in employment through the elimination of unfair discrimination; and implementing affirmative action measures to redress the disadvantages in employment experienced by designated groups, in order to ensure their equitable representation in all occupational levels in the workforce.
Similarly, this is envisaged in Section 2 of the Broad Based Black Economic Empowerment Act which states that it seeks to promote economic transformation in order to enable meaningful participation of black people in the economy; and by achieving a substantial change in the racial composition of ownership and management structures and in the skilled occupations of existing and new enterprises.
This in essence is what is envisaged when the legislation requires that companies implement transformation.
How do companies become compliant in terms of the law?
At the heart of BEE legislation lies a few key values which include equality, inclusivity, shared responsibility and respect. Transformation is linked to BEE Compliance and same is linked to various factors which are discussed herein.
Equity Ownership
Equity ownership is seen as a priority element for businesses. At the core of the principle it envisages more black ownership of companies as well as black women ownership.
At the heart of equity ownership arises four elements which can be measured in terms of the scorecard. These elements include control, economic interest and net equity interest. Control is measured by the amount of power black ownership exercises through voting rights at shareholder meetings.
In terms of economic interest, it is the measure of black ownership’s entitlement to dividends, capital gains and other economic rights of shareholders. Whereas net equity interest measures the accumulated net economic interest in the hands of black shareholders, after the deduction of monies owed by these black shareholders. Economic Interest includes those benefits to which black women are entitled.
Management Control
In terms of Code 200 of the BEE Codes, management control includes a non-exhaustive list but can be narrowed down to an essential list of:
The percentage of exercisable voting rights held by Members of the Board who are black people in relation to the total of all Voting Rights exercised by all members of the Board and Executive Members of the Board who are black people including Executive Members of the Board who are black women. Top Management participation is also measured.
Furthermore the calculations involve a determination of the percentage that Senior Top Management who are black people constitute of the total number of Senior Top Management and the percentage that Senior Top Management who are black women constitute of the total number of Senior Top Management.
Skills Development
Skills development is an element the government deems as one of utmost importance when it comes to calculating a scorecard. As we know the injustices of the past have meant that there was a gap in the education of black people which meant that previous generations could not transfer the privilege of education to a subsequent generation.
Skills development is measured by the amount of black disabled employees as a percentage of all employees, employees in Senior Management as a percentage of all such employees, black employees in Middle Management as a percentage of all such employees and black employees in junior management as a percentage of all such employees using the Adjusted Recognition for Gender. Bonus points are awarded for meeting or exceeding the EAP targets in each category under 1 to 4.
Skills Development is divided into two categories namely Skills Development Expenditure and Learnerships. The two are measured by determining the expenditure on learning programmes identified in the Learning Programme Matrix and determining Skills Development Expenditure on Learning Programmes specified in the Learning Programmes Matrix for black employees with disabilities.
How do Companies achieve compliance on the scorecard in terms of skills development? For one, this part of compliance is mainly governed by the Skills Development Act and companies have to ensure compliance with the Act in terms of programmes they seek to implement. The second stage of compliance is that Companies have to be registered with the relevant SETAs depending on the industry the relevant company operates in. The company must have programmes and plans for the relevant training and implantation of programmes.
Enterprise and Supplier Development
Enterprise development includes a non-exhaustive list of enterprise development contributions, amongst others which include grant contributions to beneficiaries, investments in beneficiary entities; loans made to beneficiary entities; guarantees given or security provided on behalf of beneficiaries; credit facilities made available to beneficiary entities; direct costs incurred by a measured entity in assisting and hastening development of beneficiary entities.
Other factors which are looked at are the creation or development of capacity and expertise for beneficiary entities needed to manufacture or produce goods or services previously not manufactured, produced or provided in South Africa. Furthermore facilitating access to credit for beneficiary entities and the provision of training or mentoring to beneficiary entities may be included as enterprise development in a company’s score card.
Socio Economic Development is another factor which is assessed and same is measured by looking at developmental capital advanced to beneficiary communities, preferential terms granted by a measured entity for its supply of goods or services to beneficiary communities, payments made to third parties to perform socio-economic development on behalf of the measured entity.
In some circumstances the provision of training or mentoring which will assist beneficiary communities to increase their financial capacity; and the maintenance of a socioeconomic development unit by the measured entity, which focuses only on support of beneficiaries and beneficiary communities.
Conclusion
In conclusion, companies have thorough guidelines in terms of BEE Compliance. A company which is required to be BEE Compliant cannot operate in the absence of BEE targets and goals if they so wish to remain favourable to prospective clients or procurement selection. The lists provided in the various codes provide sufficient and wide guidelines to enable flexibility in terms of a company’s implementation in this regard. It is up to Companies to set annual goals and targets in terms of their company structures to ensure compliance.
Bibliography
- Background Document: business approach to black economic transformation june 2017
- Code 200: measurement of the management and control element of broadbased black economic empowerment
- Code 100 – Measurement of the Ownership Element of Broad-Based Black Economic Empowerment
- Ezra Davids, Bowman Gilfilan – Black Economic Empowerment Guide
- Skills Development Act 97 of 1998
- Employment Equity Act, 55 of 1998
- Broad-Based Black Economic Empowerment Act 53 of 2003
