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SURVEY SHOWS IMPROVEMENT IN BEE COMPLIANCE THIS YEAR

12 Apr General

Only 100 out of nearly 400 listed firms scored above 30 percent. Using the Department of Trade and Industry’s scoring matrix, the other 300 would be non-compliant contributors. This means about 25 percent of listed firms are compliant with the broad-based BEE rules. Analysis will be restricted to these top 100 BEE contributors.

To unpack the data in accordance with the elements of broad-based BEE shows progress. This year is the second year of the BEE Codes of Good Practice, so there is uniformity in the measurement of the contributions from different firms. Ownership is one area where progress has been good.

The average score of the top 100 is 14.55 out 20 points allocated to the ownership elements in the BEE codes. Only two firms did not have a level of direct ownership. The average ownership by black women was 6 percent, while the overall ownership of the top 100 BEE contributors was about 25.6 percent. This simple average is high because of the high black ownership levels of Sekunjalo, HCI, Merafe and Gijima AST Group, among others. This score considered the assets sold to black people by the existing listed firms.

Human resource development is a perennial challenge for most firms. The management element had an average score of 4.98 points. But here are more black people being appointed to the boards in a non-executive capacity. There are 48 firms that do not have black people in top management. When all the JSE data is considered, the picture does not improve at all.

Source: Business Report – Vuyo Jack

Employment equity is still the worst-performing element of broad-based BEE, with an average score of 5.9 out of 15 points. When the top 200 firms are considered, the average score drops to 3.3 points.

Skills development is feeling the brunt of the downturn. This is first to get chopped in cost-cutting. The average score of the top 100 is 6.1 out of 15 allocated points. On average the top firms spend 1.65 percent of the payroll on skills development. The trend of skills development being seen as a tax has not changed much. Skills development has a significant role to play in driving the integration of black people into the thrust of the economy.

Preferential procurement remains a big challenge, with most of it going to bigger firms. The average score on the preferential procurement element for the top 100 BEE contributors was 11.52 out of 20 points. The smaller companies still do not get a greater proportion of the procurement budget. Entities owned by black women are off the radar of most listed firms. Greater effort has to be made in procurement from small, medium and micro enterprises and black-owned firms, especially those owned by women.

In the public sector, the stumbling block facing government procurement is the lack of harmony between the Preferential Procurement Policy Framework Act and the codes. This means small black firms do not benefit from government procurement, which affects their survival. This is the Achilles heel of BEE as it stops the trickle-down effect and punishes early adopters of the broad-based BEE concept.

The enterprise development element is slowly gaining momentum as most companies figure out how they can contribute to it. The average score of the top firms is 10.6 out of 15 points. Early payment terms to black suppliers are increasingly used to increase the financial support for emerging businesses. The BEE funding provided by financial institutions is included in this element. Socio-economic development is always the element where there is overperformance. On this, firms spent about 3.75 percent of profit after tax, and the average score was 4.2 out of 5 points.

What was clear from the gathering of the raw data is that the level of disclosure when it comes to BEE data is still not at the desirable level. This is where King 3 recommendations become more critical in ensuring integrated reporting enables the pertinent data to be disclosed adequately.