SINCE the black economic empowerment (BEE) codes of good practice came into effect five years ago, the overall level of empowerment across the economy has grown from a situation where the average company was noncompliant to one where the norm is a respectable level four on the empowerment scorecard.
This is according to a Department of Trade and Industry study to measure progress since the codes were published in 2007, which was released at the national summit on BEE last week.
The findings provide some perspective on the racially charged debate on BEE in which black business lobby groups argue that empowerment has not achieved enough while white-dominated interest groups say the opposite.
The study first measured the economy-wide level of empowerment in 2007, following the publication of the codes of good practice. The codes provide the basis for the balanced scorecard from which a company derives its empowerment score.
The score is attributed a ratings level between one and eight, where one is excellent and eight noncompliant.
Most companies aspire to achieve level four, which is the level at which one’s customers can claim the full number of points for doing business with a BEE-compliant company.
In a follow-up to the 2007 study done this year, the department said level four was now the average across the economy.
Presenting the results to the summit, chief director of BEE Nomonde Mesatywa said: "There has been a modest improvement in each of the elements of the scorecard by legal form, size, province and industry.
"This can be attributed to the introduction of the codes, which
gave guidance to companies on the elements for BEE measurement."
Grant Thornton director for verification services Wade van Rooyen said the findings were "an amazing achievement, particularly since large companies had had to make significant structural changes to their businesses".
While the study shows overall progress, it also highlights important differences between companies of different sizes and in different sectors. Qualifying small enterprises (with a turnover of less than R35m) as well emerging enterprises (less than R5m), for which the scorecard is less onerous, had the highest empowerment level — three. For larger companies the overall level was six.
The public sector, which is exempt from the ownership element of the scorecard, had the highest rating of level three, while most other sectors achieved an average of level five.
Ms Mesatywa said she was "optimistic but cautious about the study as while it looked good on paper, when interrogated, it didn’t look that good". For instance, 33% of large enterprises had zero black ownership and only 9% of enterprises had more than 90% black ownership.
The new codes and scorecard, unveiled at the summit, aim to incentivise black ownership more strongly by penalising companies that fail on the ownership element of the scorecard. The formula to measure ownership has also been changed to ensure that benefits flow to black shareholders and that they attain net value as soon as possible.
The tighter scorecard also squares with the view of black business lobbyists and the government that it has been too easy for companies to game the system and reach a level four rating without significant conversion.