Debates over black economic empowerment (BEE) are alive and kicking. They are often emotionally charged - driven by white fears and black aspirations. In many cases, though, there is a dearth of information underlying the debates.
Top Empowerment Companies (TEC) is the most ambitious attempt yet to provide a benchmark for, and a comprehensive picture of, BEE.
With a strong research partner in Empowerdex, TEC has set out to calculate the successes and failures of the JSE Securities Exchange' s sectors and listed companies.
TEC presents the achievements of listed companies in seven empowerment factors: black ownership; black management; employment equity; skills development; affirmative procurement; enterprise development; and corporate social investment.
Government, through the trade & industry department's BEE Act, has set guidelines through the broad-based empowerment scorecard, which we have used as the main ranking tool in TEC. However, the scorecard is not explicit on all scorecard criteria - 10% of a company's score has been left open for industries to decide. What that 10% can be used for will be established through industry empowerment charters.
But the way in which the various policy documents interpret the different weightings that should be applied to each empowerment factor can complicate the process. For example, should ownership count the same as employment equity when creating a scorecard? It is also not clear whether all industries should be treated alike. In addition, different definitions are used for terms such as "black", "management "and "ownership" in different policy documents.
Those complications mean scorecard points for companies are unlikely to be comparable across all sectors, which is our aim in TEC. In the place of real scorecard numbers, we have calculated estimated scores based on the information and analysis that has been collated from listed companies.
TEC, in line with most empowerment policy documents, defines black as African, Indian and coloured. Management is limited to board members and lower management levels are included in employment equity statistics. Unskilled workers are included in the top 200 table figures.
Ownership has been determined by examining the economic interests of shareholders in a company. Ownership of subsidiaries has not been included, but does form a component of enterprise development.
Empowerdex's research process began with public documents including annual reports, sustainability reports and corporate social responsibility reports. It also looked at stock exchange announcements, company websites, shareholder registers and other BEE-related announcements. The information gleaned from those sources was then sent to the companies for confirmation. Companies were also asked to provide any outstanding figures. Empowerdex then analysed the data to remove anomalies and ensure that only genuine empowerment achievements were counted. It should be said, though, that the process did not amount to a full audit of companies' empowerment statistics.
Empowerdex has drawn on current legislation, charters and other important BEE policy documents to establish a scoring methodology that can be used to compare companies (see table). Companies are also rated on certain "soft issues", such as evidence that a company is working to implement skills development plans and affirmative procurement policies, which were included in the TEC score calculations. As a proxy for the 10% that the trade & industry department scorecard allows each industry, TEC used the points to recognise companies' corporate social responsibility programmes - where industries have set their own measurement criteria. However, there is one caveat for readers - the debates over measurement are still alive and standards and models of measurement will shift in the future.
Therefore, TEC should be treated as a snapshot of empowerment in the economy now and of the way it is measured. Also, many companies are still grappling with how they measure empowerment internally, though some, we must point out, have made little effort to collate information regarding their empowerment activities. As a result, companies were often unable to provide all the information that was requested - you can identify them on the tables in this publication where statistics are listed as "n/a". TEC has taken a hard line in such cases - companies have scored zero for the categories for which they were unable to provide information. That has prejudiced their positions in the overall ranking.
No doubt, as analysis of empowerment improves, companies will recognise the need to provide detailed information.
The result of six months of research is in your hands. TEC has four main parts. First it examines the listed sector as a whole, ranking the 200 top empowerment companies. We also analyse the performance of the three most empowered companies in SA. The top 200 table shows how the companies scored. Each factor score is given, which was then added to give the overall score.
TEC then examines individual corporate sectors, providing tables of the top 20 companies in each. Each of the empowerment factors is then looked at in detail with tables showing all the information used in the calculation of factor scores for the top 25 companies in each factor.
Finally we examine the main black investors - the black-run companies that own large parts of JSE-listed companies. In between, we look at developments in empowerment financing technology; the effect of state-owned corporations; and funding bodies.
TEC is an important reference tool for anyone interested in empowerment. It unmasks the real empowerment profiles of companies, without the hype or emotion. It will also spur on the debate on empowerment and how it should be measured. It is the most definitive analysis of the listed sector to date.
We will be working to ensure that future issues of TEC will drive the debates.
One day, though, a TEC will be unnecessary. The empowerment imperative is part of the second wave of transformation in SA since 1994. During the first decade of democracy, political emancipation took place, but transformation of the economy has lagged behind. It can be expected that, as the economy starts to reflect the demographics of SA, the pressure on companies to transform will lessen.
Successfully getting there, though, is vital to the long-term stability of SA and TEC will play its part in driving the debate.
Please e-mail any comments to tec@bdfm.co.za.
