The broad-based BEE Act introduced last year under the ambit of the trade & industry department provides much greater clarity on government's thinking - both on the definition of empowerment and its strategic approach. The act makes provision for the gazetting of sector charters for general information, giving them recognition as a key driver of BEE and giving industries an opportunity to pursue consultative discussions on BEE.
This provision in the act eradicates some of the confusion (after the mining charter) over which sectors would be "allowed" to have charters and who would drive them. Still at issue is how the charters are developed, the content of the charters, their implementation and their monitoring.
The experience of the mining, liquid fuels and financial sector charters is formative and should assist in guiding the other processes. The following sectors intend to draft or are drafting charters: information & communications technology (ICT), advertising, health, transport, fishing, tourism, construction, property, wine and agriculture. There is even talk of charters in automotives and in metals fabrication.
The need for co-ordination, alignment and standardisation in terms of definitions, reporting and measurement frameworks is increasingly evident. More so if we are ever to measure the impact.
Public and private-sector reporting on BEE to shareholders, customers and employees is central to the successful implementation of BEE.
SA's private sector is gradually adapting to increased disclosure, spurred on by Judge Mervyn King's King 1 and 2 reports. The intention is for company reporting to extend to sustainability or triple bottom-line issues, namely the social, economic and environmental aspects of their activities (including BEE), thereby moving away from the single bottom line of profit for shareholders.
BEE charters should give added impetus, providing detailed frameworks to guide company reporting. However, adherence to these reporting requirements remains limited, made worse by varying standards and measurement systems and inadequate capacity to monitor.
Perhaps more difficult is the approach of most to these obligations: driven by compliance, companies focus on finding ways to meet minimum requirements of scorecards and underperform in certain areas when they can gain more points in others.
Little attention is given to the implementation of empowerment strategies that address constraints to effective black participation.
Few companies have recognised the benefits of BEE beyond meeting tender or licensing criteria and consequently few accept that increasing levels of disclosure of company activities in these areas is important for shareholders and customers because it affects performance and sustainability of companies.
Only when companies understand that BEE is a tool to transform workplaces, promote productive environments and grow will we be able to confidently claim that interventions such as charters have been successful.
An obvious question must then be asked: why are some charters seemingly unable to capture this intent and drive its implementation?
Charters are "short" processes captured in written form - no matter what the targets, institutions and people don't change that easily. Charters are negotiated agreements between government and business (in fact led by business), mostly excluding labour. Without full representation of all stakeholders, outcomes of charters are compromised.
Charter discussions occur in diverse and large sectors where the nature of the sector and the varying types of firms within it necessitate establishing a common threshold or industry mean on which to set targets. Though transformation is built in, targets seldom capture the interests of all stakeholders. What should make for a better charter is the extent to which it provides for effective measurement, reporting, monitoring and review mechanisms, so as to enable adjustment of mechanisms where necessary.
All charters generally require the submission of annual audited empowerment reports, which include scorecards and other undertakings, to a relevant oversight structure. In the case of mining and liquid fuels, the oversight structure is the department of minerals & energy. For the financial charter, and a new structure, the Financial Sector Charter Council (FSCC) is being created to oversee implementation.
In both liquid fuels and mining, the charters require companies to submit data to the department of minerals & energy and they provide for the publication of an annual survey by the department.
The liquid fuels charter did not include an industry agreed scorecard, but companies are required to report against a similar format.
The mining charter scorecard, though not as detailed as the financial services charter, does require reporting against quantifiable targets and measures performance against weightings for each indicator.
In terms of the charters, companies have also committed themselves to ongoing review and engagement over their charter. This is apart from the comprehensive evaluation, which would be undertaken by the department of minerals & energy, for licence renewals or applications. The department's charters introduce some subjectivity and give more space than the financial services charter does for government to monitor performance and evaluate accordingly.
There are empowerment-rating agencies in the market. However, they currently rate according to their interpretation of empowerment benchmarks. The other problem is that an accounting standard has to be set before audit reports can be issued. Auditing firms are equipping themselves to undertake the empowerment audits required in terms of the various charters. Government has said that it will develop a system to accredit agencies or audit firms to perform these ratings or audits.
Andrea Brown is the CE of Mohlaleng Investment & Management Consultants
