30 April 2004
	STATE INSTITUTIONS Big BUCKS to boost BUSINESSES By Shareen Singh But Transnet has found it's not as simple as opening the purse and dishing it out

Transnet, with its R60bn asset base, has been a strong force behind black economic empowerment (BEE) since 1996. In the 10 months to January this year, the state-owned transport company spent just over R1,5bn on procuring goods and services from black-owned businesses. Though the figure is a lot lower than in the previous two years, when the group was on a big capital expenditure drive, it is likely to go up again when government's infrastructure spending accelerates, especially on the upgrading of ports and the rail network. The group has a tender and policy unit that advises potential suppliers on its procurement requirements. As required by its shareholder, the public enterprises department, the group has also begun monitoring contracts that benefit women, disabled people and small businesses. Empowerment has been a steep learning curve for Transnet. "When we started there were some teething problems," says spokesman Tami Didiza "Some of these had to do with management skills, insufficient market awareness or poor product design and quality controls." Not all BEE suppliers have the requisite technical skills, either. Added to this was the issue of fronting. One lesson that Transnet has taken to heart is to reduce emphasis on shareholding or ownership as the only BEE vehicle. Too much attention on those issues opened the doors to manipulation since the operational issues were ignored. Who actually ran the business, an important component of empowerment, was not given enough attention. Since December 2000, Transnet has looked at a wider spectrum of requirements, including management participation, skills transfer programmes, the applicants' own procurement policies and practices, and social and community projects. "We believe that our present method of evaluating tenders using the wider spectrum makes it difficult for fronting to go unnoticed," Didiza says. There are still some difficulties in certain areas because of inadequate skills and capacity in BEE companies. In these cases, Transnet places a heavy emphasis on subcontracting or formation of joint ventures with upcoming BEE entrepreneurs. The challenge is to create a uniform BEE accreditation system, Transnet says. Government departments, state-owned enterprises and large companies have different criteria for evaluating and accrediting BEE companies. Questions have arisen about Transnet's own capacity too. New CE Maria Ramos plans to review Transnet's procurement and IT systems over the next 18 months. Getting access to information has proved a challenge, she says.