The balanced scorecard - the tool used by government to measure the empowerment levels of SA companies - is aimed predominantly at improving the skills of black employees and their access to the economy. The two main elements are employment equity - the racial profile of companies' staff - and skills development. These factors combined represent 30% of a company's overall empowerment score.
The Don Group, Sekunjalo and Brimstone dominate on employment equity. As smaller companies, they may have found it easier to make the necessary changes. Skills development, however, has larger companies at the top - Metropolitan, AngloGold and Northam are the top three. For large companies, the skills development challenge is integral to their transformation - without it, changing the profile of the overall workforce is more difficult.
The scorecard has set a target for employment equity of 50% black representation. All of the companies in the employment equity table reach that, so score 100% (which is reflected in the Top 185 table). A number of weightings apply in calculating the 50% and give increased importance to more senior black employees and black women employees - so a company such as MTN (eighth on the employment equity table) can score highly because of the dominance of middle and senior management, even though its overall black representation is only 41%. The exact weightings still have to be finalised by government and are expected only with the second round of black economic empowerment codes of good practice in the second half of 2005. For TEC we tried to predict the eventual weightings based on the weightings used in most industry charters. The scores here weight each category as follows: senior management 37,5%, middle management 25%, junior management 12,5%, semi and unskilled 12,5%, and then the overall staff make-up accounts for another 12,5%.
Implementing change
When it comes to implementation, companies have widely differing strategies. But aside from the companies on the tables here, it is Telkom - which comes 13th for both employment equity and skills development - that best exemplifies the challenge of employment equity compliance.
Telkom was 90% white prior to 1994. "In 1998 Telkom had two black group executives - CEO Sizwe Nxasana and Pinky Moholi - heading the regulatory division, and the rest were white," says Telkom human resources group executive Oupa Magashula. Today black people account for 56% of the total workforce.
Telkom scored 81% on overall employment equity implementation and 55% in overall BEE representation.
This was done while the company faced the challenge of reducing its workforce from more than 70 000 in the early 1990s to about 29 000 today.
Telkom had to be careful not to lose important members of staff and cause operational chaos.
The second challenge was to have a strategic recruitment process in place that targeted capable black people.
Of the more than 30 000 staff members that have exited the parastatal since 1999, most were skilled white staff. Between 1998 and 2004 about 80% of new entrants each year were black. The group employment equity policies had to include targeting and fast-tracking female employees. As of September 2004, 26,7% of the total workforce was female.
The group also had to ensure that equity and black representation was spread across the company - from the board and top management, to middle management and operational levels.
Now 18 of the top 22 executives are black, 36% of all managers are from previously disadvantaged groups compared with 2% in 1994. Sixty-three percent of Telkom's operational staff are from targeted groups compared with 21% in 1994.
Magashula says that the transformation is due to the commitment of company shareholders - government and former equity partner Thintana Communications (a joint venture between the US's SBC Communications and Malaysia's Telekom Malaysia Berhad).
Magashula says the Thintana consortium introduced a skills-transfer system to Telkom, which involved the secondment of US executives to SA. Thintana appointed black South Africans as deputy executives in all management positions and a Thintana executive as the head, except in human resources, which has always been led by a local person, he says.
He says the "deputisation" system ensured that there was enough capacity within the group.
The Thintana management contract ended last year and the system "has left us with experienced leadership that deserves to be in that position".
The biggest challenge to transformation is SA's severe skills shortage and the problem is worse among black South Africans because of apartheid education policies.
Telkom has spent billions of rand on training over the past seven years. For the year ended March 2004, it spent more than R390m on training and development, 1,3% of the company's revenue. Telkom employs more than 32 000 workers and operates in a sector driven by technological development.
According to the Top Empowerment Companies survey, other companies also invested more in training and skills development between 2003 and 2004. African Bank spent about 2,4% of its payroll on skills development in 2004, a significant improvement from the 1% spent in 2003.
Telkom uses and supports the sector education & training authorities (Setas). The Setas were established by the labour department in 2000 to encourage companies to address the skills shortage. The Setas manage training-related projects with a collective budget of more than R1bn/year.
SA companies are required by the Skills Development Act to pay 1% of their payroll as a skills development levy to the Seta that represents their industry.
Companies such as Johnnic Communications and Primedia have also embarked on leadership development programmes.
Johncom says in its annual report that training investment in the group was almost 5% of the salary bill. Management and leadership development enjoy primary attention through a partnership with the Graduate Institute of Management & Technology.
The company invests in other skills development programmes, including editorial training, IT, printing and adult basic education & training. A number of related bursary schemes are also offered to staff.
In 2001, Dimension Data instituted a Seta-approved learnership programme involving 50 black interns. It says that in 2002 50% of its management development programme (MDP) candidates were black managers. Executive commitment to the MDP ensures that the programme goes beyond superficial affirmative action to true empowerment and meaningful advancement.
One of the most difficult issues SA companies have had to deal with is the insecurities of white male employees. With the implementation of the Employment Equity Act, white males often find themselves in the unfortunate situation of being the first group of employees to be considered for retrenchment and the last to be considered for new appointments.
Given that Telkom had the biggest pool of skilled telecom staff in the 1990s, most of the staff considered for retrenchments were easily employed by Vodacom and MTN, the two mobile telephone operators that were preparing to launch at the time.
"We never had any white fear at Telkom because we were the only telecom company in 1994 and every company entering the industry had to get their skills from us," says Magashula.
Skilled white workers knew that they could join MTN or Vodacom as experts in telecoms. The Y2K issue also gave many skilled whites the opportunity to join IT companies or establish IT start-ups, says Magashula.
Magashula says equity policies are non-negotiable and workers have to accept that. He says Telkom continues to implement equity policies in consultation with the workers and their representatives, but the consultations are not designed to change the group's commitment to transform itself.
"Constant communication is crucial during these processes. The CEO goes to community halls around the country twice a year to interact with employees on company issues," says Magashula.
Charlotte Mokoena, the Telkom group executive responsible for the Centre for Learning & Organisational Capacity, believes Telkom's skills development initiatives are a success because they focus on the company's business needs. She says training focuses on the company's value chain and a broader understanding of the various units within Telkom.
Telkom is affiliated to the information systems, electronics & telecommunications technologies (ISETT) Seta and Mokoena believes there are synergies between the Seta's learnership programmes and Telkom's.
"Telkom's expertise is used in the ISETT Seta learnerships because of the IT knowledge base within the company," says Mokoena.
