State-owned enterprises (SOEs) are a reflection of the economic priorities of the ANC government, so it is not surprising that SOEs have led the business sector in implementing important state policies.
For the first decade of democracy, policy priorities were characterised by the need for transformation and economic empowerment, broadly, in the words of public enterprises department director-general Eugene Mokeyane, "to promote wider economic participation in the SA economy".
But the emphasis has changed over the past six months since the third ANC government took office. With a clear mandate from the top, SOEs are expected to be efficient and cost-competitive infrastructure providers for the private sector.
Does that mean that empowerment and transformation are taking a back seat? Far from it, but there has been a shift in emphasis.
At Transnet, for example, CEO Maria Ramos has introduced white managers into senior positions that previous policy would have almost exclusively reserved for black executives.
Transnet's approach should perhaps be viewed from the perspective that the transport utility, like most other SOEs, has reached a certain level of maturity - it is, to a large extent, transformed and empowered. And SOEs are using their combined financial strength - an asset base of about R300bn and a R50bn procurement budget - to effect transformation in the private sector.
A look at employment equity and affirmative procurement at the three largest SOEs - Eskom, Transnet and Telkom - confirms the fundamental change that has taken place at public-sector companies.
- At Transnet, more than R4,5bn of its procurement budget was spent with BEE companies - about 45% of total procurement spending in the 2003/2004 financial year. And almost three-quarters of its middle-to-senior and executive management is black.
- Telkom spent almost 58%, or R4,6bn, of its procurement budget on BEE companies in the 2003/2004 financial year. The percentage was even higher - 60% (R1,3bn) - at its subsidiary, Vodacom. Its equity figures, published in the latest annual report, show that 60% of all employees are black, but the percentage is 81% at top management level. Being partially privatised, Telkom has also brought 100 000 mostly black retail shareholders into the fold and is looking at selling a further 5% to BEE companies. Empowerdex rates it as SA's most empowered company.
- SA's largest SOE, Eskom, has the most impressive credentials. It started on its affirmative procurement strategy in 1994 and the 40 000 businesses that supply it have to be empowered to get a slice of its procurement pie. In the 2004 financial year, Eskom spent about R8bn of its total R18bn procurement budget with black companies, the majority of them small- and medium-sized companies (see "Effective tool for change").
Eskom's demographic profile has also undergone a huge change. Almost 60% of its managerial, professional and supervisory staff is black, as opposed to a mere 5% 10 years ago.
But it is not only the big companies that have been promoting BEE principles. Most SOEs have managed to achieve similar changes to those of the big three. The Airports Company, for example, spends almost 50% of its substantial capital expenditure programme with BEE suppliers, while more than half of its managerial team are black, according to its latest annual report.
But beyond numbers, have the SOEs advanced the cause of BEE outside the realms of the public sector?
Government certainly has concerns and is insisting that SOEs not be exempt from meeting the requirements of the Broad-Based Black Economic Empowerment Act, with the obvious exemption of the ownership requirements.
In addition, the trade & industry department, which administers the law, has indicated that a code of good practice will govern how parastatals should meet their obligations.
As it is, though, many SOEs have spent a good deal of time and resources to implement government's BEE policies.
Undoubtedly, affirmative procurement has had a huge effect on the supplier base of SOEs, particularly with small- and medium-sized businesses (SMEs). On balance, many SOEs are spending at least half their procurement budget with black-owned companies, particularly SMEs.
Eskom's supplier database lists about 9 000 active SMEs, some of which have been developed by the energy utility and rely almost exclusively on work received from Eskom. However, in its affirmative procurement budget, Eskom gives priority to SMEs, and its commercial GM Reuben Mamorare says a number of small firms that started with Eskom have diversified their income stream.
Similarly, Telkom regulatory affairs head Nkenke Kekana says Telkom's affirmative procurement programme, launched in 1996, now accounts for more than half of its spending on products and services. "More than 3 000 companies, with about 600 000 staff, rely on Telkom for business, 60% of them work exclusively for us," Kekana says.
"In line with national BEE objectives, it is vital that we implement skills transfer and that BEE involvement in management is significant," he says.
Both Eskom and Telkom have established a database of suppliers that meet strict BEE criteria in terms of employment equity, ownership, procurement and socioeconomic spend. Once on the database, BEE suppliers often receive pricing benefits ahead of more established companies.
Affirmative procurement remains an important catalyst for transformation among the wider economy and has enhanced empowerment among large and small companies.
But many critics believe that it has not yet fully achieved another key objective of the programme: to inculcate a business-like efficiency among the supplier base that ensures full compliance with high-quality requirements at all times. This is shown by the fact that many of the SME suppliers still rely heavily on SOEs for the bulk of their work.
Many public-sector corporations offer business training to start-up companies and have recently been required to accelerate and deepen their involvement with their supplier base.
For example in the 2003/2004 financial year Telkom trained more than 900 suppliers in categories ranging from tender courses to basic business management.
Employment equity, on the other hand, has been implemented in line with ambitious targets set by the boards of SOEs. Management in the three largest public-sector corporations is about two-thirds black, and black representation among middle-to-senior management is at a similar level.
Pay packages of top managers at SOEs are comparable to those in the private sector, and comprise salaries as well as performance-linked payments.
In many cases, SOE executives are paid more than their private-sector counterparts, partly because the state has made employing black managers a priority and because the role, mandate and operations of SOEs have expanded significantly over the past 10 years.
It is at the technical and professional level that the majority of staff are still white and where SOEs are implementing extensive training schemes to ensure wider demographic representation.
All SOEs have implemented aggressive affirmative action programmes that ensure most new recruits come from previously disadvantaged communities and in-house training is largely dedicated to black staff.
In its past financial year Eskom spent more than R500m on 1 850 bursary recipients and trainees, 87% of whom are black.
Another area in which SOEs have attempted to advance BEE beyond their corporation is in ensuring black ownership in subsidiaries and operations they have either sold or outsourced.
Though the privatisation drive has ground almost to a halt over the past three years, outsourcing has continued. In most cases SOEs have insisted on majority black ownership among companies that have won the bidding race, depending on the size of the contract.
Accelerating the sale of noncore operations could increase the BEE imperative, but for the time being - given government's reluctance to pursue privatisation - that seems unlikely.
