No doubt, the release of Top Empowerment Companies (TEC) will be greeted with jubilation as highly ranked business groups celebrate a black economic empowerment (BEE) job well done.
Their celebrations will be justified. The fact is, TEC is a ranking instrument which means some companies will beat others. It is human nature to feel good about coming out on top. So let the Champagne corks pop.
But bear in mind, there is still some way to go in achieving satisfactory BEE results across the board: as much as TEC is a ranking, it is also a tool that measures the progress made in the implementation of BEE.
TEC's data, which was compiled by rating agency Empowerdex, comes from measuring all the companies on the main board of the JSE against a broad-based BEE scorecard. Making sense of this data requires the exploration of every possible aspect of the empowerment paradigm. A picture emerges of BEE as a patient suffering from an elusive virus.
After more than 10 years of walking the BEE path, companies in every sector still face enormous challenges.
If it is not the unavailability of BEE funding which hinders implementation, it is dubious funding structures. Effective transformation is dogged by window dressing and skills shortage. Skills development initiatives are not having the impact they should, and the education system leaves much to be desired. Any attempt to beef up the legislative framework spooks the markets, and in some cases, there is resistance to the new order.
This is the picture you get when you look at BEE implementation under a microscope, as TEC does.
This is the third issue of TEC since it was launched in 2004. The challenge of putting together these publications has been enormous, mainly because the BEE legislative framework is incomplete. Debates about the measurement of BEE and what its basic principles should be are still circulating in the public arena. To come up with a reliable measurement tool requires a robust engagement of these debates.
Our job was made easy this year following the publication of a complete draft of the BEE codes of good practice by the department of trade & industry (DTI). The codes are out for comment and should be enacted as law this year. They come with a generic, broad-based scorecard which, according to the DTI, will be an overarching tool for the implementation of BEE in the land.
TEC's rankings are entirely based on this scorecard. This has helped to produce a relatively sustainable and comparative tool for measuring empowerment.
The latest draft of the codes has introduced significant shifts in the definition of the principles and BEE measurement. That explains why there has been major movement up and down in the rankings. For example, the ownership factors of the scorecard emphasise the inclusion of women, new players and broad-based structures more than previously. All together, they amount to five points - bonus excluded - in a factor attracting a maximum of 20 points.
In addition, the codes introduced the realisation point principle, which allocates up to seven points on the show of sustainable graduation to net equity by debt-laden BEE equity structures. That means companies which scored high without showing the latter two introductions last year, and which made no significant improvements on other factors, have lost ground in this ranking.
Companies that performed well on the TEC have approached BEE as a long-term human development programme and not just an accounting entity. They have emphasised bringing black people into senior management positions, contributing to skills development, and have practised significant procurement from black-led firms.
Space is limited, and therefore TEC has produced a set of top-10 rankings focused on particular factors of the scorecard. The raw data in itself can tell only so much of the empowerment story. The juice is captured in the qualitative analysis done by the FM writers.
