The objective of the Financial Mail Top Empowerment Companies (TEC) survey is to rank the top 200 JSE-listed entities in terms of their contributions to broad-based black economic empowerment (BEE) in 2005.
The survey is preceded by two editions, published in 2004 and 2005. These surveys reviewed BEE contributions by listed entities for the years preceding the publication.
Each year, the TEC's methodology has evolved to be in line with the latest developments in BEE legislation and regulations.
The year 2003 saw the release of the department of trade & industry's (DTI) strategy for broad-based BEE, which laid out the elements and weightings of SA's broad-based BEE scorecard. The strategy was followed by the promulgation of the Broad-Based BEE Act in January 2004, which paved the way for the drafting of codes of good practice. The first phase of the codes was released for public comment in December of 2004.
November 2005 saw the release of the final version of the first phase of the codes, focusing on ownership and management. This was followed by the release of the second phase for public comment.
The second phase of the codes of good practice includes statements on the remainder of the broad-based scorecard, namely employment equity, skills development, preferential procurement, enterprise development and corporate social investment. The methodology behind TEC 2006 is based on these, the latest versions of the codes of good practice, which have begun to provide regulatory certainty with respect to the implementation of broad-based BEE.
The release of an increased number of guidelines on broad-based BEE has also meant that the reporting of broad-based BEE contributions has begun to evolve accordingly. For the determination of an overall BEE score out of 100 for each entity, companies are requested to complete a questionnaire, detailing the entity's contributions to empowerment across all seven of the broad-based elements.
As BEE regulations have evolved, the level of detail of reported information has also grown somewhat more complex. For example, to calculate the seven points dedicated to net economic interest under the ownership element, information regarding the Financing of BEE deals is required, since this informs the level of unencumbered equity in the hands of black shareholders, which is what the DTI seeks to measure.
In addition to placing reliance on the completion of questionnaires by entities, the TEC reviews publicly available information in the form of annual reports for the most recent reporting period, including annual financial statements, as well as relying on company websites, the media and Sens announcements.
The dual combination of information sources leads to the derivation of a final BEE score per company, after the summing of individual scores for each of the seven elements, namely ownership, management, employment equity, skills development, preferential procurement, enterprise development and corporate social investment.
Each element is weighted as per the generic scorecard in the codes of good practice, with ownership, skills development and preferential procurement each enjoying a weighting of 20%. The remaining four elements each have a corresponding weighting of 10%.
Though detailed public reporting of BEE contributions has visibly increased since the survey's inception, in many instances companies refrain from reporting actual numbers or rand values of sufficient detail as per the detailed elements of the generic scorecard. For example, to achieve a maximum score for elements such as ownership, management, employment equity and skills development, companies must report on their quantifiable contributions toward the empowerment of black women.
However, as reporting on BEE becomes more and more integral to listed entities and as reporting procedures evolve, it is expected that researchers will be able to glean an increased amount of information from public sources.
The focus of the survey remains the JSE, which may serve as an indicator of the progress made in the area of BEE in SA. The scope of the survey therefore covers all JSE-listed companies, with the exception of those listed under the development capital and venture capital sectors of the JSE, as well as those listed on the AltX.
TEC 2006 is a ranking of JSE-listed entities based on disclosed contributions to broad-based BEE, obtained through questionnaires and publicly available information. It does not, however, constitute a list of verified BEE scores, which can only be obtained once a company undergoes an independent BEE rating or verification process.
Scores are largely dependent on the level of company disclosure with respect to the completion of questionnaires and disclosure in publicly available company documentation. In this regard, where disclosure of quantifiable contributions was insufficient, an effective zero score was allocated for the relevant element. This is indicated by the abbreviation n/a (not available).
