March 2008 marks the official fifth anniversary of the black economic empowerment (BEE) scorecard. Though the scorecard was conceptualised, designed and tested in 2002, its launch in March 2003 is considered the true birth date of broad-based BEE. This is when government confirmed its intention to look at BEE beyond the mere transfer of equity.
For Empowerdex and the Top Empowerment Companies (TEC) publication, March 2008 also marks our fifth anniversary. This is the fifth comprehensive data set collected on all seven elements of the BEE scorecard from JSE- listed companies.
This comes at an interesting time as we also celebrate the first-year anniversary of the BEE Codes of Good Practice, even though the significance of this date was drastically reduced when government extended the transitional period to August 31 2008.
It's interesting to take stock of what has happened in BEE over the past five years.
BEE has gained substantial ground on the SA corporate agenda. Five years ago there was hardly any mention of BEE, but now it features prominently in many annual financial statements. Also the implementation of the broad-based scorecard has seen BEE evolve from a "competitive advantage" to a "competitive necessity".
In terms of numbers, we are also able to see the progress made towards BEE. From a small black ownership base in 2003, we now have more than 100 JSE-listed companies that have sold more than 10% of their equity to black shareholders and consortiums. Out of these, there are at least 15 black-owned companies and 29 black-empowered companies on the JSE.
The 90 BEE transactions announced during 2007 also account for a record-breaking R85bn in total transaction value. There was also at least R4bn worth of unlisted shares or assets that were acquired by BEE entities in 2007.
On the more negative side of the process, we have seen the codes being criticised for their complexity and rigidity. The box-ticking approach adopted by some companies is damaging to BEE.
The single biggest challenge is still government's delays in aligning the Preferential Procurement Policy Frameworks Act (which only measures black ownership) to the codes. Given the important role that the government procurement process has on the roll-out of broad-based BEE, the lack of alignment means that public-sector procurement officers are bound by two separate and different BEE frameworks.
Our experience over the five years clearly shows that broad-based BEE is gaining ground as the predominant BEE framework. For all South Africans, this five-year anniversary is an important milestone. It has taught us critical lessons for further implementation, the success of which will likely dictate whether there will be a need for more stringent BEE policy or whether broad-based BEE would have created a natural sunset for itself.
Chia-Chao Wu is the executive director of Empowerdex
