The recent pronounced downturn in manufacturing output is not the only disappointing feature of the second-largest sector in the SA economy.
Its black economic empowerment (BEE) progress is also rather unimpressive.
Manufacturing companies are still not showing marked improvement for their commitment to BEE. Again, only furniture company Steinhoff International Holdings and textile enterprise Seardel Investment Corporation maintained a place in the rankings, with both companies managing to improve their rankings from 112 and 190 to 96 and 108 respectively. Menswear exporter Pals Holdings fell off the radar completely this year, after coming tops in the sector in 2007.
So what are Steinhoff and Seardel doing right that other manufacturing companies are not?
For a start, at least 90% of Steinhoff's Southern African staff complement of 32 000 is black. But that is as a result of the nature of an industry that does not require specialised or scarce skills, more than Steinhoff's commitment to employment equity. But to its credit, it does assist those employees with skills and development initiatives. However, none of its directors is either female or black as defined in the BEE legislative framework. Seardel has also scored its points from its employment equity and skills development. It also has an employee share incentive scheme.
Seardel has "structured equal opportunity programmes" (EOPs) throughout its divisions to advance black employees. It also offers bursaries and financial assistance for further study. Though it has no black or female directors, it reports that 50% of employees at management levels and 90% at all levels are from "designated groups". The company also has a workplace skills plan in place as well as training programmes focused on adult basic education & training and supervisory development.
Consumer electronics behemoth Nu-World and Pals continue their tug-of-war for a spot in the top three empowered companies in the sector. Though Pals was knocked off the top spot by Steinhoff, Nu-World Industries came in at number three in the sector. And by improving its ranking from 204 last year, it re-enters the overall rankings at number 179.
But again, in what seems to be a feature of this sector, boards of directors are sorely lacking designated groups at executive level. Factors such as ownership and management revealed unsurprisingly low scores for the sector. But it is notable that performance in procurement, enterprise development and socioeconomic development was absolutely dismal. Seardel, though, did outperform by far in the ownership stakes with nine points.
But the manufacturing sector can no longer take its privileged place in the economy for granted. An increase in shareholder activism saw 2008 opening with asset managers, aside from the PIC, taking boards to task for their transformation shortcomings. It will become increasingly uncomfortable in the hot seat of these companies as transformation becomes intertwined with sustainability imperatives.
If this sector does not do more to pull up its socks on the transformation front and make a more meaningful contribution to empowerment, as the financial services and ICT sectors have, it may quite simply be forced to do so.
