Traditional black economic empowerment (BEE) giants such as Mvelaphanda Group may have lost their shine in the era of the broad-based BEE scorecard. But they seem to have got certain things right: management and control of the enterprise.
The Tokyo Sexwale controlled group stands above its JSE peers on the management element of the BEE scorecard. That is according the FM's Top Empowerment Companies (TEC) 2009 survey. Mvelaphanda got 10,75 points in the management element. That is a more than 100% score in the element that carries a maximum of 10 points plus one bonus point for excellent performers. A firm needs to meet the gender adjustment principle to achieve Mvelaphanda's management score. That means, all the management targets must have a 40%-50% women representation.
Mvelaphanda set high standards when it promoted Yolanda Cuba to the position of CEO in 2006. At the age of 31, Cuba broke all records. Outside pioneering the black female route to the top of the JSE, she became the youngest female CEO on the bourse.
Cuba came into the thick of things and led the group's streamlining operation and oversaw some significant expansion. These included the acquisition of a 25% stake in media group Avusa for R1,4bn and the realignment of Mvelaserve operations. She seems to have settled in well, if comments by her chairman Sexwale are anything to go by. He says the expansion and streamlining have gone well under her leadership. This is remarkable considering the changes in key executive positions.
Cuba's appointment boosted the already strong black management team assembled by Sexwale, who now serves as executive chairman. The team includes executive deputy chairman Mikki Xayiya, executive director Vusi Mavimbela and chief financial officer Ernst Roth. That gives Mvelaphanda 66% black executive control. Mvelaphanda also excels on the nonexecutive director scale with a number of impeccable independents. It features Anglo American SA head Kuseni Dlamini, Mpumi Mpofu, Ramish Patel, Oyama Mabandla and David Moshapalo. It's evident that Mvelaphanda's 10,75 management points are well deserved.
Ironically, Mvelaphanda - which is a BEE pioneer - has fallen off the high TEC rankings. The group is placed at position 71 in the overall TEC rankings. But then this could be a reflection of nonparticipation in the TEC survey. Mvelaphanda's did not take up the opportunity to provide data that informs the 2009 TEC survey. Its latest rating, performed by independent rating agency PKF BEE Solutions, places the group far higher up in the generic BEE rankings. PKF gave Mvelaphanda a total BEE score of 82% at the beginning of this year. The group quoted its total BEE score at 61,52% last year.
Perhaps Mvelaphanda had not woken up to the fact that the broad-based BEE scorecard applies to all economic actors and not just traditionally white enterprises. In this era, black companies have to prove their blackness to earn BEE points.
Mvelaphanda corporate & public affairs executive Zolani Mtshotshisa pointed out that the group had some work to do on a number of elements of the scorecard outside ownership and management. "Further work is required to improve initiatives in the employment equity and indirect empowerment categories." The group has engaged the services of a consultant to assist, he said. The results of that process can be witnessed in the 2009 BEE score.
In many ways that sudden improvement captures the Achilles heel of BEE - the BEE legislative framework has reduced empowerment to a mechanical process that can be devoid of reality.
Mvelaphanda is essentially an investment holding group with a large exposure in the support services sector. It entered the JSE in 2003 when it reverse listed into Rebserve. The group has used its status as a BEE player to build a strong asset base, which has then been leveraged to expand the support services operations. The group is a lead partner in Absa's BEE equity holdings through the Batho Bonke consortium. It also has an 18,1% stake in Life Healthcare Group - formerly Afrox Healthcare - and 10,8% in construction giant Group Five. Besides the Avusa stake, last year Mvelaphanda acquired a 12,3% stake in Vox Telecom for R293m. Its support services operations include facilities management firm TFMC and Protea Coin Group.
The group is now changing course. In the latest annual report, Cuba points out that the BEE landscape has changed and now offers few, if any, lucrative opportunities. There is a shift away from independent players like Mvelaphanda and BEE discounts have disappeared. This has forced Mvelaphanda to change its strategy from being a recipient of minority positions in BEE transactions to being an active investment company driven solely by long-term value proposition, she says.
Back to the management factor, Mvelaphanda is followed by Telkom in the TEC's management ranking. The telecommunication giant has long produced sterling performances in the management element. This dates back to the days of Sizwe Nxasana, who left the group in 2005 to head FirstRand Bank. Nxasana was succeeded by Reuben September, who leads an executive team that is overwhelmingly black. Telkom scored 10,62 points on the management rankings of TEC. The third place is occupied by IT group Faritec, followed by Datacentrix, Brimstone, Tiger Brands, Hosken Consolidated Investments (HCI), Sekunjalo Investments, Grand Parade Investments and Avusa.
The list is obviously dominated by first-generation BEE groups, which have been through a lot. Groups such as Sekunjalo have been to hell and back, while Avusa watched its black ownership disappear into thin air. Avusa's BEE credentials were saved by the entry of Mvelaphanda. HCI is also an old BEE player. Tiger Brands is a new kid on the block in these rankings. This comes after the group brought in former SABC and Vodacom executive Peter Matlare as CEO last year. Black Management Forum president Jimmy Manyi is also in the executive team.
