The department of trade & industry's new codes of good practice on black economic empowerment (BEE), now finalised after years of discussion and negotiation, should largely settle the uncertainty that has led to frustration and even inertia in some business sectors.
Though having some form of acceptable empowerment credentials has already become a ticket to the game, the business imperative of transformation must now begin to transcend simply being about points on a scorecard.
If SA is to correct the imbalances of the past and emerge with a heritage that all its children, both black and white, will want to inherit, the focus of broad-based BEE must be about business growth through transformation.
The codes have a clever interdependency mechanism in preferential procurement. They make businesses dependent in part on their suppliers' credentials in a manner that feeds through in both directions along the value chain.
Initially, businesses reacted with a frenzy of questionnaires and telephone conversations intended to establish the effect of their suppliers' credentials. Many of these conversations were destructive: "Get your score right or we'll find someone else to do the job".
- Smith is Ownership Solutions' BEE strategy consultant
WHAT IT MEANS
 Firms depend in part on suppliers' scores
Greater emphasis on junior management
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Strategically, these conversations need to be constructive, with businesses working together rather than against each other to achieve transformation.
Though procurement remains an important part of the process, the focus has shifted. Soon businesses will have internalised the practice of communicating their scorecard credentials to stakeholders and the real success of transformation will move from chasing points on a piece of paper to their ability to use transformation to strengthen their competitive advantage and expand their custom.
Achieving competitive advantage through people is an important management reality in the new SA and places greater emphasis on the employment equity component of the broad-based scorecard.
This component is intended to provide for measurement based on occupational levels in schedule EEA9 in terms of the Employment Equity Act. It measures the representation of black people in senior, middle and junior management occupational levels, able and disabled.
This is sensible in that it aims to deal with the lack of transformation at all levels within organisations. It is aligned with the Employment Equity Act to prevent contradiction in terminology and efforts in implementing employment equity initiatives in the act and the BEE scorecard.
Compliance targets have been split into targets to be achieved in five years, and then in years six to 10, starting with 43% black senior management in the first five years, reaching 60% by year 10. The middle management targets are 63% in five years, reaching 75% in 10 years; the targets for junior management shift from 68% in five years to 80% in 10 years.
The targets for disabled black people are 2% in five years and 3% in 10 years.
The total weighting for employment equity has been increased from 10 to 15 points, plus three bonus points for exceeding economically active population (EAP) targets under junior management and disabled people.
The overall increase in weighting of the employment equity element puts more emphasis on junior management and gender than the previous version of the codes did, and seems to support a bottom-up approach to transformation. This should be more sustainable as junior managers are up-skilled, supported by skills development programmes.
It is important to note that despite what paragraph 3.1.1 of the key measurement principles under statement 300 of the codes says, it is not intended to penalise businesses unduly. It says: "No measured entity shall receive any points under the employment equity scorecard unless they have achieved a subminimum of 40% of each of the targets set out on the employment equity scorecard in respect of both five-year periods."
At first glance it appears that you score nothing for employment equity if you fail to meet the 40% subminimum on one of the four specified levels; but the DTI says this is intended to apply only to the particular levels in which a business fails to meet the 40% subminimum.
Depending on industry sector, a company may meet or exceed EAP targets under junior management and disabled people, but still fall short of subminimum targets if the EAP target is less than the subminimum in the category - that is, the company meets the requirements for bonus points without meeting the requirements for eligibility for bonus points.
It is also important to note that the scorecard requirements for small businesses are less complicated but still subject to the subminimum and EAP targets.
Strategically, employment equity should be about trying to achieve workplace diversity that enables business to respond to new and different markets.
This diversity will enable businesses to understand and appeal to SA's emerging market, so it makes sense for employment equity to focus on attracting talent that can contribute to national and global competitive advantage.
Though the targets are to be achieved over two five-year periods, the concern is that against the backdrop of a skills shortage we run the risk of reaching a tripping point, where if we try to move too fast we stumble and hurt ourselves.
The employment equity scorecard, with its punitive subminimum component, appears to focus on speeding up the journey possibly too quickly at junior management level and with black disabled people. Most businesses are only at the start of their transformation journey and can't afford to lose any of the 15 points on their scorecard that they may have had under employment equity.
The probable knee-jerk reaction will be that if a business is unable to develop talent through a pipeline within the organisation, it will have to buy it in to meet the requirements.
The 40% subminimum puts an emphasis on "bodies" in categories and a premium on an acquisition, rather than on an organic developmental human capital management strategy.
This will worsen the revolving door syndrome among top black professionals, who will continue to be poached from competitors for packages that bear little relation to market value because of the scarcity of skills at this level.
In the long term businesses are likely to pump time and money into developing talent only if there is a fair chance of retention, so that they benefit from their investment. Alternatively, they will be driven to other quick fixes that undermine the intention of genuine and sustainable transformation - window dressing, playing with titles, and tokenism. We don't need to go there again.
Though the upward mobility of black people is an important objective of employment equity, achieving equity should be seen as a journey not a destination, and any progress should be rewarded.
The final employment equity scorecard measures the contribution made by the business to achieving targets but fails to measure the effect of penalising it for underperformance in categories (particularly disabled people) which may be more difficult than others to attain.
Though it appears government is trying to create an instant black middle class, business must avoid knee-jerk reactions to the employment equity dilemma.
In weighing short-term gains against long-term losses, remember that if your action is undertaken solely to rack up points on a scorecard, it is like shooting yourself in the foot. You will have a pretty scorecard but will be a cripple.
Ask yourself: do these actions make business sense? Do they add value to the business? Do they help achieve competitive advantage? If not, these actions are bound to become liabilities.
