Financial, risk and multimanager investment services group Alexander Forbes SA has achieved a level 3 broad-based black economic empowerment (BBBEE) rating in all three of its local business units: Financial Services, Risk & Insurance Services and Investment Solutions. This accomplishment is two years ahead of its internal schedule, with level 3 being targeted for achievement only in 2011.
However, in the short space of only 14 months, since its previous rating, the group has moved from a level 5 in 2008, surpassing its own expectations, to now sit at an admirable level 3.
Transformation has always been a priority for the group - from the early 1980s when black managers were being developed in several of its divisions, through to its present Enterprise Development Adopt a Panel Shop for black panel beaters, that have even repaired CEO Bruce Campbell's car. "It was just a small scratch," he protests.
Bruce Campbell
Campbell says that broad transformation in Alexander Forbes has occurred with ease. "Inevitably, there are some who are fearful of the change that transformation brings. But there has been no contrived effort in our transformation.
"We are one of the biggest pension fund administrators in SA, many of our clients are government departments, unions and parastatals. There is clearly a strategic business imperative that will always form part of transformation, but it goes way beyond that. We want to contribute to a socially transformed economy that benefits all people."
Campbell says that Alexander Forbes's foreign private equity shareholders acknowledge that BBBEE is a business requirement in this jurisdiction. "All countries have their own unique requirements for doing business there, and BBBEE is SA's. Transformation has become a priority for our offshore shareholders, they are represented at the Alexander Forbes Transformation Committee meetings, and they push us at every opportunity."
Alexander Forbes had been transforming well before the department of trade & industry generic codes were even drafted. In 1982 it established Negotiated Benefits Consultants (NBC), a division which was then sold to its black management team, firstly in part, and subsequently in full. This resulted in the creation of the largest black-owned and managed employee benefits business in SA. In 1995 it facilitated the acquisition by Thebe Financial Services of a controlling shareholding in what became Thebe Risk & Benefits Group as well as establishing the largest black-owned and managed short-term insurance broking group. And its original black shareholders, in 1996 shortly after its listing, were Women Investment Portfolio Holdings (Wiphold), Worldwide African Investments and Malesela Holdings.
"Transformation comes from commitment and effective leadership, whatever the colour" - SELLO MOLOKO
Chairman Sello Moloko says though level 3 is quite an accomplishment, he would certainly like to move to an ambitious level 2 for the group. "Though this is an aspiration at the moment, we will definitely think about making a formal commitment to achieving this within a certain time frame. We aim to be one of the leading transformers in financial services and in the top quartile of the sector. At worst, we will retain level 3, but we are not content in the longer term to simply maintain this."
In the shorter term, the pressing need is to focus on employment equity. "The attraction and retention of black skills, particularly at senior management level, is the biggest challenge for us and the industry," says Moloko, "and it takes time and commitment to seek out the right talent and then develop it. We want quality staff to spend as much of their career with us as possible and this means offering them structured development and appealing career prospects. Where we do have successes, we need to replicate those stories throughout the group."
Alexander Forbes did come in for some criticism from certain quarters in 2007: firstly in July when Campbell was appointed executive chairman as the group was acquired by a private equity consortium, and again shortly thereafter, when CEO Peter Moyo resigned in November and was replaced by Campbell.
"This was a tough time for the group," says Campbell. "We were delisting from the JSE, and had a completely new set of private equity shareholders, which means very different reporting structures to the more conventional board format found in a listed group. Whoever was appointed to the CEO position by the new shareholders would have had to follow the transformation mandate set in conjunction with BEE shareholder Shanduka. And this would be done under the chairmanship of an also newly appointed chairman - Sello Moloko."
On the issue of CEO of the group, Moloko says the fact that the head of an organisation is black does not guarantee that transformation will occur, and conversely a white CEO does not mean transformation will not happen. "Transformation comes from commitment and effective leadership, whatever the colour. It also comes from effective frameworks and policy guidelines that are followed throughout and across the entire organisation. And it further comes from shareholders that buy into the concept, understand it is imperative, and constantly agitate for its implementation at all levels."
In 2007, the group established a Transformation Committee, chaired by Moloko. Group risk head Vishnu Naicker says the mandate of this committee is to manage transformation and ensure it takes place, monitoring each of the seven pillars to ensure compliance with the codes and the financial sector charter. "It does not only look at group progress, but drills down into each of the three SA business units, all of which have established their own transformation committees."
WHAT IT MEANS
 Has a level 3 BBBEE rating in all local units
Now the group is aiming for a level 2
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Naicker says there are business risks to not transforming. "Alexander Forbes conducts a significant amount of business with state-owned enterprises. Also, in doing business in the private sector, everyone is trying to maintain good BBBEE scores in order to be part of the chain of ratings and ensure they obtain business from each other. We need to be highly rated so other companies will do business with us and we, in turn, will only do business with those that are appropriately rated. There are also reputational risks as government is starting to name and shame those that are not transforming."
Group transformation manager Don Ray Malabie says the level 3 accomplishment was due to all divisions and departments realising the importance of transformation and committing to it. "We also improved the way we measured and reported our various transformation pillars and these enhancements showed us we were pleasantly ahead of our goals. The process of Alexander Forbes delisting from the JSE, and becoming privately owned, had no effect on our transformation commitments, and in the two years of being private, we have accomplished great things."
Malabie says transformation from this point will be about sustaining current levels and surpassing them wherever possible. "Transformation is not simply about compliance and our target is not to meet the formal requirements of the codes and charter. Transformation is about effective initiatives that bring deep socioeconomic changes."
