WHITE MALES TOP OF THE WORK PILE AS BUSINESS PAYS LIP SERVICE TO CHANGE

This article first appeared in the Business Times section of The Sunday Times on 1 May 2016. 

‘THE South African labour market continues to be racialised and gendered, it remains hierarchical with blacks concentrated at the lower levels and the white group occupying decision-making positions.”

This was the conclusion of the Commission for Employment Equity’s 16th annual report on the state of transformation in the workforce.

It’s no surprise the statistics have once again revealed a lethargic pace of racial and gender transformation in the private sector, especially in top and senior management.

The ratio of whites in top management relative to blacks remains extremely high relative to their share of the economically active population — which is a measure of people between the ages 15 and 64, who are either employed or unemployed and who are seeking employment.

Whites represent only 9.9% of the total EAP of South Africa yet they constitute almost 70% of top management.

Africans were the biggest beneficiaries of the decrease in white top management, rising from 13.6% representation in 2014 to a paltry 14.3%.

It is worth noting that they form over 77% of the total EAP.

Further analysis shows that in the public sector, over 73% of top management are African, while the largely white-controlled private sector has only 10.8% of Africans in top management.

Chalk and cheese!

So the question arises: why has the pace of transformation been so slow in the private sector and what should be done to ensure its acceleration?

Ntsoaki Mamashela, director of employment equity at the Department of Labour, puts it down to excuses of “shortage of skills” and lack of “commitment to transformation”.

She points out that the Skills Development Act was promulgated in 1998 and for 18 years companies have had clear guidelines on developing the skills of their workforce.

If you are depressed by the poor ratio of Africans in top private sector management positions, you will be horrified by the report’s observations on skills development.

At top management level, the report says, the white group benefited the most from skills development opportunities.

“What the designated employers are reporting is that preferential treatment is given to the white group at the expense of the designated groups in terms of skills development,” it says.

So South African companies are training a higher proportion of their white employees over their black employees, yet they argue that a shortage of skills is the reason they don’t have black top managers.

I often hear business leaders and government officials say “transformation is a business imperative”.

The Commission for Employment Equity also says “transformation does make business sense. No business will survive in the long run unless it reinvents itself and constantly adapts to the ever-changing demands of an increasingly competitive global environment in which it operates.”

In this context, the term “transformation ” carries two connotations.

One refers to transforming the racial, gender and broader demographic profile of employees, suppliers and owners of a company.

The other is more of a global and universal connotation. This refers to transformation of a business model, culture or even the product or service offering of a company in order to remain competitive in a rapidly changing world. Think Über — a service that used mobile technology to transform the taxi industry.

Those who want to argue that transformation, in the South African context, makes business sense conveniently confuse the two connotations.

If that were true, how do we explain the lily-white top management teams that have led South African business since 1948 to date?

Even if one argues that apartheid protected the status quo until 1994, how then do you explain the past 22 years?

How is it that multibillion-dollar companies have not only flourished but more than doubled their value in the past 20 years, yet their best record, as a collective, over the two decades, shows the 10% white population controls almost 70% of all business decisions?

We all know about the meteoric rise of Capitec.

Fourteen years ago, the bank’s share price was R2.

Today it’s just under R600. I don’t recall the company ever crediting its amazing growth to transformation, notwithstanding the fact that its core customers are Africans.

It’s a farce. For most business leaders, transformation is not a business imperative and frankly, does not always make business sense.

For them, it is a government requirement that is at best an inconvenience and at worst a destroyer of value.

Case in point is the CEOs of mining companies. They argue their companies should only have to do one BEE transaction in their lives.

They say when the BEE shareholders eventually, and rightfully, exit to realise value, the company should be allowed to remain 100% white-owned into perpetuity.

To them it “makes no business sense” to require mining companies to always have meaningful black shareholder participation.

Let’s wake up and smell the coffee. Enough with the carrots — it’s time for the stick.

Take off the kid gloves and deal decisively with these transformation dodgers.

Or history will judge us as a bunch of cowards who dishonoured the blood of those who died for this freedom.

'ONCE EMPOWERED, ALWAYS EMPOWERED' RINGS UNTRUE

This article first appeared in the Business Times section of The Sunday Times on 22 November 2015.

The results of the 10-year review of the Mining Charter and the subsequent squabble between the Chamber of Mines and the Department of Mineral Resources has brought up a key question about Broad-Based Economic Empowerment (BBBEE), and whether or not the policy can sustainably transform the ownership profile of the South African economy.   

The question of ‘once empowered, always empowered’ is central to the success of BBBEE and remains unresolved, perhaps for a good reason. 

Is it fair for a white-owned mining company to sell 26% of its equity to Black shareholders, often at a sizeable discount and great cost to its earnings, as well as practically finance the deal, only to end up with zero empowerment credentials when the Black shareholders settle their debt, sell and move on?  

On the other hand, can a South African mining company genuinely claim to have transformed an industry if it does not measure its transformation by taking a snapshot of its share register, at any given time, and see black shareholders owning more than 26%?  

And what about the right to sell? Surely the Black shareholders, assuming they are no longer encumbered and are past the lock-in period, have the right, like any other investor, to realise their investment and do as they wish with their wealth. 

The Chamber of Mines calls the charter ambiguos on this issue. I think what they meant is they find it unfair, not unclear. The charter states “In order to increase participation and ownership by Historicaly Disadvantaged South Africans (HDSA) in the mining industry, mining companies agree to achieve 26% HDSA ownership of the mining industry assets in 10 years by each mining company”.  

A lay man’s reading would therefore expect a measure that would value the total mining industry and compare that to the value of mining industry shares owned by black people. Apparently it is not that simple. 

Former Minister Ngoako Ramatlhodi tried arguing this. He was unsuccesful and eventually capitulated, leaving it up to the courts to decide.   

According to the Minister, he and the Chamber could not agree on the "principles applicable to assessing the ownership element" of the charter and therefore agreed to take the matter to the High Court for a declaratory order "to guide on the correct interpretation".   

It seems the Minister was happy to be bound by the interpretation of the courts, but not the Chamber of Mines.  They insisted on keeping the window open, and to appeal the decision, if it didn’t favour them.  

I don’t blame the Chamber for this stance. If the court found against them and their 72 members who represent more than 90% of mineral output in South Africa, its members would need to do brand new BBBEE deals or face losing their mining rights. 

However, the charter goes into great detail, outlining its principles and intentions, specifically in relation to ownership. With due respect, the Chamber’s issue is not and has never been about the principles. 

Ask any economically active South African what BBBEE is trying to achieve, and notwtshtanding their disappointment with its effectiveness, they will tell you its about trying to get Black people into the mainstream economy, and that’s the principle. 

When the government and the industry couldn’t take the public criticism of going to court to argue empowerment, they decided to attempt settling the matter out of court. Minister Ngoako Ramatlhodi was ‘reshuffled’ and enter new Minister Mosebenzi Joseph Zwane.  

The final outcome of these offline discussions was mining companies being temporarily exempt from the provisions in the Broad-Based Black Economic Empowerment Act ,which essentially means that mining companies, at least for the next 12 months, are governed by the DTI’s Codes of Good Practice and not the mining charter. 

This is meant to be a temporary measure while the Mineral and Petroleum Resources Development Act (MPRDA) and its underlying Mining Charter are being reviewed.  

Its taken the whole of 2015 for government and the industry to agree on what they signed 11 years ago, and there’s still no agreement. 

I suspect the industry has pulled one over the government here and created room for further extensions of this exemption. 

This will undoubtedly strengthen their leverage in having the provisions they want in the revised mining charter.  

Whilst all parties will keep fighting for their respective positions, the key issue of ‘once empowered, always empowered’ remains unresolved. 

I think this important question alone could mark the beginning of the end of BBBEE in its current form. Perhaps that too, is not a bad thing.