On the Cover

IT outshines other sectors in BEE IN APRIL it will be a year since the ICT industry finalised its BEE Charter and submitted it to government for gazetting. In the meantime, business has gone on, deals have been struck and the DTI has issued an updated set of Codes of Good Practice.

But has the industry shown commitment to BEE? Will the charter ever be gazetted, or do we need to start from scratch as a result of the new DTI codes? And what is the path ahead for ICT businesses?

COUNTING ON CODES

Khehla Shubane, co-author of The BusinessMap Foundation`s `BEE 2006: Charters & Deals`, reveals that the various charter initiatives have been overtaken by the latest releases of the codes of Good Practice. He adds that while the 2005 codes have clarified many issues of interpretation of the charters, it has also brought some confusion.

"The codes have brought a new question to the fore for many who have been working to produce sector charters. What is the status of sector charters in the light of the codes? Specifically, how should gaps between the sector charters and the codes be dealt with?" he asks in his report.

ON THE TABLE

Andile Tlhoaele, member of the ICT Charter steering committee, says discussion with government is ongoing and the process of getting the Charter gazetted is nearly complete. "We are in the second-last phase of discussions with government, regarding section 9 of the BBBEE Act. This section relates to how government will use the charter in its decisions, and for the ICT sector, it will determine how Icasa and Sita issue licences, procure, and partner," he explains.

As for the latest release of the codes, Tlhoaele says in many ways the ICT Charter was ahead of the DTI`s process and many changes will be easily incorporated.

"None of the charters can have targets set lower than the generic code. Understanding this, we linked particular areas to the relevant acts and codes. The result is that the changes required are process- rather than content driven. As an example, the new codes have given greater depth to the process of defining preferential procurement, but the target is still the same," he explains.

AHEAD OF THE PACK

Nevertheless, Tlhoaele emphasises that the industry can and is using the charter, a position which is supported by Colin Reddy, co-author of the BusinessMap report.

"A static estimate of how far we have gone in transferring ownership to black people, simply using BEE deal values at the time of a deal, shows that out of all the sectors, the IT sector has progressed the most in transferring or creating black ownership," he says.

However, he does note that the relatively low values in the sector make it easier for deals to take place. Over 2005, the financial services sector drew R15.5 billion in BEE equity transactions; cyclical services, R4.1 billion; non-cyclical services, R1.1 billion; non-cyclical consumer goods R8.2 billion; cyclical consumer goods R0.5 billion; resources, R21.3 billion; and basic and general industries R4 billion. Comparatively, IT drew R0.6 billion.

BLACK ON BLACK

In the report, it is interesting to note that of the top 10 empowerment deals in the ICT sector over 2005, nine involved already empowered companies investing in, or acquiring, other empowered companies.

" rel=tag>Benjamin Mophatlane, deputy CEO of , believes this is due to sector consolidation: "I believe that there are far too many services companies and not enough critical mass. Generally, there is a fair amount of consolidation to address this and this action is likely to continue until a balance is reached. As for BEE companies, most had historically focused on niche products and offerings and acquisition is a way in which to build capacity and broaden offerings."

Of course the high level of empowerment on empowerment activity could also signify the money to be had in BEE companies and thereby the success of such organisations. Mophatlane comments that BEE is certainly gaining weight in the market with pressure on industry to comply with the codes and charters increasing exponentially. However, he warns that BEE status is not an overriding factor of decision-making, but rather a consideration, and that companies - regardless of empowerment status - have to be able to deliver, implement and execute.

ALL BLUFF?

But what of Deputy President `s planned review of South Africa`s BEE and protective labour legislation? Although this may ease employment equity guidelines, it is unlikely to distract from South Africa`s need to broaden economic participation from all sectors of the market.

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