Door not yet closed on multinationals

Johannesburg, 11 May 2004

While there has been much debate over the possibility of no exclusions in the ICT black economic empowerment (BEE) charter, the issue of equity ownership is still wide open and has yet to be resolved.

Speaking at the launch of the third draft yesterday, Dali Mpofu, chairman of the empowerment charter working group, said the majority of the sector believed there should be no exclusions in the equity ownership debate. While this means multinationals may not be exempted on the equity ownership issue, the third draft states that the working group has not taken a stance on this issue and is working towards a solution.

Mpofu further clarified the issue today, saying that while the charter states there should be a minimum requirement in each category, this has not yet been set. "Companies will have to reach a minimum requirement in each category and overall they will have to attain 50 points or be classified as non-empowered," he says.

However, Gordon Frazer, MD of Microsoft SA, has reiterated the view taken by multinationals at last year`s two-day indaba, that foreign-based companies should be recognised for what they are doing for BEE, even if they don`t have equity ownership.

"What the charter is effectively saying is that multinationals may not be considered as empowered until they sort out the equity ownership component. Such deals could take years to work out, if they are concluded at all. Putting a 25% barrier on equity ownership by 2009 is a barrier to trade. None of the other charters have this barrier in place," he says.

Frazer also expressed his disappointment in the enterprise development area. "Enterprise development is what fuels growth in IT, with larger organisations turning to smaller enterprises for services, and in doing so help them to grow. Giving this category a weighting of seven instead of the government`s recommended 10, means the work done through the channel will not be fully recognised."

[VIDEO]Kelvin Reynolds, CEO of Oracle SA, supports Frazer`s view. "Enterprise development could be given more weight. For Oracle, developing channel partners is imperative to grow business opportunities and achieve empowerment in the SME [small and medium enterprise] market. We would like to see this type of development encouraged," Reynolds says.

Mpofu responds by saying that enterprise development and procurement go hand in hand as companies don`t develop other firms without buying from them. With procurement having an increased rating of 22 points (as opposed to the government recommendation of 20), the two balance each other out, he says.

Mpofu adds that the issue of targets for enterprise development has yet to be confirmed as government states it should be measured as a percentage of assets. However, this is not applicable in the ICT industry, as companies generally don`t have many assets, but instead hold intellectual property. "An alternative measurement will therefore have to be found."

Frazer`s third query on the third draft relates to the residual category, which states that 11 points will be awarded for projects to bridge the digital divide. Eight points have been assigned to projects accredited by the future ICT council and three points for corporate social investment.

"The principle is fine but what will be the determining factor remains important and will these include business imperatives? I would rather have seen the extra point given to the residual category be given to enterprise development."