The ICT empowerment charter, due to come into effect early this year, could prove challenging and demoralising for the industry, says Soria Hay, executive director of black empowerment specialist firm Bravura.
The charter, the final draft of which has been presented to Cabinet, is possibly the most prescriptive of all the empowerment charters to date, says Hay. The final draft is likely to be passed by Cabinet with few changes, she adds.
"Once this occurs, ICT companies will face formidable challenges in complying with its strictures."
Hay says the charter prescribes "achievement hurdles that are extremely difficult to attain. As such, the charter is likely to have a demoralising effect on the industry."
One example of the charter`s "exacting nature" is the scoring system, she says. All charters published to date specify a list of empowerment categories on which companies will be scored. These are: corporate social investment, enterprise development, preferential procurement, equity ownership, skills development, employment equity, and management and control.
"Most charters lay down target scores for each category which, together, add up to 100%. A company`s empowerment status is then calculated based on its total score. In the financial sector charter, for example, a total score of 80% will result in an 'A` rating, a score of 70% to 80% results in a 'B` rating and so on. This means it is possible to score zero in a particular category and still end up with a positive empowerment rating.
"In contrast, the ICT charter, as a general rule, specifies a minimum score of 40% for each category. Score less in any single category, and you will be denied your empowerment certificate altogether by the ICT Charter Council."
Hay notes that companies will be required to improve their rating on an annual basis. "This concept is referred to as annual minimum total scores." Companies will be required to achieve a total score of 45% to 50% this year, increasing to 100% by 2009, she explains.
"Given the already stringent requirement of achieving a minimum score of 40% in each category before getting onto the 'empowered` playing field, it will be difficult enough merely to achieve the annual minimum score, never mind exceed it. In our view, very few ICT companies will get there," she says.
"The most disturbing aspect of the charter overall is that it calls for companies to attain an empowerment rating of 100%, as per its scoring methodology, after only five years or be classified as unempowered. In other words, companies that fall short of full compliance will be rated as having failed altogether. In our view this is unjust, as it nullifies the genuine empowerment efforts companies might have made."
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