SAP protests Telkom BEE targets

By Christelle du Toit for SAP
Johannesburg, 08 Nov 2007

Multinational software company SAP is asking government to take Telkom, and others, to task over self-imposed BEE targets.

This week, SAP Africa MD Claas Kuehnemann and SAP international deputy CEO L'eo Apotheker said the company wants one set of empowerment rules for industry and is, therefore, appealing to government to level the playing fields in the broad-based black economic empowerment (BEE) stakes.

SAP was reacting to the recent demand by Telkom that all its vendors, including huge multinationals like HP and SAP, have a 30% BEE shareholding to qualify to do business with it. SAP Africa has a 10.5% BEE shareholding through Blitech and the Black IT Forum.

Kuehnemann says it's difficult for industry to deal with each and every state-owned entity's individual BEE requirements.

"Clearly, industry would like to see a single set of rules that are predictable in terms of long-term investment planning. It would be a lot easier to do business in SA if everyone plays by the same rules," adds Apotheker.

The Department of Trade and Industry (DTI) has issued a code of good practice and the industry would prefer to deal with one set of rules, says Kuehnemann. "We have appealed to the minister to consolidate [the different BEE requirements]."

Telkom is entitled

Telkom acting procurement group executive Elelwani Pahlana says SA's legislative framework allows the company to set its own procurement and BEE requirements for its suppliers, whether they are local or multinational.

Telkom is committed to growing the skills base, as well as retaining economic interest within the country, she says. "While some of our suppliers have already complied with Telkom's BEE requirements, others are in the process of doing so by committing to the company's BEE commitment plan."

Kuehnemann says SAP has, for the last year, been engaged in "intensive discussions" with Telkom about its BEE requirements and these talks are continuing.

Media reports indicate multinational IT vendor HP has also encountered problems in relation to Telkom's BEE requirements. Discussions are said to be ongoing.

Flexibility

Legal expert Mike Silber says it is likely Telkom is using empowered vendors to gain additional empowerment credit for itself.

He says Telkom's procurement policy may be "too inflexible", as it fails to take into account that the empowerment of a company does not originate out of equity ownership only.

"One of the critical aspects [of empowerment] is that when you get a SAP licence from Germany, the implementation would be done with a local partner, enabling empowerment," he says.

The DTI's BEE Codes of Good Practice also allow for a multinational company to make equity equivalent investments in the country, rather than selling 30% equity ownership. IT vendor HP was the first company that government approved on this basis, allowing it to invest R150 million in a skills development initiative rather than selling local shareholding.

Apotheker says SA would be well-served by a thriving IT industry and SAP is investing significant resources into the market.

SA will need significant investment in infrastructure to overcome the so-called digital divide, but the country is also one of the more advanced countries when it comes to using technology, he says.

Department of Communications policy chief director Norman Munzhalele was unavailable to comment on whether government can intervene on what is essentially a private entity's procurement policy.