ICT charter on final stretch

By Damaria Senne, ITWeb senior journalist

Johannesburg, 13 Apr 2007

SA's ICT charter is almost ready for adoption and will be put before the charter steering committee for adoption next week, ITWeb can exclusively report.

Department of Communications spokesman Albi Modise says the ICT charter steering committee will hold its final meeting next week Wednesday to discuss the adoption of the charter, which will then be presented to the communications minister, before it is gazetted.

This means the charter is expected to come into effect within the next few weeks, changing the landscape of the local ICT industry and driving government's black economic empowerment (BEE) objectives.

Next week's meeting marks the final phase of a four-year, often-troubled process in the development of the ICT sector's BEE framework, which is aligned with the Department of Trade and Industry's (DTI's) BEE Code of Good Practice.

"More than 95% of the alignment work has been done and it is now up to the steering committee to do a final approval before the current document is adopted as the sector charter."

Industry launched consultations on the development of the charter in 2003, resulting in four drafts and three "final" versions during the last few years, which had subsequently seen additional amendments. The last of these was released in May 2005.

The approval process then stalled as the DTI sought to update its BEE Code of Good Practice, which would override the minimum requirements established by all other industry sector codes.

This move left many companies, especially multinationals, in limbo as they waited for clarity on scorecard minimum requirements. Many raised concerns about minimum BEE equity shareholding requirements and whether they would be able to offset these by over-performing in other areas.

<B>ICT charter timeline</B>

June 2003 - The process of launching the ICT charter begins.
May 2005 - Final draft of ICT charter released.
November 2005 - Phase one of the DTI's code released. This phase deals with the conceptual framework, the verification agencies, sector transformation charters, ownership and the recognition of the sale of assets and management.
December 2005 - Phase two of the DTI's BEE Code of Good Practice released. This phase deals with the scorecard.
May 2006 - Cabinet approves ICT charter as a sector Code of Good Practice.
December 2006 - Cabinet approves the gazetting of phases one and two of BEE Code of Good Practice.
February 2007 - BEE Code of Good Practice is gazetted.

However, the final document is understood not to include a blanket exemption for ownership for multinationals and compliance will take more than "over-performing" on the remaining indicators. The charter is also expected to require companies to employ 50% black executive directors and 40% of senior black top management. In terms of management control, the target for voting rights of black board members is 50%.

With regard to BEE stakeholding, the charter will likely require companies to sell a minimum of 30%, or R7.5 billion worth of shares, depending on which is valued higher, to a BEE entity. The steering committee also addressed the needs of small and medium businesses in the revised ICT charter.

Companies in their first year of business will be exempt from compliance, while companies with turnover of up to R5 million per annum will immediately be deemed to be compliant. Companies with turnover of up to R35 million a year can choose any four of the seven indicators with which to comply.

Application

Andile Tlhoale, MD of Inforcomm and long-time member of the steering committee, says the gazetting of the ICT charter essentially legalises BEE.

"Previously, if government denied you business because of BEE preferential procurement, you could, in principle, take them to court and argue there was no legal basis for government to do so."

The ICT charter also provides a comparative tool through which firms can measure their empowerment activities, he says.

"Companies should not just aim to meet the targets; they should aim to exceed them."

He says there is a huge gap in areas of skills development and preferential procurement, and companies should pay strong attention to these areas as they implement BEE strategies.