Implement BEE at operational level

As I see it, there are seven areas that need to be addressed to ensure effective black economic empowerment (BEE) practice. In the coming months I will discuss the importance of ownership, enterprise development, management, employment equity, skills development corporate social investment and procurement.

In this first Industry Insight, I will examine the effectiveness of BEE in the workplace and what still needs to be done to ensure the process achieves its intended goals.

The role of BEE as an active force within South African business for some years has led to considerable progress towards redressing some of the inequities of the past. At the same time, empowerment continues to evolve and become increasingly far-reaching and broad-based. Although the response of South African corporates to BEE has reached a point of maturity, much still needs to be done in the middle to lower levels of the enterprise, where at an operational level, understanding surrounding BEE and employment equity still needs to filter down through organisations.

The `How to play the game` has been incremental and fairly slow; therefore corporates have responded in different ways. In the early days, the response was a reluctant acceptance of the BEE reality, with a largely tactical reaction from corporates to do the necessary to obtain government contracts or to be politically correct. Today, however, there is a maturing of corporate SA`s response. Organisations are now not being led by political expediency, but acknowledge the necessity of BEE as a tool to transform an economy that was falsely engineered in the past.

As corporate SA begins to develop a deeper meaning of what needs to be done for BEE at the fundamental level, we`re seeing more interested and sophisticated responses to transformation. At the higher decision level, there`s a more mature acceptance of the process and a sustainable strategic response. The challenge, however, is to filter this down to the operational level, where there is still frustration in the execution and implementation of BEE.

The BEE debate, however, is moving in the right direction; namely how to structure BEE transactions where there is a much wider impact as a result of influence and control.

As corporate SA begins to develop a deeper meaning of what needs to be done for BEE at the fundamental level, we`re seeing more interested and sophisticated responses to transformation.

Hasmukh Gajjar, deputy CEO and executive director of Faritec.

While companies appear to have mastered the art of doing deals and putting appropriate systems in place in the form of equity and board representation, corporate SA has not done a good job of implementing diversity at managerial and operational levels. This requires responsibility on the part of selected BEE partners to become more operationally involved and to grow the enterprise. Transformation can only be achieved in a growing economy. BEE is not about replacing a white workforce with a black one, but rather about creating equal opportunity and managing the process of diversification.

As operational people in corporate SA realise the value of diversity and transformation, it becomes easier to see the benefits of BEE and accept the process. Corporate SA does need more case studies and methodologies on the hardcore transformation of the enterprise, as in the change management that`s required, it`s implementation that needs attention. We need to get to a point where we have greater diversity in the operational roles.

At the top, there is the too few black skilled management base that`s much in demand but extremely expensive to recruit and retain. At the lower end, however, where diversity is introduced from the bottom up, the lack of sensitivity and the need for transformation often creates a hostile environment. We need to educate our own workforce in implementing and managing the bottom up diversity in terms of employment equity, as we don`t necessarily have racist behaviour, but rather a lack of sensitivity.

Corporates should also be sensitive to diversity, but be careful of stimulating a culture of entitlement. BEE and transformation is not an isolated limb; it`s part of an eco system and has to be looked at holistically.

While all elements of BEE are critical, preferential procurement is one of the most important - if done well. It needs to be fair and equitable, as it raises the most challenges around corporate and procurement governance.

Preferential procurement is a powerful instrument in driving change, but it is the one most open to abuse. If not properly managed, this is the area that can lead to cronyism and nepotism.

Corporates need to structure their procurement under strict governance and oversight, as preferential procurement often favours the few rather than creating a larger and wider economic impact.

Corporate SA has also generally been very bad at human resources development, with many organisations preferring to poach and procure human capital rather than investing in development.

Now, we are confronted with the need to recruit and hire people of colour very quickly, in spite of the fact that not enough attention, vigour and energy have been applied to skills development. We cannot achieve BEE objectives without a sustainable pool of people of colour; otherwise we don`t have the tools necessary to transform our economy and society.

* Hasmukh Gajjar is deputy CEO and executive director of Faritec.