After 15 years of democracy, black economic empowerment (BEE) still remains elusive for the majority of black South Africans. This makes a strong case for the rationalisation of BEE in its current form in order to accelerate its intended impact. The good news, however, is that the current economic downturn has had no discernable impact on the implementation of broad-based BEE.

These are some of the key findings in the latest BBBEE survey conducted by KPMG, says Sandile Hlophe, managing director at KPMG Restructuring Advisory. The survey's findings were released under the title, "Are we there yet?".

According to Hlophe, the key recommendation emerging from the survey is that the current seven traditional elements of the BEE scorecard should be narrowed down to four "critical elements", namely Ownership, Management Control, Employment Equity, and Preferential Procurement.

"Because the findings show that companies have consistently met their targets for the Socio-Economic Development element and that the Enterprise Development and Skills Development elements have had little impact, there is a need for companies to refocus their energies on the other four critical elements," says Hlophe. "We need to shift our attention to the areas which have not shown positive progress over the past four years of monitoring BEE implementation progress."

Meaningfully empowered black sector

In addition, he says, the weighting of these elements should be increased to 25 points for each, in a reconfigured scorecard. In respect of the Ownership element, Hlophe says that income and wealth creation comes from equity ownership and that a "meaningfully empowered" black sector of the population will therefore need access to ownership of corporate equity.

"Because the transformation of an organisation starts with leadership, Management Control of organisations is essential for effective transformation of corporate South Africa, while Employment Equity acts as a measure of the transformation of an organisation through the profile of its staff complement."

"In addition, we should not underestimate the role of Preferential Procurement. This is the key enabler to ensure that the spirit of the regulation on black economic empowerment is translated into practical consequences for both suppliers and contractors in terms of compliance," says Hlophe.

To galvanise the attainment of the level-four compliance requirement, the target should be set at 75 points to ensure progress on all four elements.

Set back the progress on BEE

The survey determined that over the past year, only "limited progress" has been achieved in respect of Ownership, while "poor progress" was made in respect of Management Control and "great progress" in respect of "Socio-Economic Development".

In respect of the other elements, it found that "progress" had been made. Hlophe cautions that "no further changes be done on the selected four elements, as this would require further stakeholder consultation and gazetting of the new measures which would set back the progress on BEE by a few more years". Another major finding of the survey is that the current global economic downturn has had no major impact on BEE in South Africa.

Hlophe says the survey found that business appeared to insist on greater compliance in some aspects, rather than a deviation from empowerment plans.

"Business realises that a dual system of running their operations — normal business processes on the one hand and BEE processes on the other — is not viable and have rationalised around broad-based BEE to optimise costs. This is especially true for procurement," he says.

The survey found that 69 percent was achieved in terms of compliance in this area compared to 43 percent achieved in 2008 and the 54 percent achieved in 2007. The survey also found there had been no impact on ownership plans for 94 percent of the industries surveyed, no impact on management control plans for 85 percent of the industries, no impact on employment equity plans for 37 percent of the industries, while 52 percent put new appointments on hold, and that there was an impact on skills development plans for 65 percent of the industries.

"Management control and employment equity are two of the most challenging areas in implementing BEE for most companies," says Hlophe.