Paul Janisch

They just can’t do it

You might have read that recent Mzwandile Jacks article where he quoted the ultimate bright spark, Keith Levenstain. Our PLT is quoted as saying "We would like to see the government and public enterprises obtaining a scorecard because it would show the government's commitment towards its own policies". Beautiful words – sadly uninformed and stupid. It's one thing to mouth off (as Levenstain does) but it's another thing to mouth off and actually know what you are talking about (which Levenstain doesn't).

I'll help our learned friend. Simply put – the government cannot do it.

The codes would love to let us think that government can implement them. After all the codes are really only applicable to those entities contained in schedules 2 and 3 of the PFMA, and by implication the MFMA.

Code Series 000, Statement 000: General principles and the generic scorecard – paragraph 3

3.1.1 all public entities listed in schedule 2 or schedule 3 (Parts A and C) of the Public Finance Management Act;

3.1.2 any public entity listed in schedule 3 (Parts B and D) which are trading entities which undertake any business with any organ of state, public entity or any other Enterprise;

To then add more credence to this statement they created a separate scorecard for specialised entities (Statement 004: Scorecards for SPECIALISED Enterprises). This scorecard is actually applicable to government entities – the complete list is

• companies limited by guarantee;
• Higher Education Institutions:
• Non-profit Organisations:
• public entities and other Enterprises wholly owned by organs of state;
• Public Benefit Schemes; and
• section 21 companies: and
• specify scorecards applicable to Measured Entities subject to this statement

Unfortunately the codes don't specify a scorecard so we have to guess what it might look like. This is the first problem – no scorecard is specified.

Now onto the actual scorecard.

Ownership

Strange that they left this element out. Logically they are right – the government (and section 21 companies et al) cannot be owned. However the ANC has somehow managed to convince Hitachi that they are black owned enough to be a suitable BEE partner. Be that as it may – ownership is excluded.

Management

This is one element that a government entity can implement and implement it well. They do it anyway – although it does seem as though it follows a jobs for buddies regime as opposed to merit.

Employment equity

Similar to management. In fact they are a little too good at this element, possibly even illegally too good at (as Captain Barnard will attest).

Skills development

This is where things get interesting. The government cannot favour any one race group over another when it comes to training. And the skills development element requires a vast amount of money to be spent on the training of black people (simply put) – this is quite easy to do in the private sector but not in government. They can however achieve these targets if the overwhelming majority of their staff are black – but does this then mean that they would need to request extra money from treasury to achieve it?

Any government policy that states they will favour the training of one race group over another is a huge problem and is discriminatory – which the constitution outlaws. More on this in preferential procurement.

Preferential procurement

The PPPFA might favour certain types of entities but it CANNOT and I stress CANNOT favour those entities at the expense of others. I mean, it can't exclude bidders from bidding because they don't fulfill a certain criteria which preferential procurement has to do. I'm not going to go into the finer details of the PPPFA, and I don't recommend that you ask Levenstain to explain them to you either. The best thing a government department can do is measure their procurement, it cannot target certain types of entities at the expense of others. This would be a gross violation of section 217 of the constitution. Tenderpreneurs are a different type of targeting – not something that preferential procurement envisaged either.

Enterprise development and SED

Both are no-goes. Complete and utter no-goes (not sure how to spell that). Firstly they measure it using NPAT (or some other convoluted way which no-one understands), and NPAT is not something that government understands or needs to measure. Secondly that if a government department did try and implement these two they could not favour 50% black owned companies and 75% type charities because this would be discriminatory. Thirdly if they wanted to do this they would have to go off to treasury and ask for more bucks to do it – and there is no way treasury would give it to them.

Technically speaking they can actually measure these two elements (according to Obed de Swardt). Every non-profit entity can declare a profit in the form of a surplus and it would be a percentage of that that would be measured – but I can't see that this would work in a government context.

 

I have been a little verbose here but it is abundantly clear that the DTI has not figured out a method to include government departments in their broad-based system. I told the same to Mzwandile when he called me about this story but he chose to go with Ajay Lalu (Udge – I hope you were quoted wrongly in this article because if not it does not bode well for your knowledge of the codes). My thinking is that the DTI is acutely aware of this problem and has decided to leave BEE in the capable hands of the private sector. Unless of course they are going to throw this problem at the BEE Council just to test their mettle.

King III and the B-BBEE codes of good practice - repost

King III's effective date is today.  Time to get those boards in shape.  This is a repost from last November.

The long awaited King III report was launched on September the 1^st this year and will come into effect on the 1^st of March, 2010.  It is expected that King III will assist companies in their compliance with the new Companies Act that should be promulgated in July 2010. 

King III is a framework that all companies should follow in their pursuit of good governance.  Its ambit has been extended to all entities regardless of the manner and form of incorporation in any sector, public, private or non-profit.  It aims to set standards for leadership, sustainability and corporate citizenship.  Instead of legislating the requirements (as the Americans have done with the Sarbanes-Oxley Act) it instead opts for an “apply or explain” regime.  This then allows boards to make decisions that might not be in keeping with King III recommendations but are in fact in the best interests of that entity.  The rationale behind these decisions are then required to be recorded to satisfy the stakeholders in that entity.  King III is at pains to point out that the ultimate compliance officer are the stakeholders.

Whilst King III is applicable to all entities, because of its intrinsic relevance to boards and board members its BEE application is limited to those entities that are generic entities.

Code	Exempt	QSE	Generic
DTI	R0-R5m	R5m-R35m	R35m+
Tourism	R0-R2.5m	R2.5m-R35m	R35m+
Construction (BEPs)	R0-R1.5m	R1.5m-R11.5m	R11.5m+
Construction (Contractors)	R0-R5m	R5m-R35m	R35m+

 From a board perspective the management element is concerned with black representation, both from a voting rights perspective and the percentage of black people on those boards.  The table below shows the DTI’s generic management code with the top management aspect eliminated as this is not significant to King III.

Management Control (top management excluded)
Description		Compliance Target
	Board participation
Exercisable voting rights of black board members using the adjusted recognition for gender (ARFG)		50%
Black executive directors using the adjusted recognition for gender (ARFG)		50%
	Bonus points
Black independent non-executive board members			40%

King III does not make any specific reference to voting rights but it is very vocal about the percentage of non-executive and executive directors.  It recommends that each board should have a minimum of two executive board members (who should at least be the CEO and CFO) and that the majority of the board should be non-executive.  The thinking behind this is that an executive director should not be in a position to exercise an undue influence over other executive directors who are employees of the company.  Furthermore the majority of non-executive directors must be independent.  One of these independent non-executive directors must be the chairman.

If a board is pursuing points under the management element they might want to follow this example of a board of five people.

• Each director should have an equal number of votes
•  At least two of the directors should be black women
•  If there are two executive directors one of them should be a black woman
• Of the remaining directors two should be independent non-executive directors and one of those should be the chairman. 
• One of the independent non-executive directors must be a black person

 We will be hosting a breakfast session in March on King III and BEE.  If you would like more information email me. 

There are a few other acts that have a bearing on the behaviour of directors.  I am going to do a lot more research on this and post something as soon as I have - I think it might be found within the King report.

Caird Code Rule #1 – Is BEE applicable to you

A while ago I was doing a presentation to the American Chamber of Commerce on Equity Equivalents. One of the delegates was an apparel manufacturer who asked my why his company should consider the programme I was proposing. I was a little surprised that such a company would even consider equity equivalents as an option. Why would they need to, they sell takkies, T shirts and caps. Every single one of their products are sold to a consumer who is very unlikely to use BEE status in their decision to buy their product. Edgars etc might ask them for their BEE status but I have my gravest doubts that they will not stock those products in their stores because that company does not comply with their BEE wishes. And it is also unlikely that Edgars will incentivise their sales staff to push a local product over the imported one. Can you imagine the conversation

Consumer: I'd like to try on these Adidas shoes.

Sales assistant: Please sir would you consider these Dlaminis. They are locally manufactured and Edgars will get more BEE points if we sell these.

Consumer: No I will not you horrid sales assistant you. I'm off to Sportsman's Warehouse.

This fictitious interaction exposes the deepest flaw in the implementation of BEE viz if the average joe is the end user then BEE is not going to be very important. This means that BEE can really only be applicable when the consumer is some sort of a corporate or government entity.

The general rule here is that if your business caters for consumers then it is unlikely that BEE will ever affect you. This would include restaurants (that don't serve alcohol), shoe shops, clothes shops, plumbers, electricians, pool companies, record shops, news agents, retail jewellers. As with any rule there are exceptions.

1. Any restaurant, hotel, pub or anything that serves alcohol requires a liquor licence. And those licenses are handed out by the DTI. And the DTI asks a bunch of BEE questions in allocating these licenses. I have written countless BEE plans for liquors wholesalers and retailers that have to be submitted with each renewal.
2. Shops looking to rent in malls that are owned by parastatals like Transnet or Eskom. I have heard that your BEE status is important to these types. ACSA is another example – the annual tender for renewals for shops in the airports require BEE credentials. I don't know who drafted those BEE questionnaires but they are so badly written they are an embarrassment (mind you so is ACSA). I haven't come across private property owners asking for BEE credentials.
3. Manufacturing jewellers have to comply with the Mineral and Petroleum Resources Development Act of 2002, (MPRDA). The requirements for this are exactly the same as those for a mining licence. I won't comment on this right now but suffice to say – this abomination requires its own future post.
4. Anything that can be used under section 10 of the BEE Act. I haven't really seen this being used, although I have worked on PPPs where the legal advisors have anticipated it in the PPP agreement. The DTI has taken a cautious path when it comes to section 10 because I believe that they recognise that over-regulation will stifle the development of the South African economy (as if we aren't over-regulated already). Technically speaking they could shove section 10 in the way of almost everything to achieve the BEE Act's transformation goals.

What about those entities that think they might need a BEE scorecard but don't

Charities and other section 21 companies that are looking for SED money

Paragraph 5 of Code 000, statement 004 states very clearly that their BEE status is not a consideration in determining whether they will be beneficiaries of SED contributions

The status of Socio-Economic Development Contributions made to any of the types of entities in paragraphs 1 and 2 under Code series 700 is not dependent on such entity's scorecard result, but rather the nature of the contribution itself and the identity of that contribution's beneficiaries.

There are some NGOs/section 21s who provide certain types of services to corporates to raise money for their core activity. Under these circumstances they become a supplier to that corporate and might be required to produce a specialised enterprises BEE scorecard (statement 004).

Entities or companies providing enterprise development services

Now this is a very common occurrence. There are many private companies providing these services, Endeavor, Raizcorp and ED Alliances are three that I know rather well. This practice is contemplated by code 600, paragraph 3.2.5.12

payments made by the Measured Entity to third parties to perform enterprise development on the Measured Entity's behalf

However it does not appear that these companies actually need to produce a BEE scorecard to provide ED services. One of the exclusions under Code 500 (Preferential Procurement) is empowerment related procurement – more specifically (paragraph 6.5.2)

investments, loans or donations qualifying for recognition under any statement under Code series 600 or 700

This means that the expenditure is excluded and hence a BEE scorecard is not needed.

PPC new BEE rating and the construction code's applicability

This is very interesting.  PPC announced that the have moved up from a level 4 to level three in their latest rating.  This is actually so important that they have made a JSE SENS announcement as well.

They haven't actually updated their website so I haven't seen the certificate but I surmise from the article that they used the DTI's codes to get there. 

PPC met its objectives in almost all of the Department of Trade and Industry’s code of good practice scorecard pillars, with notable increases in scores relating to employment equity, enterprise development and socioeconomic development

If they did use the DTI's codes then this brings up an interesting debate about which scorecard they should follow.  I presented a Construction Codes seminar around the country earlier this year and one of the delegates came from a cement manufacturing company and asked why she should attend the breakfast they are a manufacturing company that derives its income from the construction industry.  This posed a bit of a conundrum so I looked at the code itself

Code 2000, paragraph 3 (précised) says

Any company that conducts any construction-related activity must determine what percentage of their turnover is derived from construction
if the majority of their turnover is derived  from construction related activities then the charter is applicable

The construction sector is defined under the interpretations and definitions (page 29) as

all enterprises that are involved in the

• creation
• expansion
• maintenance

of fixed assets related to residential, or non-residential buildings, infrastructure or any other form of construction works in South Africa

This is difficult, manufacturers like PPC are indirectly involved in all three bullet points.  Is this link then strong enough for them to find the construction code applicable to them.  The available evidence suggests that the verification agency doing PPC might have thought that there was no strong link between them and the construction code.  However before I make any rash conclusions I need to consider

Date of applicability of the construction code

The preamble to the codes (notice 862) announces that

this notice is effective from the date of publishing (5 June 2009) and means that the Construction Sector Code is binding on all stakeholders operating in the construction sector

Does this mean that if the code falls into your measurement period then you are suddenly bound by it?  I would think not - but I have heard of VAs who seem to think so.

It is possible that the measurement period that PPC used might have pre-dated the gazetting of the construction code and that's why they used the DTI's COGP.  This sentiment is now common cause - there is nothing in the construction code that says it is retrospectively applicable.

ABVAcuousness

I was sent an email by Louis McLaren telling me that the certificate I issued might not be accepted.  I sent him a mail back telling him that it was perfectly legal in terms of notice 32467.  I then got a response from him telling me that a VA would not accept it because ABVA says it won't.  I then mentioned that the VA is not in a position to decide who are what certificates are acceptable.  I have blogged about this in a great amount of detail before.

I need to stress that Louis is a highly respected man in this industry - he is not part of this tirade.  At all times he kept the name of the VA away from me.

This dimwit (who is nameless to me) has a similar intelligence level to Bright Matonga  - in fact I'll call him/her that name.  This is Bright's response (peppered with my comments.

"His statement that no verification agency may decide what to accept or not clearly shows ignorance on the side of the individual in question.

Really?

It is the precise function of a verification agency to decide on the validity of evidence presented to it by a measured entity.  The procurement official of that measured entity may have decided what to accept as sufficient proof for its procurement purposes but for verification purposes verification agencies have to make their decisions within the context of a legislated regime which prescribes what is acceptable evidence or not.

Questionable legislation.  Tell me Bright have you actually read the verification manual?  It is a document drafted by someone who might be marginally cleverer than you.  The English and exemplary BEE knowledge of the drafter/s make for comedic reading indeed.  Here are but two examples

• Establish the existence (?) proof through the AMP201 (page 64).  What the hell is an AMP201?  It doesn't exist in a South African legislative context.  I somehow think they are referring to an EMP 201.  If Bright's drafter friends don't even know this then what are they doing drafting this riveting document?
• There are no local production (5.4.6.1 - page 69).  Lovely stuff - something my corporal might have uttered and he made no bones about the fact that he spoke English very reluctantly.  Bright, could you be my old corporal?

Whilst it might be regarded as "law" for now - everyone knows that this document would be thrown out of a court of law. 

The decision of the verification agency can therefore not be arbitrary but must have a sound legal basis.  The interpretation of ABVA on the particular matter is based on the current legislation issued on the matter.  Although controversial, it is the only interpretation that stands the test of legality.  I would love to hear the legal - not policy or emotional argument, for the view adopted by this individual.

Yes Bright this is ABVA's interpretation.  Confirmed to me by Andile (is BEE really my strongpoint?) Tlhoaéle.  And this is the most important point - it is not a point endorsed by the DTI or SANAS.  Whilst Andile avers that it has some legal backing because of the definition of a verification agency in R47-02 it still lacks legitimacy.  And this is another perfect example of ABVAndalism and ABVAingloriousness. 

I suggest he starts off by providing me with the legal definition of the term "unaccredited verification agency" that does not result in an absurdity"

I just did you knucklehead.  And I have a little news for you I have heard the Sipho Zikode asked the question why your little association should be the only one that gets to play BEE god.  He suggested at a recent meeting that SAICA, ACCA or any other association should also represent their members who are VAs.

My advice to you Bright is wake up, read the gazetted legislation and then work your pathetic little backside off from the 1st of February next year, because you are going to have to do about 50 verifications a day.  In the meantime stop hiding behind ABVA's skirt tails and service your clients not your immature ego.

The changing face of BEE deals as per FM?

Taken from an FM article on BEE investment houses who end up being benificiaries of deals and their overall performance.  The article concludes that BEE deals need to evolve, suggesting perhaps that a move toward entrepreneurship and away from passive hand-out involvement.

Recent broad-based empowerment deals from the likes of SAB, Tiger Brands and Adcock Ingram point to a changing trend in the structuring of black economic empowerment (BEE) deals. The tide has swung away from those that favour one black company or group of individuals. "The BEE deals of today are different to the way they were structured five years ago," says Sanlam Investment Management portfolio manager Ricco Friedrich. "Staff and related communities are now the preferred beneficiaries in deals that are broad based. They are more sustainable than the kind that favoured the usual suspects'. Those are dead in the water."

And then there is this quote from Jenny Cargill of BusinessMap.

"Current policy has effectively placed a 25% ceiling on BEE equity ownership. The acquisition of controlling interests by BEE investors is no longer evident and this has led to a more opportunistic character to BEE ownership."

I have always noted the sterility of the 25% target.  Once you set a target then people go for it and rarely exceed it - ask any sales manager.  Could this be why jungle (speaking predictably out of turn) is suggesting a 30% equity target by 2017?  Got to love his exemplorary knowledge of BEE and affirmative procurement.  And why not leave this post with a quote from my esteemed aficianado

Manyi said the BMF was changing its focus to concentrate on ownership, affirmative procurement and enterprise development instead of employment equity.

Does this mean that it's his other hat as DoL DG that will be looking after the EE side?

SAB's BEE deal

It's made the press again -in fact it's made a lot of press.  I was referred to the Business Day report by Robert Simmonds.  This report concentrated on the beneficiaries, 20% of whom are SAB's lower paid white employees.  And once again Mr Obvious (one Ajay Lalu) is asked for his opinion - to which he replies  “Unfortunately, according to the codes of good practice, white beneficiaries don’t qualify,”  Er....... tell us something we don't know Ajay.  So what if they don't get any points for this deal - what SAB hopes to achieve is the financial independence of their staff and sundry other players.

And then not to be outdone ol' Aj "criticised the fact that there was no guarantee on the value of the stakes at the end of the 10-year lock-in period."  He might have been taken a bit out of context here so I'll cut our hero a little slack - but just in case AjLal is not that clued up about these things I'll explain it for him.  RISK AND REWARD OLD MAN, CAPITALISM IS ALL ABOUT RISK AND REWARD.

I've blogged about the SAB deal before

SAB is a fascinating deal, it stands out as the only one where the business reasons are so apparent.   We know that the Western Cape is clamping down on unlicensed taverns and 70% of SAB's turnover comes from unlicensed taverns.  Here is SAB staring at the potential demise of their biggest channel unless they do something.  Sheer brilliance, if I may use such a superlative.

And I still think it's the best deal done so far, in spite of what Fawu says.  Let them strike I say - just make sure that you suck on Windhoek Lager at the end of the day of hard toyi-toying.

Zuma appoints members of BBBEE Advisory Council

I just got a call from Mzwandile Jacks telling me about the BEE Advisory Council that's just been announced.  This is what it looks like

1. Minister of Trade and Industry, Rob Davies.
2. Minister of Labour, Membathisi Mdladlana
3. Minister of Economic Development, Ebrahim Patel
4. Minister of Women, Children and Persons with Disabilities. Noluthando Mayende-Sibiya.
5. Professor Mohammed I. Jahed, professor of macro-economic policy, economics and public finance at the Wits University Graduate School of Public and Development Management.
6. Prof Eltie Links, a professor extraordinaire at University of Stellenbosch Business School
7. Wendy Lucas-Bull, a businesswoman and the founder of Peotona Group Holdings
8. Andile Lungisa, Chairperson of the National Youth Development Agency
9.  Sebenzile Matsebula, an independent consultant and former Director in the Office on the Status of Disabled Persons in the Presidency
10. Jerry Vilakazi, chief executive officer of Business Unity South Africa
11. Dumisani Mthalane, a member of the National Working Committee of the South African National Civics Organisation
12. Ellen Tshabalala, a business and management consultant with expertise in small, medium and micro-sized enterprises development, banking and marketing.
13. Adv Matshego Ramagaga, Vice-President of Black Lawyers Association
14. Tsakani Matshazi, President of the Association of Black Accountants and Vice-President of the Confederation of Black Business Organisations
15. Sidumo Dlamini, President of the Congress of South African Trade Unions
16. Sandile Zungu, businessman with extensive experience having served in various companies at a senior level including NAIL and Denel.
17. Don Mkhwanazi, a former president of the Black Management Forum
18. Dr Claudia Manning, businesswoman
19. Chantyl Mulder, senior executive for transformation and growth at the SA Institute of Chartered Accountants, who has served as facilitator of the BEE Charter process amongst other work on economic transformation.

It's the required 19 people with the exeception of the President who is required in terms of section 6(a) of the BEE Act.  I wonder if this will have an impact on the legitimacy of the council.

I would have liked to see more business representation.

Moerse Tier

I should know better to leave well enough alone.  But I can't really ignore this.  I need to mention that I am not writing about Tiger Brands because jungle jim works for them (or as the Business Day once said, moonlights for them).  I am intrigued by their new stance on suppliers.

I asked the question in my last post as to whether Tiger would extend their demands to critical suppliers.  In a very presumptuous email Dave Webster confirmed that they would, why would they not?   I'll tell you why Dave - it goes like this.

Tiger Brands (TBS) is a listed company.  Which means that Peter and co are accountable to the shareholders (I am not one).  If they decide to start to enforce their somewhat lofty wishes (and I quote)

It is also confirmed that suppliers who are deficient in these expectations will be granted a three-month grace period, with Tiger Brands thereafter being forced to consider alternatives.

then they may have to start looking for new rice suppliers for  Tastic, peanut suppliers for Black Cat, sugar suppliers for Maynards and Beacon and the list goes on.  How is this then going to affect the price of these consumer goods?  Will consumers then start choosing other brands because Tiger has priced themselves out of the market?

It's highly likely that they will.  And where does this leave the shareholders and Matlare's options. 

This leaves me with two possible conclusions.

1. They are pushing an empowerment agenda over a business strategy which has the potential to erode their share price.
2. It's a bluff that is going to be exposed.

I somehow think it's going to be the latter.  But if there are any shareholder activists who are Tiger Brands shareholders - perhaps they'd like to check with Tiger as to what their plans are.

Don't leave the implementation up to the HR department.

I wrote this article in for the 16th October 2006 edition of Real Business.  I have spoken a bit about music as my ultimate hobby.  Every now and then I incorporate certain musicians into my stories - it keeps them interesting for me.  There are a few characters in this story that are real people, I've hyperlinked their names to sites that tell you more about them. 

-------------------------------------------

Black economic empowerment (BEE) is not purely the responsibility of human resources (HR), says Faritec deputy CEO Hasmukh Gajjar, recognising the trend to lump the implementation of BEE with the myriad other duties HR managers have. He says, correctly, that a successful broad-based BEE implementation and strategy cannot be HR’s sole responsibility.  Let us create a fictitious (and somewhat ridiculous) broad-based BEE implementation.

Webb’s Chicken is a large agricultural company with about 200 employees. It supplies chickens to a wide range of customers from small retailers to government. Some customers are cutting back on orders because they are able to source chickens from other broad-based BEE suppliers. 
Founder and CEO Stan Webb decides it is time to start working on the company’s BEE profile. He tasks group HR manager Christine Perfect with this implementation. “Come back to me when it is done,” Stan tells Christine.

Christine starts off looking at the equity aspect of the scorecard. The first step is to find a suitable investor.  Pablo Ntuli is the only person who seems to have an interest in the chicken industry and the money to do the deal. Christine negotiates the deal, appoints Pablo as a director. and plans to introduce the two shareholders to each other. She hopes Stan and Pablo will get on.
Her next step is to increase the number of black people within the various management levels within the organisation. There is a lot of black talent in the market place, but she has to offer competitive salaries and sign-on bonuses to bring them across.  Christine manages to employ an extra 20 managers. They have come at great expense but the company’s scorecard is starting to take great shape. She will introduce the new managers to Stan at the same time that she introduces Pablo.

Christine is not too concerned about earning the points for skills development, because her training schedule is well documented. She then heads off to work on preferential procurement. Her problem is that she is not that familiar with Webb’s suppliers, nor does she understand the concept of supplier-customer relationships. Nevertheless she dives in head first, sending threatening letters to all suppliers, telling them that they have a short time to generate a level-one score (100 points plus) or they will lose the Webb contract. She also manages to replace a few existing suppliers with black ones. The black suppliers’ prices are competitive but they are on the other side of the country; this shoots the unit price up.

There is no shortage of enterprise development and corporate social investment causes and Christine does not hesitate to randomly select a few to support. She chooses causes that have no relevance to the Webb’s Chickens business — in fact they have nothing to do with agriculture at all. She requisitions two hefty cheques and posts them off. 

It has been a productive two weeks. Webb’s Chickens now has a very impressive scorecard. She presents the new shareholder, staff members and latest financials to Stan on a Friday afternoon. Stan is dumbfounded. He and Pablo have met in the past in a bar fight, the staff have shot his overheads through the roof, his company is being sued by 10 very angry suppliers for breach of contract and Webb’s has donated a huge sum of money to causes that make no sense to him.  The only way to solve this problem is to get rid of Pablo at great expense and raise the price of chickens to cover his losses.

I apologise for making this example so ridiculous but there is a strong element of truth that resonates through it. The executives in an organisation cannot simply outsource the BEE implementation to the HR department. Admittedly 40 points on the scorecard has a direct bearing on HR (management, employment equity and skills development), but proper implementation has huge business implications and the correct executives in the firm must be involved in the process.