The purpose of the survey is to establish the extent to which progress has been made in facilitating Black Economic Empowerment across a broad range of South African industry sectors.
The 2010 survey, released under the theme 'The evolution of BEE measurement', elicited a broad base of responses from organisations of all sizes, including locally listed, multinational and unlisted companies.
The research shows that 83% of companies had implemented BEE internal controls, and that where these were implemented, companies experienced a low variation between verification expectations and actual scores.
Internally prepared scorecards were maintained through various means by organisations. These included BEE toolkits (8%), consultants (35%) and in-house resources (40%). The in-house resources included managers or teams that were either trained through empowerment workshops or completed transformation courses.
The survey demonstrated that the majority of companies (87%) with proper internal BEE controls had reasonable expectations for scores which did not vary significantly from independently verified scores. Of the remaining 13% whose scores did vary, 64% claimed that they had insufficient knowledge of BEE.
Consultants were listed as the strongest form of internal control. Generic scorecard companies that used consultants had an average score of 67 points out of 100 (equating to a level 4), which was eight points higher than companies that did not use consultants and 12 points higher than companies with no internally maintained scorecards. The use of consultants, by Qualifying Small Entities (QSEs), however, did not lead to increased scores. Interestingly, QSEs that did not maintain their own scorecards continued to score well. Wade van Rooyen, Managing Director of IQuad BEE Verification, suggests that “QSEs that did not maintain scorecards, but still showed a high average score, were able to do this by investing heavily in Enterprise Development (ED) and Socio Economic Development (SED). The data also showed that all companies that used consultants were more likely to invest in ED and SED.
The survey also indicated that the majority of the companies that indicated that the verification process was less onerous than expected also maintain their own scorecards. It also established that companies with BEE internal controls were more likely to conclude their verification in less than three months, than companies without BEE internal controls.
Therefore, companies that applied BEE internal controls were better prepared for verification because it resulted in the implementation of a smoother process and a determination that is reached within a shorter timeframe than average.
“This is a welcome development which shows that with better planning greater efficiencies are being realised during the verification process,” says Sandile Hlophe, Restructuring Advisory Managing Director at KPMG. “More than that, it illustrates that BEE measurement has evolved as it now relies heavily on well planned and implemented BEE controls.”
One of the most frequently asked questions of verification agencies relates to the cost of verification. The survey revealed that the majority of participating organisations agreed that although the cost was higher than expected, it was fair and reasonable due to the lengthy process involved. The cost of verification was thus not necessarily a primary factor in altering an organisation’s choice of controls.
The survey demonstrated that neither the type of internal control, nor the size of the company, affected the perception that the verification process was onerous. Nor did it affect the probability that the final score would differ from the internally maintained scorecard.
Where company scores did vary, van Rooyen reiterates the importance of professional training and accurate scoring. “Maintaining your organisation’s scorecard and achieving the maximum scores are the pillars to efficiently executing your business strategy and successfully competing in the BEE environment. Lack of professional advice, however, through verification agencies or consultants, can have a knock-on effect and set your company back in cost and time.”
“KPMG and IQuad were satisfied that the survey has shown some powerful shifts in B-BBEE thought processes, accentuating the fact that B-BBEE compliance measurement is rapidly becoming a more constant and more permanent part of SA organisations,” says Hlophe.