Dr Ivor Blumenthal | CEO | ArkKonsult | ivorblumenthal@gmail.com |
It is doubtful whether organised business, who began participating in activities at the National Economic Development and Labour Council (NEDLAC) in the mid-90s, anticipated how it’s expressed mandate in BBBEEE legislation would be twisted and turned to such an extent that it is now unrecognisable.
Charter councils
Charter Councils, being voluntary social partnerships between organised business, labour participants and other interested groups indicate to the Department of Trade and Industry that they wish to work with the generic Broad-Based Black Economic Empowerment codes in order to customise them to suit the realities of a particular industry or sector.
I recently interviewed Mr Thabo Masombuka, CEO of the Construction Sector Charter Council. You can listen to the interview by clicking on the link at the end of the article. Our discussion makes the purpose and operation of any Charter Council clear.
Manipulable final agreement
During my discussion with Thabo, it became evident how manipulable the final agreement can become when the wrong people involve themselves in the process and the people who should be at the table are absent. So who should be at a Charter Sector Council table representing the interests of employers?
The negotiation team
Due to the consequences of this negotiation, which will impact directly on all companies, small medium or large, included in the affected Industry or Sector, the Organised Business community must send its most insightful, competent, assertive and articulate negotiation team, rather than its weakest.
Equally, even if you are a member of an Employer Association in a position to represent your interests collectively, and have appointed persons to represent your interests who are just not suited to the job of effective representation, engagement, and assertive lobbying, the situation will be worse. Their mere presence in the process will be taken as tacit acceptance and acquiescence with any final agreement.
The other social partners can legitimately point fingers and say that you were at the table, that you had representation, and that therefore you have no right to complain about the outcome of the negotiated agreement.
What is critically important is a proper understanding and exhibition of the mandating process. The affected companies need to agree on what is contained in any agreement reached by a Charter Sector Council. This can only happen through an effective process of communication, workshops, and in-depth engagement
However, CEOs will tell you that they don’t have time to participate in these events. They have a business to run….
They absent themselves at their peril.
Purpose
BBBEE legislation’ original intention was to manage the transformation processes in all economic sectors and industries in South Africa.
Social partners are there to customise the legislation application in a specific domain. But, with an imbalance of partners around the table, the legislation can be manipulated away from the central core purpose of the generic codes, in favour of a more insidious set of nefarious motives, having very little to do with true transformation and more to do with industry or sectoral capture.
This legislation was never intended to simply replace White businesses with Black businesses. It was not designed to cleanse every affected industry ethnically.
The result of non- or badly considered partial participation is a one-sided agreement heavily weighed against traditional business owners and processes and almost exclusively in favour of Black Business.
While traditional business owners are too busy or simply disinterested in participating collectively in the business of a Charter Sector Council, the Black Business Council and other organised Black Business entities are only too eager and committed to participating in the process, which they know can be manipulated to their benefit.
All credit to them for taking the time to understand the process fully and grabbing the opportunity to capture the Industry or Sector under consideration by simply presenting themselves at that table.
Codes critical
These codes not only affect medium to large-size businesses in South Africa. Even if you’re a BBBEE-exempt business, in the medium to long-term, your clients will stop doing business with you if they can do business with another identical supplier of goods or services who just happens to be Black owned. Their benefit for making such a move simply cannot be ignored or overlooked.
If on the other hand you are a company requiring a BBBEE rating, you may be surprised to find yourself facing insurmountable obstacles in complying with the rating requirements.
Captured!
Thabo openly acknowledges that during engagement between the social partners, there was an agreement to reduce the requirement for Skills Development, which in the Generic Codes is set at 6% but in the Sectoral Code has been reduced to 2% in year one, rising to 3% over 3 years. At the same time, the Black Ownership requirement at less than 25% in the Generic Codes has been voluntarily increased in the Construction Codes to 35%.
Why?
If there were an argument to prove that the process has been captured, then this would make sense if one could show that the loudest voices in the engagement process have been those of Black Business, knowing smugly that black businesses represent more than the 35% ownership requirement in the codes.
At the same time, the reduction in the Skills Development requirement from 6% to 3% makes total sense in relation to an organised and concerted negotiation effort from the social partners representing the interests of Black Businesses.
Why should they have to train and develop their staff and themselves for that matter, when they already satisfy a higher percentage of Black Business ownership than is required in the Generic Codes.
The trap!
This is obviously a trap that the traditional business community walked straight into during the engagement and negotiation phase on the Construction Sector Codes.
If the argument is that the Codes are intended to encourage self-driven and self-governed transformation in an industry or sector, then equally the argument can be made that as Black Business is not required to transform (or at least that is the interpretation of Black Business), it should not play a role in the decision-making processes on a Sectoral Council. This is specifically in relation to setting the targets, but instead should play a role in ascertaining and evaluating the nature of transformation and the success of any agreement, as and when the need requires.
To do this successfully though would require a level of maturity amongst all social partners on a Charter Sectoral Council, which simply does not seem to exist at present.
You can listen to the interview with Mr Thabo Masombuka, Chief Executive Officer of the Construction Sector Charter Council, by clicking HERE l
