The information and communication technology (ICT) industry's BBBEE sector code needs a refresh as empowerment regulations struggle to keep up with rapid changes therein, says the 2022 Sanlam Gauge Report.
The result, it adds, is a mismatch between code requirements and industry needs.
The code was published in 2012 and amended in 2016.
In the report, a Vodacom spokesperson says because the code was drafted before the fourth industrial revolution, it needs to be refreshed.
“Companies operating in the ICT sector are penalised for ensuring [their staff] are reskilled to remain relevant,” says the spokesperson, adding that unintended consequences of the code have resulted in transformation initiatives falling by the wayside.
The report found the sector achieved 74.5% for black ownership, 53.9% for management control, 80.5% for skills development, 61.8% for enterprise and supplier development (ESD), and 87.44% for socioeconomic development.
We’re encouraging companies in the sector to take pride in their transformation achievements, rather than adopting a tick-boxing approach to the code
— Andile Tlhoaele, ICT sector council chair
It gives the sector a level 4 score, based on a sample of 839 companies. This is confirmed by the March 202 ICT BBBEE Monitoring Report, which says 72% of medium and large enterprises achieved level 4 status.
Speaking at the report's launch, Andile Tlhoaele, chair of the ICT sector council, said its priority is to deliver technology, most of which is imported, making it harder to deliver on the code's local procurement requirement. Similarly, the sector needs IT skills and has to import these if they are unavailable locally.
Though transformation in the sector might not be progressing as fast as it could be, there are encouraging signs, says the report.
It cites data in industry regulator Icasa’s latest report on the state of the sector, revealing that 85.2% of telecommunications services procurement spend and 72% of broadcasting services spend went to suppliers based on their BBBEE rating level.
Tlhoaele says the ICT sector charter council aims to ensure companies voluntarily meet, then exceed, target requirements.
“We’re encouraging companies in the sector to take pride in their transformation achievements, rather than adopting a tick-boxing approach to the code.”
He concedes, however, that the sector needs to factor in transformation initiatives that extend beyond the code.
Vukani Mngxati, CEO of Accenture in Africa, which falls into the code, confirmed the sector has made progress in transformation.
Alluding to the sector’s poor management control score, he said this is an area in the sector’s control to change, arguably more so than the ownership pillar if the company has international ownership.
Mngxati said though he was pushing Accenture’s global parent to achieve 51% black ownership locally, this was taking some convincing. Management control, on the other hand, is a score local businesses can improve on because “it’s in our hands”.
Though Accenture is a level 1 contributor, he questioned the real impact this score made.
“We need to measure the real impact (of transformation efforts). An intention to transform is not enough. We need to progress beyond incentives and voluntary participation. Instead, participation must be measured by law, with consequences for those who don’t comply with the code.”
However, as the report points out, more than 95% of businesses in the ICT sector are small players which are not legally required to report their transformation progress. The report says if these players were compelled to report their scores, the sector’s overall score would be lower.
New draft employment equity regulations for the sector, published this year by Icasa, aim to promote equity ownership by historically disadvantaged people and promote BBBEE.
Icasa says the changes will be introduced through a revised ICT sector code, accompanied by “strict punishment” for non-compliance.
However, the Industry Service Providers’ Association (ISPA), which represents internet service providers (ISPs) and related companies, argues in the report that regulatory transformation requirements from the sector code and Icasa create challenges. ISPA says it would be preferable for Icasa to focus only on certification under the ICT sector code.
• This article was paid for by Sanlam.
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