The results of the recently launched Sanlam Gauge, a research study I co-founded with the Sunday Times Business Times that measures the progress we are making (or not making) when it comes to Broad-Based Black Economic Empowerment, once again raises the key question of why we are not making any meaningful progress in transforming our economy.
When I decided to act on the idea of launching such a measure, I was frustrated that we as a country, set an objective of accelerating economic participation by black people, and chose B-BBEE as the policy to achieve this, yet we do not have an effective yardstick to measure our progress. We have no way of pausing and assessing the bottlenecks that might be compromising our efforts in trying to achieve this non-racial and non-sexist nation we speak of.
The Sanlam Gauge results show an economy that is transforming but at a very slow pace. It is also clear that transformation has become more about compliance than it is about ‘impact’. Often companies see BBBEE as a cost of doing business in South Africa – a form of state tax – and as is the case with all taxes, companies spend an inordinate amount of time and effort trying to pay the lowest amount possible. We have failed to sell the assertion that transformation is good for all businesses and residents of South Africa. Most executives do not see BBBEE as the rising tide that lifts all boats, but often see themselves as the turkeys that are meant to vote for thanksgiving. Most large companies have an over representation of white males in leadership positions, and the same white males are expected to sponsor a drive to have fewer white males in these positions. No wonder ‘management control’ is the lowest scoring element in the research.
However, it is not correct to say that all white male leaders reject BBBEE. Several white leaders have openly sponsored transformation, and in fact some – not often spoken about – black CEO’s have shied away from pushing for more black executives in the fear of shaking ‘their’ apple cart.
So, what is the fundamental issue?
I think the issue is that business still primarily rewards short term financial performance, and not long-term sustainability. I remember the first time I learned about ‘triple bottom line’ or TBL – the accounting framework that was meant to have three parts: social, environmental, and financial. This was meant to be a new way to measure true business value as it defined the role of business beyond financial performance. It was no longer only about shareholder value, but stakeholder value and stakeholders included employees, communities, customers, and the environment.
This TBL concept then developed into what we now call ESG or Environmental, Social, and Corporate Governance, which refers to ‘three central factors in measuring the sustainability and societal impact of a business. We are led to believe that these three criteria are now critical in determining the future financial performance of companies, and investors are increasingly demanding these before they inject any capital.
In the South African context, the ‘S’ in ESG must be seen as a proxy for B-BBEE. This is how transformation must be seen by business and the investment community at large.
If your business is not able to show real impact as a result of addressing the five elements of BBBEE then your business is not complying with the standards required by ESG.
Non-compliance with BBBEE should be a red flag to investors who profess to care about sustainability, the same way the use of fossil fuels and poor corporate governance is.
Because for as long as BBBEE is seen to be outside of business sustainability, it will continue to be treated like a tax, a cost of doing business, a tick-box exercise.
This article first appeared on www.businessday.co.za, on 21 May 2021.