The Broad-Based Black Economic Empowerment (BBBEE) Commission’s report on the 'National Status and Trends on BBBEE for 2019' shows a one percentage point decrease, to 42%, in the number of submitted compliance reports by JSE-listed entities and a five percentage point increase, to 15%, by organs of State, with the majority of measured entities still failing to comply with Section 13G of the BBBEE Act.
Section 13G of the BBBEE Act makes it compulsory for all JSE-listed entities, organs of State, public entities and sector education and training authorities to submit compliance reports on BBBEE to the commission on a yearly basis.
This year's report is based on compliance reports from 150 JSE-listed entities, 43 organs of State and 5 818 entities whose BBBEE certificates were uploaded to the commission's Certificate Portal for the year under review.
The report shows a slight change in the levels of transformation, with the overall black ownership reflecting a four percentage point increase to 29%. Management control is at 39% overall and, among JSE-listed entities, board control is at 43.6%.
In 2018, management control was at 45% overall, while board control among JSE-listed entities was 38.3% .
Meanwhile, only 3.3% of entities listed on the JSE are 100% black-owned, which is an improvement on the 1.2% reported in 2018 and the 1% in 2017.
The three worst performing sectors on ownership in 2018 were AgriBEE (11.19%), marketing, advertising and communication (19.55%) and financial (21.64%), with construction (48.03%), transport (40.53%) and forestry (33.66%) showing relatively good progress.
In 2019, the three worst performing sectors were AgriBEE (12%), financial (25%) and forestry (26%), with construction (44%), property (42%) and information and communication technologies (36%) showing a relatively good performance.
Women ownership in 2019 remained at about 10% in all sectors, except for property (11%), generic (12%), transport (12%), tourism (14%), construction (16%), MAC and ICT (17%).
On average, contributions towards skills development and enterprise and supplier development ranged between 50% and 60% in 2018 and the 2019 performance shows an average of 49% to 51%.
Black people continue benefiting from bursaries, partnerships and incubation opportunities under these elements; however, absorption into a job or sustainable supply chain remains a challenge, says the commission.
Meanwhile, the report shows that 49.3% of JSE-listed entities were at Level 4 and higher, while 50.7% entities were between Level 5 and a non-compliant BBBEE status.
Of the organs of State that submitted data, 32.56% rated between levels 1 and 4, while 67.44% were at Level 5 or non-compliant.
There are also worrying trends observed over the three-year period from 2017 to 2019, the commission notes.
Although black ownership indicates a slight change, the black ownership percentage does not always correspond with the management control scores, it points out.
For instance, an entity is able to score full points for ownership and very low on management control, which gives the impression that despite black ownership recorded, black people are not involved in the control and core operations of the measured entity.
Also, the saturation of management control points is still between junior and middle management, which indicates the rotation of black executives from one measured entity to another, without using the skills development element to create a pipeline of new black executives.
Under the enterprise and supplier development element, measured entities are still not able to transform the value chain by developing sustainable black-owned entities using the supplier development and enterprise development aspects of the element.
Preferential procurement enables market access but does not automatically translate into enterprise or supplier development and the commission states that these three aspects should be implemented in a complementary manner in order to have the desired impact.
Further, whereas supplier or enterprise development focuses on creating sustainable black-owned entities, most initiatives are increasingly implemented through a third party or intermediary, with less focus on the needs of the beneficiary.
While the codes of good practice do allow for the use of a third party or intermediary to implement enterprise and supplier development, there must still be a comprehensive needs analysis, and a substantial part of the spend by the measured entity must be initiated and implemented with the beneficiary entity, and not for the benefit of the third party or intermediary that facilitates the initiatives, the commission says.
“For the real and accelerated broad-based black economic empowerment to be achieved, the BBBEE Act must be applied consistently by both the private and public sector, particularly in regard to Section 10 and Section 13G, which are mandatory.
"Also, ownership, skills development and enterprise and supplier development are priority elements; however, performance overall is not satisfactory,” it says.