Leading B-BBEE consultant says the scheme is fundamentally sound
Dionne Kerr, founder and CEO of Siyakha Consulting, has weighed in on the Broad-Based Black Economic Empowerment (B-BBEE) debate. Kerr has 19 years of experience working in the B-BBEE domain, and argues that the scheme is not to be blamed for poor ownership deals, calling for proper audits of these deals to prevent such conclusions from being drawn.
The B-BBEE act, formally passed more than a decade ago in 2003, is essentially a method of ensuring the equitable distribution of economic benefits across all sections of society. The scheme is aimed at historically disadvantaged communities in South Africa, particularly those of ethnically black, coloured, or Indian origin.
In concrete terms, the scheme stipulates Codes of Good practice, which offer companies the opportunity to gain points in a number of areas. These include: Ownership (25 points), Management Control (19), Skills Development (25), Enterprise and Supplier Development (40), and Socio-economic Development (5).
The most prominent of these indicators is that of ownership, as a number of companies have undertaken elaborate restructuring processes to gain points in this domain. However, the ownership indicator has also been the primary target of criticism for the scheme, as it acts as a major deterrent for international companies looking to invest in South Africa, among a number of other economic restrictions.
Poor ownership restructuring deals based on B-BBEE have been blamed, among the South African business community, for loss in shareholder value as well as in market share. Dionne Kerr, however, argues that the two phenomena are almost entirely unrelated.
She states; “Personally, I am not sure there is such a thing as a bad BEE deal. If your advisers structured it, your lawyers drew it up, your auditors signed it off, your board approved it and your shareholders gave it a “thumbs up”… then I am not sure BEE is to blame for poorly constructed ownership deals that do not hold value for the parties and/or that don’t ultimately achieve the objectives of empowerment.“
Kerr is a former General Manager of Private Label Promotion, and is presently the founder and CEO of Siyakha consulting, which she established in 2001. Operating broady in the domains of implementation, capital advisory, and development, the consulting firm primarily offers clients customised solutions in the B-BBEE domain. Prominent clients of the firm include Standard Chartered, Unilever, AON, Eskom, and a number of other major industrial names.
Having spent 19 years working in the domain, Kerr insists that the flexibility of ownership redistribution options allows for minimal hindrance to business; a sentiment that is echoed by Big Four professional services firm EY. For example, Kerr cites a report from Intellidex revealing that the top 100 companies listed on the Johannesburg stock exchange generated R317 billion of net value from 2000 to 2014, purely through the implementation of B-BBEE schemes.
The problem, according to Kerr, lies in the manner in which these ownership transactions are carried out, as the calculations required to generate actual benefit are often extremely complex. Explained in her words: “There is no absolute solution other than for us to sincerely apply our minds to the real challenges in South Africa today and to remain committed to doing business in the right way. We need to audit and scrutinise BEE transactions and insist that they are done correctly.”
