Bernard Sathekge

Broad-based black economic empowerment (BBBEE) scores have improved significantly across the South African economy over the past five years, according to the 2011 survey by audit firm KPMG released on Thursday.

The results of the annual survey show an increase of the BBBEE contributor status from an average of level eight to four in the period between 2006 and 2011. The sample from which this picture emerged includes exempted micro enterprises, qualifying small enterprises, JSE listed and unlisted firms, and multinationals. Warren Watkins, a partner and head of restructuring advisory at KPMG, said this was a huge improvement. “This increasing investment in BBBEE compliance is encouraging, particularly given the tough economic climate in South Africa. “The focus remains on improving traditionally lower scoring people elements – employment equity and skills development. In this year’s survey, management control was also a priority element.”

Watkins said on average, the survey indicated that respondents had increased their efforts towards supporting small black-owned entities. There was a significant increase in the enterprise development scores from an average of 3 points in 2006, to 12.41 points last year.

The average enterprise development scores were now at 80% of the stipulated target.

In terms of ownership and socioeconomic development elements, the survey indicated that there was less emphasis on these areas. These elements are now less of a priority among respondents as their scores were within acceptable ranges.

Scores for equity ownership and socioeconomic development stood at averages of 13.43 and 4.51 points respectively.

The survey revealed that 43% of respondents last year, as opposed to 27% in 2010, indicated they had set minimum BBBEE levels for their suppliers. “Unsurprisingly, 69% of respondents indicated that BBBEE level four contributor status is the most preferred target level set by respondent organisations.

“Most respondents also indicated that noncompliance to BBBEE by suppliers will be addressed by ­putting these suppliers on notice to improve their BBBEE contributor level status,” the report said. “The challenge remains for organisations to keep abreast of BBBEE scorecard measurement and target changes.

“Four out of the seven elements of the measurement criteria are changing and are likely to have a negative impact on subsequent scorecard ratings.”

Watkins said this year’s survey revealed that 75% of the respondents were aware of the pending employment equity changes and 48% were certain that their BBBEE scorecard would be negatively affected while 30% were unsure of what the implications were. Surveyed companies had undergone significant transformation in the past six years.

Companies that were ill prepared for BBBEE scorecard changes were likely to suffer the consequences, Watkins said. “The time for leaders to navigate organisations to transformation has never been so critical, especially given the current difficult economic climate.”

bernards@thenewage.co.za