The politics of black economic empowerment (BEE) in South Africa keep taking twists and turns but they are highly fascinate to learn from.
Take the example of Empowerdex, the independent economic empowerment verification and research agency, for instance, which a year ago found that more than 60% of South Africa’s most valuable commercial fishery, the deep-sea trawling industry, is black-owned.
The finding is in sharp contrast with widely held opinion that the deep-sea trawling industry, which has annual sales in excess of R5 billion, is largely untransformed.
However, Econoserv, the BEE consultancy group, noted that the amended BEE codes introduced the concept of priority elements.
“The three priority elements are Ownership, Skills development and Enterprise & Supplier Development. Companies must achieve at least 40% of the target or else they will drop a level. This means that if you are a level 5 and you have not earned enough on Skills Development you will become a level 6. BEE levels are becoming more and more competitive and your good BEE score can be seen as a major advantage,” says Econoserv.
Last year though, Empowerdex lead researcher, Lister Saungweme, said the study was conducted to understand and verify the extent to which the fishery has transformed in recent years.
“Our aim was not only to clarify the deep-sea trawling industry’s verified transformation status but to benchmark it against other industries. A significant finding is that the industry is 62.36% black-owned and a level three contributor to broad-based black economic empowerment (BBBEE),” she said.
Research reveals, “A level three contributor scores greater than 75 out of a possible 100 points when scored against a range of BBBEE criteria including, inter alia, ownership, management and control, employment equity, skills development, preferential procurement and enterprise development.
Rights-holders in the deep-sea trawling industry operate capital intensive businesses that require large vessels and extensive skill to harvest fish about 100 nautical miles from the coast. With nets cast up to 800 meters deep and vessels sometimes riding 6 m swells, fish is regarded as one of the last hunted sources of protein available commercially.
The catch is delivered to fish and chip shops in every corner of South Africa and processed and packaged into fish fingers and other popular hake products for local supermarkets. There is also a demanding international market that is supplied with a range of value-added hake products. Collectively, the industry employs 7 050 people at sites in Saldanha Bay, Cape Town, Gansbaai, Mossel Bay and Port Elizabeth. Wages are negotiated at industry level and employees are offered a range of benefits including a variety of training opportunities and scope for career progression.”
Nazeem Allie, Empowerdex divisional manager, says the transformation achieved by the deep-sea trawling industry should be acknowledged.
“At the beginning of the study we were aware of the widely held view that the industry has to be restructured, but our findings have shown that there has been a significant shift in the transformation credentials of the deep-sea trawling industry. It has a relatively high number of employees and requires very costly equipment and extensive skills to, firstly, go and hunt for the raw material and, secondly, extract maximum benefit through a series of complex processes from production to marketing and distribution,” he said.
Empowerdex noted that the industry’s transformation compares very favourably with other sectors of the economy.
For example the deep-sea trawling industry placed fourth out of 10 when compared with other industries, scores for which were drawn from the top empowered listed companies in each sector. With a score of 79.17%, the deep-sea trawling industry came in after the construction and materials industry (83.12), the ICT industry (81.90%) and the forestry and paper industry (80.38%).
Tim Reddell, chairman of the South African Deep Sea Trawling Industry Association (SADSTIA), had this to say, “It would be correct to say that the deep-sea trawling industry is a transformed industry that has undergone a sea change over the past 25 years. Before 1990, there were a few rights-holders in the fishery – all of them large and predominantly white-owned. Today, there are 44 rights-holders and many of them are small to medium enterprises (SMEs) that have invested in vessels, factories and other capital equipment and are operating successfully alongside the large companies that remain in the fishery.”
He added, “Change is happening and SADSTIA believes the Empowerdex report proves that the industry has transformed to a great extent, relative to other industries of similar size and complexity.”
The deep-sea trawl fishery is certified as sustainable and well managed by the Marine Stewardship Council (MSC), the world’s gold standard of sustainability ratings.
Econoserv adds, ” We realise that making a decision to sell your business can be an emotional and tough decision. We also recognise that your BEE decisions should make business sense and structuring the deal correctly is of utmost importance to the future sustainability of the company.
Ownership is a key element on the Broad Based BEE Scorecard accounting for nearly one quarter of all BEE points and a critical tool to ensure full compliance with other policies.”