Making progress in transforming the economy

The Sanlam Gauge report into the rather tricky subject of transformation of the SA economy has found that a lot has been done to expand ownership of assets and participation in local businesses. The authors of the report say that certain aspects of transformation are however not moving forward fast enough.

Researched by Intellidex in conjunction with Sunday Times Business Times, KhumaloCo and Arena Holdings, the latest report claims to be a better yardstick than most in measuring transformation of the economy.

Sanlam CEO Paul Hanratty notes in the foreword that it is important to accurately and meaningfully measure transformation to see what works and what doesn’t.

“This is the first aspect of the work we are doing in the Gauge. The research house Intellidex has worked tirelessly to expand the database and deepen the research at all levels. And then we have to use the findings to improve how we are doing this important transformative work in society. To kick-start dialogue, but far more importantly, to catalyze more impactful and urgent strategies and approaches,” he says.

Hanratty draws attention to the fact that the research base has expanded significantly since the first Gauge report published last year. This year, Intellidex got input from more than 10,000 businesses compared to barely 3,000 respondents in 2021.


The authors say it became clear over the past two years that there is a definite need for a credible and effective national measurement process for black empowerment.

“We believe that this year we have taken major steps towards providing the foundation for that to happen for two reasons: fruitful collaboration with sector charter councils and the big jump in the sample size of this year’s Sanlam Gauge, which more than trebled from 3 154 companies to 10 336 – by far the most comprehensive independent research study on B-BBEE,” according to the authors who presented the results of the research at a function in Johannesburg on Wednesday morning.

“This provides a strong platform [on which] to build a national database that truly reflects the progress of transformation, which we believe is a prerequisite for generating policies that serve to accelerate both transformation and economic growth.

“In the short term, the survey findings and the comments from industry participants highlight numerous problem areas that require immediate attention which the newly formed Presidential B-BBEE Advisory Council is well placed to address,” notes the report and referred to by several of the speakers at the event.

Hanratty says that while Sanlam sponsors the research and publication of the report, the research is done independently by Intellidex and the opinions expressed are therefore not those of the sponsors.

‘Informative and challenging’

“The findings are informative and challenging, highlighting some strong progress, but also placing a spotlight on the work the various sectors of our economy still need to do as we collectively journey towards a truly inclusive, diverse society and economy,” says Hanratty outlining the reasons Sanlam thought it important to sponsor the research.

“We share a deep passion for our country and continent and we know that for us to achieve our common goals – a thriving, inclusive, equal and robust economy – we must successfully transform and include. Not for a scorecard, not for a certificate, but for the sustainability of our country.

“We need to do it for all those people still struggling to make ends meet, still living in informal housing, still fetching their own water. For those unthinkably high numbers of unemployed in our country.

“The inequality in our society cannot be overlooked; we urgently need to address this as corporate SA,” he adds.

“Sanlam as a company is embedded deeply in the DNA of the African continent. This is where we can make the most meaningful impact, working towards financial inclusion – which for us means access to those financial instruments which allow people to protect themselves and build financial resilience – across Africa.

“Last year, we created the largest black-owned asset manager in South Africa. Asset management is one of the most effective ways to drive inclusion and growth in a country, and so this is a pivotal part of our impact journey too.”


The authors of Sanlam Gauge especially noted criticism by participants in the research.

“With South Africa emerging from the devastating effects of the Covid pandemic, B-BBEE sector councils are working hard to get transformation initiatives that had been stalled by the lockdown restrictions back on track,” they say.

“Similarly, sector-wide economic rejuvenation strategies are being implemented across the economy and these are often being integrated with transformation objectives.

“There is some tension between the two, with some perceiving that transformation comes at the expense of recovery. However, most sector councils are generally positive that the two are not mutually exclusive.

“The quest to combine transformation with economic growth is one that will be top of mind for the newly appointed Presidential Broad-Based Black Economic Empowerment (B-BBEE) Advisory Council, established in July by President Cyril Ramaphosa with councilors representing government, business, labour, the youth and other stakeholders,” add the researchers.

Presidential advisory council to ward off anti-BBBEE rhetoric
Policy uncertainty, specifically in the BEE world
‘Economic transformation and economic growth are intertwined’

“The council’s primary mandate is to address the issues raised by many of the people we interviewed: that transformation is happening too slowly, that it is not meaningful particularly at the management and ownership levels and that after 28 years of democracy it is time we reassess the B-BBEE framework and address areas that are not working.

“A strong belief persists that the overall B-BBEE strategy needs to be adapted, or possibly overhauled completely, so that it better reflects transformation on the ground. In any such assessment, it’s important to also look at the elements that are working.”


The report quotes Black Business Council CEO Kganki Matabane as responding to the survey by saying that each sector’s management control score should correlate with its ownership score if there is no fronting because “owners usually appoint people who look like them”.

“There are very few companies owned by white people who appoint black people and women in positions of influence – in core business operations instead of human resources and corporate affairs – hence my contention that the ownership figures from the companies are ‘cooked’.

“In real life you would expect a correlation between ownership of a business and its management control, but we don’t see this, especially when black-owned trusts are involved. They look good on paper, but when we interrogate them, we cannot trace a shareholder who is black,” says Matabane.

“They make it look like the company is fulfilling its B-BBEE obligations but they have no intention of transferring ownership to black people.”

Ownership status of broad-based BEE trusts no longer hanging in the balance
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However, Sanlam Gauge co-founder Andile Khumalo says this does not take into account the advent of black-owned investment companies.

“By their very nature, BEE investment companies do not often come with their own management teams into the deals they do, so management in the investee companies would not be black overnight.

“You can quite easily have a majority white managed company that is black majority owned. Unlike a founder-managed business or a family business where indeed the race, culture, language and even the religion of the founder is likely to influence directly who [they hire] over time, these black owners are not involved in the day-to-day management of the business.

“What we should be doing is holding the black investment companies to account when it comes to transformation once they are shareholders over a period of time, especially at management level,” says Khumalo.

“But I don’t think it’s fair to conclude that just because management of a company is not majority black, it therefore means the black shareholding numbers are not true.”

The research shows that BEE initiatives are gaining traction, with certain sectors in the economy achieving high overall scores relative to targets.

BEE scores by sector

Source: Sanlam Gauge

However, the report notes that socioeconomic development stands out as one of the areas where companies are doing very well. The 10 336 companies in the database exceeded targets by an average of 160%.

With various bonus points allocated for certain sectors and qualifying small enterprises, as well as additional elements where certain sub-sectors can attain extra points, it is possible to achieve more than the scorecard weighting.

“It’s easy to sniff at the high scores for socio-economic development and accuse companies of throwing money at a problem so that they can tick it off on the scorecard, and indications are that too many companies do so,” say the authors.

“But most of the bigger companies, particularly those in the public eye, do put in a lot of effort to ensure their contributions make a meaningful impact on the beneficiaries,” the researchers add, indicating that companies are driving BEE ownership and not choosing soft options to make up for underachievement in black ownership.


Management remains a concern. “The core problem is reflected by the Commission for Employment Equity in its latest workplace transformation report which found that more than a quarter of private sector employers are not investing in meaningful training and development, and more than 20% do not have clear succession plans for the advancement of African, colored and female employees to top, senior and middle-management levels,” according to the Gauge report.

“White males accounted for 63.2% in top management positions, down from 64.7% a year earlier, Africans occupied 17% compared with 15.8% in 2020; Indians accounted for 10.9% from 10.6% in 2020; and colored people made up 5.9% from 5.7% in 2020,” according to the report.

It notes that there is a belief that the reality on the ground is far worse than the scorecards suggest, “none more so than with ownership – at 74.8% of target, the best performer after socio-economic development”.

‘Avoiding’ equity deals

Nigel Adriaanse, CEO of the Enterprise Development Property Fund, says companies sometimes focus on building points in the other scorecard elements to avoid equity deals.

“For instance, they’ll focus on enterprise and supplier development (ESD) by supporting entrepreneurs wanting to become suppliers and they get 39 points because they’ve done their ESD.

“Yet, on the ownership side there’s very little being done as there are ways to reach a good B-BBEE level without having to change your ownership structure,” he says, adding that “if you want to transform any industry, you’ve got to look at the ownership side of things”.

However, the figures in the Sanlam Gauge report dispel this.

It lists no fewer than 36 black economic empowerment transactions during 2021 and 2022, the largest the R33 billion sale of 26% of Northam Platinum to a BEE consortium.

Other notable transactions include the BEE component of the unbundling and separate listing of Thungela Resources out of Anglo American (nearly R3 billion), the placement of R1 billion worth of Capitec shares and the R6.5 billion African Rainbow Energy transaction.


Listen as Fifi Peters chats to Capitec co-founder and CFO Andre du Plessis about the bank’s BEE deal (or read the transcript here):

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