IS THE SOLUTION TO ACCELERATED TRANSFORMATION, TO SIMPLY INCREASE BLACK OWNERSHIP?
Or should we be digging deeper for the reasons why it is so difficult for emerging black companies to compete in the marketing, advertising and communications sector?
The intent of the marketing, advertising and communications (MAC) sector codes is to “promote a transformed, vibrant and globally competitive sector that reflects the demographics of South Africa and contributes to the establishment of an equitable society”.
The current member base of the ACA shows that nearly 80% have reached B-BBEE Level One, and 94% have reached B-BBEE Level One or Two, which is a significant achievement for any sector. Yet, despite this impressive achievement, there seems to be a narrative that the MAC Sector is not transformed; that it’s is not doing enough to transform at an acceptable rate or promote growth through transformation. This is misleading and ironic given the current achievement, but could this narrative imply that compliance may have been too easy to reach or that the weighting itself may be faulty, in which case the assessment of the transformation is incorrect?
While compliance within the MAC Sector Code is not easy, it is by far the easiest of all the Sector Codes and as such, there is an expectation that Government will require that the Codes become more restrictive. In response to this expectation, a revised MAC Sector Black Economic Empowerment Code has been recommended. One of these new measures is to increase Black ownership from 45% currently, to 75%. This measure is believed to be one of the key solutions to achieving the transformation required within the sector. The current 45% ownership expectation, is already the highest in any sector and the excessive increase is perplexing given the genuine commitment and results that have already been achieved in this particular regard.
While ‘transformed’ may be viewed differently from the perspective of different interest groups, the question that begs an answer is whether the onerous ownership recommendation will enhance broad-based transformation or merely make it significantly more difficult (possibly near impossible) for any entity other than 100% Black Owned companies, to score high B-BBEE levels or even to compete for business in the sector.
The irony of this approach is that the Ownership change may actually not have an impact on the purchasing decisions of the MAC Sector Clients. They have their own Preferential Procurement scorecards and the focus on BEE Levels and Ownership requirements are determined by these priorities.
We believe that the purpose of the Codes is to set the objectives for transformation by the Sector within that Sector, but this new requirement, may lead to the complete eradication of the ability of the well-structured B-BBEE Act and Codes to incentivize “Good Practice” and to penalize lack of compliance. The result may be an arbitrary set of rules that leads to extensive economic exclusion of companies that do actually abide by the rules and excel at transformation.
A better approach may be to take the time to understand the underlying drivers and industry dynamics that are hampering the growth of Black Owned Businesses in the Sector and work together to mitigate them and deliver the deep, effective and pervasive change we need to aspire to.
Gestalt understands the Sector codes you need to align to and can help you, not just ensure compliance, but embed true transformation in your business in a way that positively impacts the MAC sector and delivers the diversity of participants that will create the transformed, vibrant and globally competitive sector that reflects the demographics of South Africa and contributes to the establishment of an equitable society. We help to unlock business growth and shareholder value through BEE compliance by aligning the sector intent to your business and integrating it into your strategy to futureproof your business, positively impact the MAC sector and build a lasting transformation legacy.
Talk to us today about how we can help you transform your business.
Gestalt Consult.
Creating profitable growth by applying original B-BBEE strategies since 1998.