The third draft of the ICT charter, published on Monday last week, has finally set specific equity ownership and management targets, whereas the first two drafts did not. However, says Soria Hay, executive director of integrated equity and debt specialist Bravura, the targets are onerous to say the least, and significantly higher than the targets set for the financial services industry by the financial sector charter.
The third draft stipulates that by 2009, between 30% and 50% of senior and executive management of ICT companies must be black. It also sets targets for 2014 of 50% to 80% black senior management. In contrast, the financial sector charter, released last year, provides targets of 20% to 25% within five years and leaves the stipulation of long-term targets to the to-be-established Charter Council.
Hay feels the ICT charter`s management targets may stifle entrepreneurship, particularly white entrepreneurship, as the targets apply to all sizes of companies. "If three to four out of five employees of a small company have to be black, that hardly leaves room for family businesses, for example, which are an important component of our economy."
Another controversial point, in Hay`s opinion, is the fact that compliance with the minimum requirements of the ICT charter by 2014 is mandatory. The financial services charter, on the other hand, calls for voluntary compliance.
Hay believes this could act as a deterrent to entrepreneurs wishing to establish their own companies. "The first year or two in a company`s life centres around survival. Management of such companies will find it difficult to comply with the onerous requirements, while simultaneously trying to keep a young company afloat financially. Exactly how the targets will be enforced is also not clear from the charter," Hay says.
Hay suggests that companies who do not need to comply with employment equity legislation (companies with less than 50 employees) should also be exempt from obligatory compliance with the ICT charter. This will provide such companies with the opportunity to get on their feet and build a solid business, before being forced to comply with the charter`s targets. Of course, in terms of the procurement legislation, these companies will in any event be incentivised to transform and empower as soon as financially possible.
The third draft also calls for much higher levels of equity ownership. Targets of 25% to 35% for 2009 and 25% to 51% for 2014 have been set. This compares with the target of 25% for the financial services industry with only 15% of this being direct ownership and the other 10% being indirect.
In addition, the third draft states that multi-nationals will have to comply with the targets, whereas the financial services charter exempts multinationals from compliance.
According to Hay, multinationals like Microsoft and IBM are unlikely to be willing to comply with the equity targets in particular. She feels that in setting such targets, the ICT charter gives little or no recognition to the positive role that multinationals have played in the South African ICT sector to date. For example, Hay credits IBM with having proactively recruited and trained a significant number of black IT managers as early as the 1970s and 1980s, long before there was any direct pressure to do so. "Many of the successful black managers working in IT today came through IBM`s ranks."
In conclusion, Hay thinks the new charter is unnecessarily aggressive, and questions the motivation for such excessive requirements.
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