Long-awaited charter creates admin nightmare

The ICT sector charter, which has been nine years in the making, has finally been gazetted and aims to ensure transformation in the sector.

However, the empowerment code is set to be an administrative nightmare for companies as it comes into immediate effect, which will invalidate current empowerment certificates and require unlisted firms to go back to the drawing board and re-empower.

The charter requires that unlisted companies in the ICT sector be 30% empowered, and listed entities sell 25.1%, with equity deals capped at R7.5 billion. The generic codes only require firms to sell a 25.1% stake.

Work on the charter started in 2003, which was followed by the launch, two years later, of the first “final” version. Then the Department of Trade and Industry gazetted the generic codes in February 2007, which meant the ICT document had to be aligned with the codes, causing yet another delay.

Trade and industry minister Rob Davies gazetted the final ICT charter on 6 June and noted that it comes into effect immediately and is binding on all stakeholders operating in the ICT sector. The charter will affect the just over 4 000 firms in the sector, of which only about 30 are listed.

digital divide by promoting access to ICT; promote the effective implementation of the Broad-Based Black Economic Empowerment Act; stimulate and support growth in the sector; support skills development; and advance economic and social transformation in the sector.

The code remains in effect until it is amended and will be reviewed by the communications minister in its 10th year. Yearly reviews will also take place to monitor broad-based black economic empowerment implementation.

Adrian Schofield, president of Computer Society South Africa (CSSA), says although publishing the codes removes uncertainty for the sector, the need for immediate implementation will cause a considerable amount of work for enterprises that complied under the generic codes.

Schofield argues that the fairest way to treat the intention of the Act would be to have a level playing field that applies the same rules to all sectors. However, the sectorial codes mean the ICT sector has to comply with different rules to qualify as empowered, such as the higher ownership requirement.

Many companies have taken the time and trouble to become verified under the codes and now have to face a more onerous scorecard process, Schofield points out. He says the charter has not been on the radar screen for nine years and now firms suddenly have to comply without a transition period.

Empowerment certificates will no longer be valid because of the higher targets, notes Schofield. “It's just going to confuse the marketplace.”

Schofield says empowerment levels could be downgraded as a result of the higher requirements, which could see ICT companies losing out on business with government, which requires a high level of empowerment for tenders.

“We expect to see a flurry of activity as the sector stakeholders evaluate the implications for their businesses in the next few weeks,” Schofield adds.

Business Connexion's Jimmy Morakile, who is responsible for empowerment at the group, says the new ownership requirements will be a challenge for most organisations, including BEE companies seeking a stake in large firms as a result of the recent economic downturn.

Morakile says, instead of immediate enforcement, a transitional period of about 24 months would be ideal, to allow companies a smooth and effective transition from the codes to the charter. BCX is currently 37% empowered.

Steering committee deputy chairman, Andile Tlhoa'ele, says the market has always known the charter is on its way and the 30% ownership requirement did not come out of the blue. The transformation issues that faced the sector seven years ago are still relevant today, he adds.

Tlhoa'ele says the charter provides companies with a framework against which empowerment can be measured, and it will unlock opportunities as it requires investment in skills. In addition, there will be larger consumption of ICT products and services.

He says the focus on the charter is on increasing the base as there is less emphasis on ownership and more on other aspects of the scorecard, such as skills development. This will increase the skills base and bolster the sector.

The charter will entrench a lot of redesign on how companies do business and develop skills, says Tlhoa'ele. “Let's get the most out of it.”

The charter can be accessed here.