Multinationals spark BEE debate

Johannesburg, 17 Sept 2003

The issue of multinationals in the information and communications technology (ICT) sector`s black economic empowerment (BEE) initiatives sparked heated debate at the two-day ICT empowerment charter indaba in Sandton this week.

Major multinational ICT companies said yesterday that they had joined forces to draft a proposal on how they could approach the BEE issue. However, their proposal sparked debate during various indaba sessions - even spilling out into the tea breaks between sessions.

Dell, Hewlett-Packard, Microsoft, IBM and Oracle say they have several proposals on ways in which they can contribute to BEE in the SA ICT sector, among them introducing "equity equivalents". They also suggested that their contribution to empowerment could include helping black entrepreneurs to build businesses, working in partnership with black-owned firms and setting minimum targets for black board members.

The question of how multinationals will approach BEE has raised considerable debate in the past. Multinationals have come under fire for "paying lip-service" to BEE, without actually implementing changes in their own management structures.

Sharing knowledge

During indaba sessions yesterday and today, the multinationals reiterated their support for the BEE process, saying they should be given the opportunity to share knowledge gleaned from similar processes in other countries.

Oracle CEO Kelvin Reynolds said this morning that multinationals were judged on international standards, not South African standards, and that if the ownership caused added cost and inconvenience for multinationals, they would take their business elsewhere. He pointed out that they should be convinced to keep their business in the country, because SA needed their investment and the jobs they created.

Also siding with the group, Michael Minassian, EDS Middle East and Africa president, told the conference that the issue of ownership was a South African one, not a multinational one. He said the charter needed to be flexible, so that companies that could not allow equity partnership could also participate. Delegates from other multinationals echoed his comments during a session on ownership this morning.

On the other hand, a Siemens delegate said during the debate that his company and Sony Ericsson were examples of multinationals that were successfully introducing black ownership.

ICT working group member Hashmukh Gajjar warned against focusing too much on the ownership issue within multinationals, rather than on the question of skills development and empowerment as a whole. He told delegates: "The industry needs to get past its fixation on ownership."

A State IT Agency spokesman also highlighted the fact that certain major local ICT companies were failing to implement BEE within the companies. He said results of BEE initiatives should be seen within three years.

Transformation ownership

Martin Vergunst, MD of the Computer Sciences Corporation in SA, challenged the multinationals: "Multinationals must understand that black people want to own the process of transformation. They want ownership. They want some form of equity participation in international enterprises operating in SA."

Vergunst elaborated: "For the average member of the American multinationals, activities in SA represent less than 1% of their international trade, and since stock values can fluctuate by more than this amount on a daily basis, some could regard SA`s ICT trade as insignificant." However, he said SA was the gateway for foreign companies to gain access to the rest of Africa, and should not be disregarded.

"Many want to offset - or dodge - the equity ownership issue by seeking equity alternatives using already catered-for other aspects of the scorecard. There is some validity in this approach because it can convincingly be argued that multinational IT companies are making significant contributions to SA," he said.

"However, we can jockey with the numbers and fancy terminology forever. But we cannot escape the reality that black South Africans want equity participation and it is up to multinationals to apply their imaginations to finding out how we can deliver this. It is time for each multinational to put its business ingenuity to the test and develop ways to enable equity participation with black South Africans."

The ICT empowerment charter indaba is gathering submissions from all ICT stakeholders to formulate the industry`s BEE strategy, including a scorecard on how the BEE plan should be carried out.