Nearly a third of ICT non-compliant with B-BBEE, says Parks Tau

Minister of trade, industry and competition Parks Tau says up to 30% of large information and communications technology (ICT) companies operating in South Africa are at the lowest level of compliance with broad-based black economic empowerment (B-BBEE) policy.

He was replying in writing to questions from MPs. MK Party MP Sihle Ngubane asked the minister what the current verified transformation compliance status is for major ICT original equipment manufacturers operating in the country.

Ngubane asked specifically about Dell Technologies, Microsoft, HP, Oracle and SAP, asking for their B-BBEE levels, employment equity compliance, affirmative action commitments and adherence to equity equivalent investment programme (EEIP) obligations.

Tau said the ICT sector had a sizeable share of Level 8 or non-compliance of about 30% between 2018 and 2023, but a decent share of ICT companies at Level 1 to Level 4 were at about 60% over the period.

“Level 1 compliance has been around 25% among ICT entities in the 2019-2023 sample. The report further states the performance of ICT sector entities is against the maximum points available for scorecard elements.

“The report indicates a steep increase in the average number of points attained for enterprise and supplier development (ESD), likely due to a scorecard that strongly promotes ESD, which is allocated almost half the points. For ownership and skills development, there have been limited increases in points attained, and for management control there has been a decline since 2018.”

The matter of B-BBEE compliance in the ICT sector has gained prominence since last year, when South African-born US billionaire Elon Musk slammed South Africa’s policies as “racist” and said they hindered him from bringing his satellite-based internet service Starlink to the South African market.

Tau said the EEIP was created for multinationals whose global practices or policies preclude them from complying with the ownership element of B-BBEE through the sale of shares to black South Africans.

“Such multinationals must provide proof they have not entered into any ownership partnership arrangements in any other countries.”

He said an EEIP initiative must promote investment in the development of black enterprises and SMMEs, skills development and meaningful participation of black people in the economy.

“EEIP initiatives must also be aligned to government strategic economic policies and programmes such as the NDP, industrial policies and sectoral policies and plans. Primarily, multinationals use EEIP to create opportunities within their value chains for black enterprises and SMMEs.”

He said the big five global ICT companies operating in South Africa were at different stages of EEIP applications and participation, except SAP, which he said does not actively participate in EEIP.

“Dell Technologies’ EEIP application is being considered. Microsoft SA’s EEIP was approved in 2024 for a total value of R1.32bn. Microsoft’s EEIP proposal is structured around ESD, skills development and research and development.

“Regarding the B-BBEE level, the company is currently at Level 1. HP’s participation in the EEIP has expired. Oracle has indicated their intention to participate in the EEIP, but an application has not been submitted yet. SAP does not participate in EEIP.”

In a separate written reply to questions on B-BBEE compliance in the ICT sector, also from Ngubane, Tau said ownership points achieved out of total points rose marginally from 78% in 2018 to 84% in 2023.

“The share of management control points achieved declined from 69% of total points available in 2018 to 53% in 2023. Skills development is the second lowest as a share of total points available and has been fairly static since 2018.”

Consistent with the growth in ESD points across all sectors, the share of points achieved rose from 97% in 2018 to 104% in 2023, primarily due to the higher weight assigned for this element, especially for large entities compared to smaller entities in the industry, he said.

Business Times