Female empowerment

The new BEE codes might be missing the mark


The new BEE codes aim to correct the imbalances of an Apartheid era, but also those created by version 1 of the BEE codes, and that have been revealed as weaknesses. But some analysts feel they have a fatal flaw that is only going to hinder sustainable transformation. In particular, they believe the new codes will encourage companies to focus on increasing African, and particularly female representation at board or top-management level – a noble idea, but one which is a quick fix which commentators warn could have unexpected and negative consequences.

“We’re not disputing the necessity of BEE,” says Brett Bowes, CEO of independent strategy group TerraNova. “Of course we need redress for apartheid that includes promoting the role of black South Africans in business – not only as a matter of conscience, but also as an economic necessity. It is absolutely required if we are to grow the middle class, and we need to grow the middle class to have any hope of long-term sustainability. The truth of the matter, though, is that the focus of the new BEE codes is at the top levels of management and in boards – to the exclusion of middle management. The job of stimulating the involvement of black African people – and particularly African women – in middle management is left to the Employment Equity Act.”

Bowes believes this oversight is going to fall foul of the fundamental law of supply and demand. “Whatever economic system you subscribe to,” he says, “you cannot ignore the fact that high demand and short supply pushes prices up, whereas low demand and oversupply results in prices dropping. We believe that as we go forward, this policy may cause a huge shortage of talent at the top end – particularly African, female talent, and in young white males choosing not to become professionals. Neither consequence is desirable.”

Georgina Barrick, CEO of search specialists Humanity Search and Select, is already familiar with this shortage. “Humanity is busy with a search at the moment,” she says. “We’re looking for an African, female CFO with 15 years’ CFO experience. The truth is, there are only a few women in the country who meet those criteria. In 1994, there were hardly any African, female chartered accountants in South Africa, and the situation hadn’t improved much by 1998. It’s likely that a qualified CFO will need to be a Chartered Accountant. It takes seven years just to complete a CAs(SA) education and training; add 15 years’ experience to that, and we’re trying to find African women who started studying accounting at least 22 years ago, in 1991. That pool is very, very small.”

“The artificially high demand for qualified African, female CFOs, combined with a severely restricted supply, inevitably drives the price of those CFOs up beyond the value of their services,” Bowes says. “The same is true for senior positions, in all of the professions, be it law, engineering, or whatever. The demand/supply deficit of African, female talent in any general manager or senior executive post will drive their price (remuneration) up beyond their value to the firm, which is neither sustainable nor profitable. At the same time, it creates an oversupply of white, male professionals with 15 years experience – who are in steadily decreasing demand. As the price for which they can sell their services drops below their value, those men are either going to leave the professions and apply themselves to other careers, or they are going to emigrate to where their professional skills do have a market value. The inevitable consequence is that fewer young white males who leave school today will want to become CAs(SA), lawyers or engineers. They will see demand for their skills as low, and their prospects and salary levels in the professions as even lower”

“It’s a situation I see every day,” says Barrick “We are willing and able to help clients find top-level African, female talent – but the artificial skewing of the market means that the cost of these rare women is beyond the budget of even some listed companies. Many have to broaden the pool to include Coloured, Indian and even white women, or heaven forbid, men. Because above all else, at that level, they require competence and experience. Appropriate female African candidates are in many cases already too expensive.”

“The ultimate consequence could be a no-win situation in top-level management,” Bowes adds, “as there are simply not enough female African professionals with the requisite qualifications and experience to meet the demand. If every listed business in the country demanded an African, female CFO with 15 years’ experience, we’d end up at least 350 short. And while professional institutions like SAICA are running world-best programmes like Thuthuka to speed up the transformation of the accounting profession, these students and trainees simply must complete seven years training at best, and sadly 15 years worth of experience takes…..well, 15 years. One simply can’t just turn up the heat to bake the cake faster. The new BEE Act is inadvertently promoting this distortion in the marketplace, and a side-effect is that it is highly likely that potential white, male professionals will either turn their skills to something else, or consider leaving the country – with no impact at all on the supply shortage of qualified African candidates, but with a disastrous effect on the overall market where there are well defined total shortages.”

“We feel strongly that the BEE codes should not intervene in the market in such a way as to create these unintended and negative consequences, without even achieving the redress that they were intended to deliver. It would make much more sense to create a BEE intervention that rewarded companies who favour the employment of under-represented groups in middle management – because at this level, candidates require a lot less experience, and are in much greater supply. Within five to seven years, this approach would actually create a much larger pool of African, female CAs with enough experience to fill those top posts. Middle aged white professionals could in the meantime be retained and become excellent mentors, and young students of all hues would be encouraged to study to become professionals – which is just what the doctor, or was that accountants - ordered.

As all decent economists will tell you, when you interfere with the laws of Supply and Demand, you will create distortions. This one is avoidable if the DTI is prepared to listen. ”

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