The slow pace of meaningful transformation in the ICT industry has been exposed.
The B-BBEE ICT Sector Council says it received only three equity equivalent investment programme (EEIP) applications over the past 12 months.
In addition, the council says it encounters pushback when trying to verify the investment commitments and deployment of funds by multinational companies through EEIPs.
These were some takeaways from the ICT sector council’s presentation to the Parliamentary Portfolio Committee on Communications and Digital Technologies earlier this week.
The council is an independent body that operates under the Department of Trade, Industry and Competition (DTIC), as well as the Department of Communications and Digital Technologies (DCDT), with a responsibility to advise on transformation agendas and review the ICT sector codes.
It was invited to appear before the committee to detail progress in achieving transformation in the ICT sector, amid heightened debate around SA’s transformation laws.
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Sibongile Thulo, chairperson of the ICT sector council, indicated to the committee that despite legislation such as black economic empowerment, the ICT sector “has not transformed”, based on the council’s assessment.
Thulo did not disclose the names of the multinationals that made the EEIP applications, but remarked that three is a “dismissible number, considering there are probably over 50 multinationals operating within the sector”.
Facilitated by the DTIC, EEIPs were created for multinationals whose global practices or policies prevent them from complying with the ownership element of broad-based black economic empowerment (B-BBEE) through the traditional sale of equity or shares to black South Africans.
Such multinationals must provide proof that they have not entered any ownership partnership arrangements in other countries globally. EEIPs aim to promote investment in the development of SMMEs and broad-based participation in the economy. For example, Microsoft, Amazon Web Services, Samsung and several companies in the automotive industry have made EEIP commitments.
According to Thulo, until recently, conglomerates that take up the EEIP option for equity equivalent were solely required to report their transformation impact or plans to the DTIC, with no oversight from the council. However, it now shares that mandate with the department.
According to the sector council, overall compliance with sector reporting requirements stands at 0.003%.
“When you are applying for an EEIP application, you are indicating that you are not giving 30% of your equity as per the ICASA Act, but you will give an equivalent of that 30% as an investment in the country.
“The challenge is that none of these multinationals have given us any verified data for us to be able to evaluate whether the contribution they are making is the equivalent of that 30%.”
Thulo explained that SA has a lot of publicly-pronounced EEIP applicants, but lack of data collection means the council is unable to quantify that what was pronounced lands and is received by local citizens, in terms of the B-BBEE mandate.
Another challenge, she pointed out, is that some multinationals say “their international laws bypass our local laws”.
“What has then happened is that these companies apply for the operating licence for 10 years, but there hasn’t been any monitoring and evaluation between the years whether they are increasing or decreasing in terms of their profitability, because that would ultimately change their contribution perspective to the industry.”
In terms of the parameters of ownership, management, control, skills development, and enterprise and supply development (ESD), the sector council reported marginal gains in management control, achieving around 12.4% of the 20% target. This, said Thulo, means the sector is seeing a ceiling for black professionals within the ICT sector.
Progress in ownership remains poor, averaging at 18% to 25% (30% has not been achieved).
The ICT sector, as per the council, performed relatively well in ESD, reaching about 40% of the 50% target, but skills development efforts have stagnated.
In skills development investment, the council noted companies are reaching 16% of the expected average performance of 20%.
Khusela Sangoni-Diko, chairperson of the Portfolio Committee on Communications and Digital Technologies. (Photograph by Lesley Moyo)
The portfolio committee has said it is concerned about the “slow pace” of transformation and weak progress of B-BBEE across the ICT sector.
The members also warned that the lack of sustainable funding hampers the council’s ability to conduct verification and audit processes, particularly in relation to EEIPs for multinationals.
ANC MP Shaik Subrathie expressed shock, questioning if SA has dropped the ball when it comes to transformation and building an inclusive economy in the ICT sector.
Democratic Alliance MP Tsholofelo Bodlani stated the committee has received information that opens questions on the return on investment the country has made on monies spent, in terms of B-BBEE within the ICT sector.
“BEE was supposed to be a vehicle post-democracy and there is no question about its necessity, to redress the injustices of the past. However, the custodian of the ICT sector on BEE has told us that this has not happened. We still have international conglomerates that have the technology and abilities that we have failed in, even with the legislation in place.”
Khusela Sangoni-Diko, chairperson of the Portfolio Committee on Communications and Digital Technologies, commented that the committee remains “deeply concerned” about the slow pace of meaningful transformation in the ICT industry.
“True economic empowerment in the ICT sector is fundamental to achieving inclusive growth and innovation. We cannot allow transformation to stagnate, while technology continues to shape the country’s economic future. The sector must demonstrate genuine commitment to equity and accountability.”
To address the matter, the committee plans to engage the DTIC next month to gain a broader understanding of the obstacles and explore potential policy interventions.
