In my article, Racial discrimination: two questions for Momentum, I wrote that, based on the sources I had read, Momentum Metropolitan Holdings (MMH) said it intended implementing a broad-based BEE trust that would hold 3% of its issued share capital, worth about R641m.
I went on: ‘Thus, a benefit is being granted to all African, coloured and Indian/Asian – but not white – employees of Momentum, with an allocation being made even for black employees who don’t yet exist.’
Metropolitan advised us that ‘this is inaccurate as the transaction is for all permanent SA-based staff of all races, including white’.
Momentum went on to say that an initial SENS announcement regarding the Momentum staff share scheme may have caused some confusion in the market. There was an initial piece written by Bloomberg, which has subsequently been corrected, that unfortunately was syndicated widely with the initial inaccuracy.’
Momentum is correct. In light of my inaccuracy, we published a ‘right of reply’ from Momentum on 26 October 2020.
I subsequently asked Momentum whether the BEE trust deal was structured in such a way that one race group and/or gender would benefit more than others.
‘Promote inclusivity’
Momentum’s response was: ‘Momentum Metropolitan structured this Scheme to allow participation of all employees in an effort to promote inclusivity among all its South African employees. BEE regulations do not restrict the participation of all races, but emphasise the participation of black people. The primary purpose of the transaction is to conclude a BEE empowerment transaction in order to fulfil the business strategic and growth objectives of the company. The B-BBEE Act allows for the inclusion of employees of all race groups (including those who are not black) in structuring such transactions, as long as the minimum requirements are met at all times.’ (My underlining)
‘For an employee share ownership transaction to qualify as black ownership, it has to be structured within the rules of the Financial Sector Codes and the B-BBEE Amendment Act, which stipulates that at least 85% of the economic benefits of the scheme must accrue to black people (in this document, the term black people always includes Indian and coloured employees as defined in the B-BBEE Codes). For this reason, the proposal is that black employees, who currently constitute 78% of the Group’s employee base, will receive at least 85% of the economic benefits from the Scheme. Black (including Indian and coloured) women employees will receive at least 55% of the economic benefits from the Scheme. Currently, 51% of our employees are black women. The current staff composition reflects the work that Momentum Metropolitan has already done to transform its employee base to reflect the demographics of SA. The proposed structure therefore is a considered solution of inclusivity while still adhering to the codes and regulations as stipulated by law.’
The above reveals that in order to create a scheme of this nature, and in order to qualify for ‘black ownership’ in terms of its B-BBEE ‘scorecard’, the company has to structure the scheme in this way.
‘Financial Sector Codes’
In other words, if Momentum wants to be competitive and have access to business, public and private, it is bound to operate ‘under the Financial Sector Codes and the B-BBEE Amendment Act’. Thus, ‘(the) Group announced the proposed transaction as a key strategic lever to strengthen its B-BBEE ownership and retain its competitive empowerment rating, a business imperative. This is to be achieved via an inclusive employ.’
Momentum is, as many companies are, operating under B-BBEE sector codes, and is spending huge amounts of time and money in complying with a system that is intensely complex and a considerable distraction to its core business. The Financial Sector Codes run to about 130 pages of arcane, complex and bureaucratic rules that the National Socialist Party in Germany could only have admired. The idea for these codes was created and executed by a socialist, Rob Davies, when he was minister of trade and industry.
The irony for Momentum is that it has achieved an ‘acceptable level’ of representation at this stage – 78% black employees, 51% of whom are black women – with the remaining 22% presumably being white male and female. Why should Momentum still have to jump through BEE hoops by making the distribution 7% more for black employees and 4% more for black female employees?
It is inconsequential and is unfair to white employees. Momentum is bound by this behemoth of an employment equity code that doesn’t materially benefit the black majority in the country in any way at all. Momentum appears to have an admirable Corporate Social Investment programme – yet no one talks about CSI anymore. Maybe that’s because no company has time for CSI on top of complying with B-BBEE and trying to run a business.
The tragedy
The tragedy is that the industries that are now held hostage under BEE didn’t oppose it earlier. The government required the buy-in from industries to realise these codes.
Someone recently described a meeting held by a government department to discuss the tender process that was about to open for a project. It was an information-imparting exercise to potential bidders.
Two thirds of the meeting was taken up with discussion of the BEE requirements of the tender. The cost to the efficient running of the economy must be huge, with companies having to deal with issues that have nothing to do with how a company does the work required of it or the cost-effectiveness of its bid.
The irony? Like many companies which have to tender under these conditions, the company in question has a weird black ownership structure that is crafted to avoid accusations of ‘fronting’ but sounds like ‘fronting’.
The company is in a niche industry that requires staff to have considerable academic qualifications. It is also in an industry that at this stage does not attract black graduates. It just doesn’t, and the few graduates there are, are likely by virtue of their scarcity to be employed in the public sector at far higher salaries.
The discrimination, for any reason, remains immoral and distracts us from the failures of government.
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