NontobekoNontobeko ”Distinguished Woman”

Is Black Economic Empowerment (BEE) in the

Insurance Industry a business imperative or is it a

matter of social consciousness?

“Debates over black economic empowerment (BEE) are alive and kicking. They are often emotionally charged, driven by white fears and black aspirations. In many cases though, there is a dearth of information underlying the debates”

Financial Mail-Top Empowerment Companies 2004

PurposePurpose

• To determine whether BEE is a business imperative in the insurance industry or are there other motivating factors.

• To identify best practices.• To make recommendations, which will assist

companies to overcome obstacles they are faced with and which will assist the Insurance industry to implement BEE successfully as a business imperative.

AgendaAgenda

• Background to BEE• Scope of the Study • Research Conducted• Primary Research Findings• Alternative Solutions• Recommendations and Implementation Plan• Conclusion

BackgroundBackground

• Narrow-minded approach applied to BEE and seen as a “commercial reality”

• BEE relegated to a category of “necessary evil”• Various levels of commitment and motivation

exist:– Political– Compliance– Social Consciousness– Business Imperative– Other

Background…Background…continuedcontinued

• Transformation remains key for both government and private sector

• BEE must be seen as an integrated socio-economic process as a mechanism to normalise the SA economy

Background…Background…continuedcontinued

• Evolution of transformation in SA• First wave of BEE

– Aimed to create meaningful participation by black people in the economy

– Very little change as the economy remained mainly in the hands of a minority.

• Second wave of BEE– Primarily driven by charters to fortify the

already existing extensive BEE and EE legislative framework.

– Specific to Insurance Industry is the Financial Sector Charter

ScopeScope

• The scope of this project is the Financial Services Charter (FSC), with specific emphasis on the Balanced Scorecard incorporated in the Charter as a measurement tool.

• Recommendations will be made taking the pillars of the balanced scorecard into consideration leading to a focused approach

Research ConductedResearch Conducted

• Qualitative approach followed• Literature Review• Interviews & Questionnaires• Best Practices

Application of Classroom Application of Classroom LearningLearning

Research conducted was integrated with WIN classroom learning with emphasis on the following areas:– Leadership– Transformation/Change Management– Economics– Finance– Marketing

Research - Literature ReviewResearch - Literature Review• Research included the Empowerdex JSE Survey

2004• Top 5 BEE companies of the sector, according

to this survey:

0

10

20

30

40

50

60

Total BEE Score

BEE: Financial Services

Research - Literature Review Research - Literature Review … … continuedcontinued

Empowerment Comparisons – Benchmarking

Lessons learnt from USA– Avoid the pitfall of affirmative action being

stigmatised as reverse discrimination– Focus on minority firms to grow and develop– Focus on skills needed to develop a digital

workforce era– Personal involvement and mentorship

Research - Literature Review Research - Literature Review … … continuedcontinued

Empowerment Comparisons – BenchmarkingMalaysia– Used as a true benchmark– Plans included

• Expanded educational opportunities• Employment quotas• Incentives for corporate restructuring

– One of the main tools was the transfer of up to 30% ownership

Research – Questionnaire Research – Questionnaire and Interviews and Interviews

• Used as the main research tool to ascertain where companies in the insurance industry are at in respect of BEE

• Stakeholders included:– MD’s and employees of companies in the

sector– Individuals and/or committees identified as

the “responsible persons” for the Charter requirements within and across companies.

– External stakeholders like suppliers and service providers

– BEE Charter Focus Groups and Task Groups

Research – Best PracticesResearch – Best Practices

• National and international best practices and success stories were researched

• Specific emphasis on “Top Empowerment Companies 2004” as per the April edition of the Financial Mail

Primary Research FindingsPrimary Research Findings

Interviews:• BEE and the FSC now transformational

philosophy and strategy• 50% = BEE is a business imperative • 50% = BEE started out as a social conscious

and compliance issue, slowly turning into a business imperative

• BEE does not increase business risk

Primary Research Findings… Primary Research Findings… continuedcontinued

• All organisations interviewed have a BEE policy and strategy

• Not all organisations’ BEE strategy focus on all focus areas of the FSC

• Primary focus is: – Human Resource Development – Procurement and – Corporate Social Investment

Primary Research Findings… Primary Research Findings… continuedcontinued

• The BEE benefits for business are:-– A growing economy– Business Growth– Compliance– Good reputation– Clients in new markets– Diversity– Business Opportunities– Reduction in crime

Primary Research Findings… Primary Research Findings… continuedcontinued

• What makes organisations committed to BEE?– Espoused and personal values– Sense of responsibility– Financial Benefits– New opportunities– Willingness to change– Financial commitment toward own business,

industry, economy, country– Compliance with legislation

Primary Research Findings… Primary Research Findings… continuedcontinued

• General challenges include– Perceptions, myths and misunderstanding of

the intent of BEE– Companies have to compromise to comply:

• Additional funds• Change systems & processes• Road shows for communication• Time & money invested in meetings &

planning• Reporting• Training

Primary Research Findings… Primary Research Findings… continuedcontinued

– Procurement: suitable service providers & accreditation

– Finding suitable EE candidates for senior positions

– Changing cultures and mindsets– Different legislative reporting structures and

targets– Lack of an operational Charter Council

Reflections: BEE as a Reflections: BEE as a business imperativebusiness imperative

• Regarded as a tool to integrate our society into the surrounding global environment

• Unique approach to BEE• Long Term success = BEE as core strategy• Knowledge, commitment and willingness to

change • BEE does not equal charity• BEE = moral, social, business and economic

imperative

Reflections: BEE as a Reflections: BEE as a business imperativebusiness imperative

• “BEE is not a zero sum game. It doesn’t mean that for some to win others must lose.” Desmond Lockey, Channel Life

• Moses Kgosana, Chairman of KPMG explains that: “BEE is not a threat. It is a business imperative and an opportunity to strategically prepare businesses to thrive in an economy that has never looked as good as it does today and will grow strongly as the majority of the population is economically included.”

Reflections: BEE as a Reflections: BEE as a business imperativebusiness imperative

Leon Vermaak of Auto & General:• … there are wider issues at stake than basic

compliance, namely the transformation of the country and the opportunities that exist in the emerging black market

• … transformation can be the platform businesses need in order to take advantage of these huge business opportunities

BarriersBarriers

• Lack of Finance• Limited skills pool• Conflicting legislation• Illegal immigrants• Lack of commitment• White fears• Regulations and reporting overload• Competitive edge

The findings thus illustrate that in spite of the barriers identified, BEE fundamentally is a business imperative in the Insurance Industry.

Levels of commitment and motivation are definitely changing towards recognising BEE as a business imperative.

Alternative SolutionsAlternative Solutions

• Create an appropriate environment for a business entity to succeed in and to achieve its goals

• Black ownership and BEE is a process that should develop sensibly to be sustainable

• To ensure that BEE transactions are successful, the appropriate funding structures must be developed fully

Alternative Solutions …Alternative Solutions …continuedcontinued

• Skills development and training is critical to ensure a sustainable & educated labor force

• AIDS will negatively impact on skilled labour levels, include in risk management plan

• Levies and Incentives as rewards• Provide lucrative government business to

compliant companies

Alternative Solutions …Alternative Solutions …continuedcontinued

• Consider that one size does not fit all• Captains of the industry must take charge in

the successful implementation of the Charter• Focus must change from development to

implementation of BEE as a way of business

Alternative Solutions …Alternative Solutions …continuedcontinued

• BEE should be understood an supported throughout the organisation to ensure a holistic approach

• Company culture must embrace and encourage black economic empowerment

• Visionary leadership with firm commitment to BEE is crucial

• Expect resistance & ensure commitment at all managerial levels

• Diversity management provides people with skills to enable them to deal with change

• Consumer education

Alternative Solutions …Alternative Solutions …continuedcontinued

• The visibility of high profile “role model” companies is essential

• BEE poses great opportunities for those who are flexible and innovative; change is inevitable

• Procurement – companies face the same challenges and must work together to find solutions

• Become mentors! • Success is dependant on peer-driven processes

that capture the commitment, hearts and minds of the entire financial services sector

• “Experience is Priceless” – use the lessons learned

Alternative solutions …Alternative solutions …continuedcontinued

• Work together to increase SA market share - create opportunities

• Form strategic alliances, collaborations and partnerships

• Provide employee share ownership schemes• Outsource where possible to contribute to

enterprise development• Develop other African markets and the

continent as a whole

Recommendations and Recommendations and Implementation PlanImplementation Plan

• Create a communication vehicle in the Insurance Industry that would reach every employee and share BEE successes

• Share the vision within the industry

• Create structured and organized forums

Recommendations and Recommendations and Implementation Plan …Implementation Plan …

continuedcontinued

• Employee share ownership schemes and participative management a way to retain and incentivise black employees

• Share and learn from industry best practices• Celebrate successes of those companies who

excel and ensure acknowledgement at an industry level

Embracing BEE in organisations is a function of leadership and management, transformation and change management and has an economic impact.

“It is not the strongest of the species thatsurvive, nor the most intelligent, but the one most responsive to change.”

Charles Darwin 

In ConclusionIn Conclusion

• Take the time to reflect on the successes of transformation and how we touch the lives of black people through our initiatives. John is a plumber and building contractor whose life and business have been changed through BEE – for the better. He receives work, support, training, guidance and quick payments from one of our short-term insurance companies. The quality of his service and workmanship is an asset for the insurer, but he couldn’t have done it on his own in such a short space of time. Meet John!