Civil Society and Black Economic Empowerment

governance CSOs BEE
Tuesday, 17 April, 2007 - 09:32

Transformation - CSOs Have a BEE Score Card Too!

Many nonprofit organisations are unaware that they too should be keen participants in the Codes of Good Practice for Black Economic Empowerment. Implementation of Score Cards and Transformation Charters are an imperative for civil society organisations. 

This framework is not uniquely applicable to the private sector and government, it encourages Civil Society Organisations (CSO), sometimes referred to as the third sector, to be proactive and embrace the spirit of transformation.

The fundamental principle of BEE measurement is really that of substance which in effect takes precedence over legal form.

So what do we mean by substance? Throughout the Codes, various criteria appear which advance the interests of certain categories of black people. These include:

  • black women who should form between 40% and 50% of the beneficiaries of all Elements of the Generic Scorecard; and
  • black people with disabilities, black youth, black people living in rural areas and black unemployed people who must form between 2 and 3% of the beneficiaries of all Elements of the Generic Scorecard.

Who is Black? African, Coloured and Asians (born in SA).

Ownership

Under the section called specialized enterprises in the Broad-Based Black Economic Empowerment (BBBEE) Codes of Good Practice section 9 (1) of the Act (Broad-Based Black Economic Act 53 of 2003) highlights Non-Government Organisations, Section 21 Companies, Public Benefit Organisations and Higher Education Institutions and refers to the understanding around black ownership.  Although such organisations are incapable of evaluation of black ownership under the Code series 100, as such entities don’t have shareholders and most of their ‘owners or caretakers’ are in voluntary capacities anyway – there is no economic advantage for an individual.

The CSO Score Card

As mentioned above Civil Society Organisations do not have a shareholding, these organisations’ contributions towards BBBEE can only be measured against six of the seven element of the generic score card.  The score card weighting has been adjusted and omits Ownership for CSO Ratings as follows; 

Generic Score Card Rating

     CSO Score Card Rating

Ownership

20              

Ownership

Not Applicable

Management control

10

Management control

15

Employment equity

15

Employment equity

15

Skills development

15

Skills development

20

Preferential procurement

20

Preferential procurement 

20

Enterprise development

15

Enterprise development

15

Socio economic development

Socio economic development

15

However, this does not mean that CSO’s can ignore the ‘ownership” element of BEE and should constantly review the equity levels of the leadership.

 

Getting to grips with the adjusted scored card for the sector takes some digesting and this means that board-members of nonprofit organisations need to take-up this challenge and lead the process forward.

During a series of recent Centre for Resource and Funding Training (CRAFT) workshops we were able to engage with some concerns expressed by NPO’s. Two organisations based in the Western Cape were struggling with their identities and the face of their leaders or owners;

  • A palliative care service with its facilities based in a predominately white community had recently been told, by a long-term funder, that if they wished to enjoy ongoing support then they had to get the equity levels of the board right! Historically this organisation had always delivered their dedicated care to all people, regardless of their ethnicity, but the leadership had traditionally been those who had the time and money to give and lived in close proximity.
  • Mitchell’s Plain is a coloured community in Cape Town and is plagued by gangsterism, drugs and child abuse – the community is highly dependent on the services of a mental health community based organisation – they too have leadership representing the typical face of the community and were worried that maybe they weren’t black enough.

We posed both of these cases to Shirilee Bridge of Empowerdex, a BEE rating agency, who was able to allay fears as she proposed that they look at the strategic level, their beneficiaries, where they were probably going to score high on skills development, employment equity and socio economic development and that this would balance-out the ratings.

Ms Bridge suggested that “one of the solutions to this dilemma is for the leadership of an NPO to encourage beneficiaries to join the board and become part of the decision taking”. 

There is often pre-conceived thinking that a lack of skills or financial means discounts a  person from participating in the management of an NPO (mainly coming from White leader-driven organisations) but wisdom and local knowledge is a valuable asset and by making space for this to take place presents an ideal opportunity for people to grow into their new role of becoming effective social builders.

It’s no longer acceptable for White faces only to continue to run NPO’s whilst the beneficiaries remain previously disadvantaged people.  Its believed to be elitism or charity – BEE is not about charity but development of a nation and a poverty turn-around strategy.

What are the benefits

For an NPO or CSO to become a keen participant in the BEE process it is important to dangle one or two carrots, after all this sector is highly dependent on the generosity of individuals, corporate social investment, private foundations, government contracts and so forth so it needs to act rightly and justly.

  • Equip the organisation with proof of its BEE status, which is often requested as part of a tender requirement by businesses working with organisations (this could include corporate social investment)
  • Opportunity to increase potential donor contact through the inclusion in an accredited and rated CSO databse that is accessible to corporate and government funding bodies
  • An independent assessment of the organisation’s own status to fast-track and improve the elements analysed
  • Safeguard existing donors by eliminating ‘fronting organisations’ as competitors
  • Create additional avenues for funding
  • Increase the level of public benefit derived through good-will.

“Resolving the issue of ownership is definitely a positive shift”said Andrew Miller of Project Literacy, an ABET training provider, “in the past we missed out on winning tenders with local government due to a lack of understanding that a Section 21 company does not have shareholders. We have worked hard over the years at transforming our voluntary leadership and ensuring that our managers are representative of our society. This has reaped rewards for us as we have recently been awarded a Department of Labour ABET tender of R30 million per annum over the next five years – this is our BEE success story”.

Preferred Procurement

Procurement is another strong component of the Codes, proactive NPO’s have already started to update their suppliers database and are requesting BEE Score Cards – one such organisation is Abraham Kriel Maria Kloppers Kinderhuis in Johnnesburg, an organisation that commenced the transformation journey some years ago – we asked their administrator Thuli Mkhonza why they were doing this and she clearly stated that it was vital for them to ensure BEE compliance by all their service providers, ‘we have to start the process somewhere’ she said. At this point she wasn’t sure how this would help in raising funds.

Grantmakers are also seeking BEE compliance from suppliers; the Nelson Mandela Children’s Fund in a recent meeting with a direct mail consultancy elicited the enquiry as to their BEE status and asked the question of ‘where are the black fundraising consultants?” 

Equity Mix

We often blame our historical backgrounds for hampered progress in transformation but getting the equity mix right is a challenge not only in South Africa. At last years’ Association of Fundraising Professionals (AFP) Convention in Atlanta in the USA,. Chairman, Mr. Alphonse Brown, an African American, has introduced a new dimension to the international event by hosting sessions on the State of Diversity in the Profession. (AFP is highly sensitized in ensuring representivity and killing the image of elitism). One of the trailblazers in support of this initiative is dynamic Birgit Burton, head of Foundations Relations for the Georgia Institute of Technology, she related the problem as “when you are made to feel unwanted in selective groups it is very difficult to participate and contribute, you move out and restore your pride with your own kind and nothing changes”.  In a recent statement made by Minister of Finance, Mr. Trevor Manual on the flaws in the BEE system he echoed similar sentiments. They (his white partners) say “We want you there. You are a good man. But actually we do not need you too close to what we do. We will run the business, but we have bought an insurance policy through you.”

BEE is by no means perfect and we have a challenge ahead of us all but we (CSO’s) are no longer exempt from the government’s measuring rule, civil society organisations will find themselves exposed to a new world order where they must transform to survive. But with civil society organisations already carrying administrative and legislative burdens and the constant battle for financial sustainability will there be a sense of flee or fight? Many will simply not know where to begin.

NOTE:  All Codes were ratified by Government and Gazetted on 9th February 2007.

- Written by Ann Bown of Charisma Communications, a financial sustainability consultant to the nonprofit sector and Andrew Miller, CEO of Project Literacy. Both are voluntary Directors of the Centre for Resource and Funding Training.

- Shirilee Bridge can be contact at Empowerdex, Tel: 011 234 7890 or e-mail sbridge@empowerdex.com for assistance and information on the CSO BEE Ratings.

Picture courtesy of Rebecca McDaniel.

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