A new type of business consultant is emerging in South Africa. They help companies complete racial scorecards the government now requires under its black economic empowerment program. Some observers say the consultants are vital. But others think they hurt South Africa's effort to transform its apartheid-era economy. For VOA, Terry FitzPatrick reports from Cape Town.
Keith Levenstein teaches companies how to cope with a new program intended to change the way South Africans do business. The program, Black Economic Empowerment, or BEE, is a government initiative to move financial control away from whites and into the hands of the country's black majority.
The heart of the program is a racial scorecard that companies must complete each year. It tracks if a business has black owners, managers, employees, trainees and suppliers. Levenstein goes over the scorecard's point system.
"Okay, so let's take a look at the scorecard. Ownership is worth 23 points, 20 for procurement, five for socio-economic development….," he said.
The scorecard rules are complex, with nearly 30 ways to earn black empowerment points. Each category has a target. A company should have 25 percent black ownership. Junior management should be 68 percent black. Half of a company's supplies should come from black-owned firms. A lot is at stake. Only companies with good scorecards will be able to compete for government contracts. Levenstein says this has made business owners confused and afraid.
"There's a lot of fear. They're fearful about BEE," he said. "It's a fear of change and not knowing what they really need to do."
This fear has helped launch a new industry: private consultants who provide racial advice and independent auditors who certify scorecards are accurate. Levenstein says most advisors are trustworthy, but many are not.
"Lots of companies are jumping on the bandwagon. I get very concerned about them because they honestly don't get the job right," he said. "They simply are attorneys who see that there's a way to make a bit of money."
Critics complain that unethical consultants are helping companies manipulate their BEE scorecards. Mbulelo Bikwani is a member of South Africa's Black Management Forum.
"BEE is a cry of black people saying: "take us out of this spiral of poverty," said Bikwani. "And if people don't have that philosophy before they jump into consulting, then they would allow certain things that would not advance the cause of BEE to happen, because they want to satisfy their clients."
Paul Hoffman, at South Africa's Center for Constitutional Rights, says a single word describes the new breed of race consultant.
"They are parasites who are living on the system of black economic empowerment by preparing these fancy little scorecards and making sure that everybody has got their ducks in a row," he said. ""Parasites, that's what they are."
Hoffman says black ownership is the biggest problem with consultants and scorecards. He says white-owned companies are being advised to recruit black partners, whether they are qualified or not, just to earn scorecard points. Hoffman says this does not strengthen the economy.
"It lends itself to fronting and tokenism," he said. "And tokenism and fronting are not a way to make a country grow. It's a way to drop a country into corruption and decline."
Hoffman says South Africa needs to focus more on training and education. Mbulelo Bikwani agrees that whites should be transforming their companies not only in the boardroom but on the factory floor. But he says whites should not fear what Black Economic Empowerment is trying to accomplish.
"Those companies that are regarded as white companies must not panic," he said. "There is no way they can function and really make money out of a country where the majority of the people are poor. BEE is trying to help those that are poor in order for us to grow the economy."
The BEE scorecard program is just beginning. The deadline for companies to complete their first black empowerment report is August. Authorities hope the problems caused by unscrupulous consultants and auditors will end soon. New rules to regulate their industry should take effect in May.
