by Jarred Cinman (@jarredcinman) In April 2016, the Marketing, Advertising and Communications Charter (MAC Charter) was promulgated in the government gazette. This heralded the arrival of new black economic empowerment (BEE) codes for the marketing sector, particularly businesses such as advertising agencies which operate in this sector.
This special set of codes replaced the generic BEE codes and gave this industry specific targets to meet to receive their BEE rating. So far, so good.
The broader industry had some quibbles with this set of codes: precisely who was consulted and when? How were the targets reached? Who makes up the “charter council” referred to in the document? Why were only a tiny handful of our industry bodies mentioned and, apparently, endorsed? And what exactly is “Responsible Marketing”? (We still don’t know.)
Still, overall, this was a good change. It broadened the way points could be earned and refined the way money needed to be spent to enact transformation. There was a much bigger focus on skills development — bringing young people into the industry and skilling them up — and a drive toward supporting small enterprises as start-ups and as suppliers. The 45% black ownership target was a challenge but more of logistics than philosophy. No one with any credibility thinks that South African businesses should be mostly owned by white people.
Agencies worked hard to earn new BEE scorecards. I know of a few that got Level 1 scores and that really showed a commitment to broad-based transformation. As I said to our staff, when we proudly announced our Level 1 scorecard, you can’t trick the system. A level 1 (or any high level) represents meaningful transformation. You must have taken on learners and made them employable; you must have procured services from transformed businesses; you must have invested in training and contributed to CSI projects and done good for society; and you must have transferred a meaningful amount of your equity to people of colour.
Are our clients delighted?
So, our clients are delighted with us and feel we have made a profound contribution to their efforts to transform their businesses, right?
No, not really.
As it turns out, I’ve been in numerous conversations with clients who quite openly say the BEE levels mean very little to them. Sure, they’d like agencies with high BEE scores. But what they really care about is ownership. They want to steer their spend toward black-owned businesses.
In other words, in a choice between a Level 1 agency with 20% black ownership and a Level 4 agency with 51% black ownership, they want the latter. And this is not an aspiration for them. I’ve seen several pitches that stipulate these figures as criteria.
Deep lack of foresight
When I’ve asked some of the people involved in drafting the MAC Charter “what gives?”, the response has been: companies are free to set their pitch criteria as they wish. While obviously true, this implies a deep lack of foresight on the part of our industry leaders and the government teams responsible for this sector code. Why bother crafting this incredibly complex scorecard, paying a fortune to ratings agencies and driving the industry to adopt and succeed at it — only to find that the most-important customers don’t really care about it?
Things change. Yes, I get that. But things like this don’t change in two short years. If they are changing at this pace, why are the industry bodies we pay lots of money to not engaging corporates and government on our behalf to figure out a solution to this?
Did the MAC Charter lie to us? Have we, as an industry, been sent off on a wild-goose chase? Even those of us who’ve actually caught the geese find ourselves empty-handed.
Now, what corporates and perhaps the community at large is expecting is not unreasonable. After nearly 25 years since the end of apartheid. our industry is still filled with white-owned and white-controlled agencies. Many dodgy and insincere BEE deals have been done to try and stave off the inevitable: transfer of ownership and control to a more-representative team.
To be fair, there are agencies which have actually made this shift. There are also a flurry of new, black-owned communications businesses that are enjoying some success because they are truly of the new South Africa. However — and crucially — these are people who have ignored the BEE sector codes (or may as well have) and focused on something else. If they turn out to be right, that’s not because we as an industry have driven sensible transformation but because they are more plugged into the zeitgeist.
Agencies now face a stark choice, and a complicated one. Getting high BEE scorecards costs a lot of time and money — and will only commit you to 45% black equity. If clients expect either 51% black ownership or 30% black-female ownership, that 45% could prove to be an expensive and pointless mistake. However, selling a large stake in a business to an investor, who may not be able to buy it outright, means complex financing schemes, share trusts or other mechanisms. Considering how many local agencies are in the hands of global groups, multiply that complexity by 10.
Entirely different consequences
It’s not to say these two outcomes are mutually exclusive but they could easily be. And they will have entirely different consequences for agencies, their staff, their clients and, perhaps, the industry and country.
May I humbly suggest the following?
- Make a change, now, before history overtakes us
- Stop trying to employ delaying tactics — clients are in no mood to buy vague plans
- Listen to what the market wants, not what rating agencies or sector codes say; sadly, these may be at odds with each other
- Embrace change, not because we have to, but because it’s the right thing to do
- Don’t lose the focus on broad-based empowerment (BBBEE) just because ownership has such a high priority. We owe a debt to the future to build a better society for all.
- Partner with your clients to create meaningful change
- Make sure your agencies know exactly what you expect from them — or at least how you will be rating your agencies on their transformation efforts
- Don’t focus on ownership to the detriment of everyone else in society who also wants to enjoy the benefits of transformation; we’re already one of the most-unequal societies on earth and we don’t need more elites
- Help to create competent and sustainable businesses in our sector; advertising and communications has become a complex business and you’ll need deep skills and experience to win at your business
- Build some consistency into your ideas of transformation — agency businesses can’t change their goals every couple of years as these things take time to put in place and solidify
- Partner with your agencies to create meaningful change.
- Big Q 2017: Jarred Cinman’s expectations for the SA ad industry — Jarred Cinman
- The heart of BEE is our own minds — Jarred Cinman
- BEE myths & facts in adland — Jarred Cinman
- An introduction to BEE in the advertising industry — Jarred Cinman
Jarred Cinman (@jarredcinman) is the CEO of VML South Africa, part of one of the leading digital agency networks in the world. He sits on the Loeries Committee, was a board member of SAARF and the Creative Circle, and is a board member of DALRO and, in his spare time, answers his email.
“Motive” is a by-invitation-only column on MarkLives.com. Contributors are picked by the editors but generally don’t form part of our regular columnist lineup, unless the topic is off-column.
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Interesting debate, echoed in another sector, where we are objecting to the DTI’s proposed changes to Statement 000 in respect of BEE status stemming from ownership. If accepted, they would change the focus from a relatively small white ownership controlling a largely black enterprise to a relatively small black ownership controlling a largely white enterprise. Is that what we want? I don’t think so. Broad-based must mean exactly that.
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