Black is black I want my credit back
By rights, Dr Hasmukh Gajjar should be in hiding. Never one to shy away from shaking up the hornet`s nest which masquerades as the South African IT industry, this time he`s kicked it over and danced a tango on the pieces.Needless to say, the hornets are angry. Very angry. Death-threats-and menacing-late-night-calls angry. But Gajjar, chairman of the Black Information Technology Forum – now known by the snappier moniker BIT4M – is unbowed, unrepentant and unashamedly punting a new accreditation system he says will help the fledgling black IT sector stand on its own two feet once and for all.The Accredited BIT4M Company (ABC) scheme is the forum`s latest riposte to what Gajjar calls the “fronting, landlording and rent-a-darkie scams” riddling the industry.Landlording happens when decision makers in government bodies, parastatals and the private sector award contracts in return for having their palms crossed with silver – and does nothing for development, which, says Gajjar, is the driving force behind ABC. The thriller scenarioTo qualify as an ABC-accredited company, black-owned IT firms will be scrutinised by an independent audit committee and, once approved, will get “abundant” marketing support and become part of an A-list for a bite at large IT contracts, both in government and the private sector.The scheme has been dogged by controversy from the start. Getting people hot under the collar is nothing new to Gajjar, but even he is taken aback by the sheer range of reactions provoked by ABC, including a sizeable pocket of resistance from within the 3 000-strong ranks of the BIT4M itself.Indeed, the issue is fast developing into a scenario with all the ingredients of a John Grisham thriller: political intrigue, allegations of conflict of interest, whispers of shady dealings and enough controversy to fill a medium-sized data warehouse.Critics of the scheme are outraged that companies with any white IT shareholdings are barred from certification, with some even suggesting the ABC is a smokescreen for enriching companies owned by the BIT4M`s executive committee. They have also panned the R20 000 joining-up fee as excessive, and say the terms of the accreditation are too narrow.Gajjar doesn`t understand what all the fuss is about. “It`s critically important we nurture organically-grown, black-managed, black capacity companies that grow into significant players in the South African IT industry,” he says.“Right now, meaningful black empowerment is simply not happening. Most empowerment initiatives are ineffective palliatives and do not demonstrate the kind of understanding required to make a real change. I refer to it as the ‘you don`t get it` factor. We need continuous dialogue to change the thinking of the large players, and to introduce policy and governance that guides this transformation,” says Gajjar.The BIT4M says the ABC programme was the result of broad consultation amongst all interested parties, and has the support of government, parastatals, and multinationals operating in the country, as well as several large corporations.But there are a couple of kickers that go with the deal – and it is these which have people on both sides of the empowerment fence crying foul.The first thing that sent tempers soaring is the BIT4M`s decision to disqualify from potential ABC accreditation any company that has sold equity to a white IT firm, or previously white-owned organisations now controlled by black investment companies.“It`s very difficult to figure out what is a genuine partnership and what is fronting,” says Gajjar. “But through hard experience we`ve seen that when a white company invests in a black company operating in the same sector, it doesn`t work. The white partner invariably blocks the black firm from competing against it. We have seen these deals for years and years – show me one which is successful.”With the messy divorce between MGX and Motswedi still relatively fresh in the minds of the industry, Gajjar has a point. The MGX and Motswedi deal was a classic example of how the technical details are handled by the “white” company, reducing the “black” company to the role of schmoozing the right people and signing the deal.Few companies are prepared to say it out loud, but for many the issue goes to the heart of business: money. The unspoken fear is that if the ABC becomes the key with which to unlock significant amounts of government business, a lot of people will be left on the outside while the chosen few frolic.“No-one`s being locked out here,” retorts Gajjar. “We simply expect the industry to start sharing in the revenues in a meaningful way – and the only figure that really matters is how many black people are growing. Historically we haven`t seen that particular balance sheet grow.”A second bone of contention is the not insignificant joining-up fee, which at R20 000 could be a touch rich for the blood of many of the smaller players in the industry – the very people the ABC is supposed to be helping.Not so, says Gajjar: once accredited, companies will be marketed to the extent that they become household names. What`s more, the money doesn`t have to be paid in one fell swoop, and will probably pay for itself if a company takes advantage of one of the benefits of the accreditation, like exposure in an online press office or operational infrastructural support from multinationals.“If you want to run with the big dogs, you can`t piss like a puppy,” says Gajjar pithily. “We`re not going to transform the sector by having a lot of SMMEs. We must develop a larger capability. If you put all the black IT companies in the country together, they still wouldn`t be the size of a flea on a dog`s backside in relation to the rest of the industry.” For and againstZeth Malele, the CEO of arivia.kom, agrees, saying the ABC is “not just certification for certification`s sake”.“Let`s understand very clearly who the ABC is targeted at: struggling black companies. If you`re already partnering with a white IT company, it doesn`t mean you`re out of the loop, it simply means you don`t need the same level of support to get you on your feet,” says Malele.One person who finds the ABC decidedly less palatable is Semela Tseka, the chairman and CEO of systems integrator Choice Technologies. Hardly surprising, considering Dimension Data`s 49 percent stake in Choice blows its chances of the ABC certification sky-high. But Tseka says it goes further than that.“I agree with the principle of the ABC, but not the implementation. We`re a black-owned, black-run company with genuine black skills, and now we`re excluded because of a partner who has brought a lot of value to the table. This is nonsense.”Tseka also pooh-poohs the notion that the ABC was born from wide consultation, alleging it was railroaded through by BIT4M executive committee members with “vested interests”, and that the accreditation “suits some people on the committee down to the ground”.Gajjar himself is CEO of Consilience Technologies, while fellow BIT4M executive Lufuno Nevhutalo heads up another emerging black IT company, Cornastone. But Gajjar is quick to point out that all applications for the ABC listing are vetted by an independent panel of auditors from six different companies, which makes it impossible for anyone to get preferential treatment.Tseka`s not so sure. “This ABC was never discussed. The BIT4M never allowed caucuses and discussions around it. When our representatives queried aspects of the programme, the executive committee became defensive and emotive, but never addressed our concerns,” claims Tseka. Whingeing whitesNevhutalo himself has been no shrinking violet on the empowerment issue, being on record as suggesting that deals involving white-owned IT companies “reek of greed and convenience rather than a serious commitment to transformation. I don`t believe a white company investing in a black company has any intentions other than an artificial business driver.”Gajjar says he`s sick and tired of hearing white industry leaders complaining about the lack of reliable black companies to partner with.“Dammit, that`s the whole point of ABC!” exclaims Gajjar. “I really fail to understand the industry`s protest. What we`re doing with ABC is giving the industry a list of those ‘good` companies they say they`re looking for. Right now there is no means or mechanism to achieve that. We`re simply trying to respond to the frustration in industry.”For their part, many of the traditional white players are all acting a little hurt and surprised, both by the ABC scheme and Gajjar`s suggestions that they`re not doing enough to build black capacity.John Miller, group sales director at AST, is not one of them. He`s “broadly supportive” of ABC, and believes an accreditation scheme will go a long way to reduce the opportunism and fly-by-night operators giving black empowerment a bad name.“There`s still a lot of fronting in the industry, with people winning business on which they have no hope of delivering. That`s unfortunate, because there are a lot of black-owned businesses that can do the work. We`re in the process of building two majority black-owned businesses which have genuine delivery capabilities – Thuso and Naledi – and we support them with hands-on training and mentorship,” says Miller.By all accounts, CS Holdings` Annette van der Laan is less benevolent. She is said to be livid with Gajjar for mentioning her company as an example of an “undesirable”, while Derek Wilcocks, executive director of strategy and technology at Dimension Data, says the ABC certification is “a very narrow definition of black empowerment”.“Many so-called white-owned companies have made significant investments in human resource development, both in partnerships and in terms of providing funding and skills transfer. The ABC certification doesn`t take those into account in defining which companies qualify as BEE operators,” says Wilcocks.But, says Gajjar, ABC was never meant to accredit or pronounce on the BEE and transformation efforts and strategies of white-owned firms. “This can be achieved through a sector charter. ABC is meant for black-owned companies.”While Didata itself doesn`t indulge in the insidious practice of fronting, says Wilcocks, going after bids in the government sector together with black companies “is absolutely a necessity”.“You have to show that the companies we partner with actually do the work, and don`t just shake hands with the right people to seal the deal,” says Wilcocks. “Choice Technologies, for example, is a fully-fledged technology partner when we bid together.”That`s all very well, says Gajjar, but he sticks by his assertion that a lot of large players see black empowerment as another level of VAT.“To transform the sector we have to have the people with which to transform. We as a sector have failed miserably in developing that pool and capacity of people. Unless we develop the skills and capacity within all people, we have a lesser chance of transforming and growing the economy,” says Gajjar. Missing the boat“Once existing business understands these issues, they will also understand there`s a cost to transformation. We are going to have to bear the pains of transformation, but if you buy into the outcomes, we can all work together to find creative ways to minimise the cost of transformation,” Gajjar adds.CEO of Kunene Brothers Holdings, Dudu Kunene, believes multinational firms missed the empowerment boat in a big way after the demise of Siltek.“There was a golden opportunity for some of the smaller BEE companies to get distributor deals, but none of the multinationals showed any interest in giving them the chance to handle distribution of their products,” Kunene said in a recent interview with a local trade paper.What`s more, says Kunene, most major deals still end up in the hands of major players in the IT sector – an opinion shared by arivia.kom`s Malele, who takes the diplomatic view that transformation is happening in the IT industry, but just not enough of it, and not at the right level.“We all have a role to play in this process,” says Malele. “It`s not a question of having a choice, either. If we don`t do it, we`re risking our entire democracy as we know it.” A broad forumSaths Moodley, the bullet-headed former activist who now heads up the fledgling Webnet Network Solutions, couldn`t agree more. He just doesn`t see the need for the BIT4M in any of this. "In this day and age should we be having a blacks-only IT forum at all? I don`t think so. We should have an IT forum made up of all players if we`re to have the BEE debate in an open way and carry our colleagues with us. It`s no use debating this among ourselves. If we want to make a real impact on empowerment, we need a broad forum of all companies." This is the year 2002, eights years after the advent of democracy in our country. As blacks, I believe we are both confident and able to win these debates in a forum truly representative of all South Africans, as envisaged in the Freedom Charter. For South Africa to succeed economically and politically, we must move away from associations based either on ethnicity or racial backgrounds.”Moodley questions the need for the ABC certification, saying it could be viewed as duplicating measures already being put in place by the government`s State Information Technology Agency (SITA). "I applaud any initiative designed to promote genuine black empowerment. But are we ready to spend R20 000 on a certification? No ways. I`d rather pay my staff bonuses with the money. Why not simply publish a list of companies accredited by SITA, which includes most if not all the elements contained in the ABC anyway?"Moodley describes the current state of BEE in the IT industry as "lots of shares being moved around, but not making an impact where it matters: in the management structures and at board level, where you can actually influence policy and make a difference. It is clear that while the political power has moved in South Africa, the economy is still in the hands of a small group of people: pale white males. And, as black people, we must take some responsibility for that. A number of our colleagues have allowed themselves to be used in the past to enrich themselves (by fronting), and they must carry the can for damaging the greater effort to achieve parity," says Moodley. Who owns what?It is in this regard that Moodley, a former trade unionist from Natal, questions the appropriateness BIT4M`s commercial ventures."An association should remember what it`s there for: to represent the interests of its members. By having a commercial arm, as BIT4M does, it could be seen to be competing with the very people it`s supposed to be representing."He has a point. Indeed, a closer look at the BIT4M`s business concerns reveal an interesting web of cross-holdings - which do nothing to weaken the case of the critics who say the ABC is catering for vested interests within the forum.For a start, the forum`s commercial arm, the Black Information Technology Consortium Limited (Blitec), has significant investments in Datatec, MTN and M-Cell – the very type of white-owned companies railed against by Gajjar and Nevhutalo. Blitec also holds a 30 percent stake in SAP PS.It doesn`t stop there, though. Two years ago, Blitec bought 72 percent of the then-struggling Casey Investments Holdings, a JSE-listed company, amidst rumours of strong-arm tactics and infighting. Both Casey non-executive chairman Jeff Molobela and MD Lemmy Khumalo also sit on the board of Blitec – which is chaired by none other than Simon White, joint MD of black empowerment consultancy Forge Ahead BMI-T.White is a proponent of what he calls “a more interventionist approach” in the small business sector, and is on record as saying it is not enough to leave the growth of the small business sector to market forces.According to its web site, Blitec also holds 80 percent of Ndizani Info Communications, a Cape Town-based IT company. It claims to be “in advanced stages” of investing in four black ICT companies in South Africa, and says it is “currently pursuing several new ventures and opportunities in the ICT industry.”Blitec`s stated aim is to improve the competitive advantage of black-owned ICT companies, many of which face problems of lack of capital, skilled resources shortage, poor access to niche licensed products, limited access to the private sector market, and a lack of infrastructure support to build capacity. On this it speaks the same language as the ABC.Then it starts to digress, saying it will assist its member companies “where it makes business sense to form joint ventures and strategic partnerships with traditional vendors and international technology partners to facilitate technology transfer and to enhance the capacity of black ICT companies”.“The BIT4M should really make up its mind,” said one analyst. “The one hand doesn`t seem to know what the other is doing, and this kind of conflicting message will only fuel controversies like the one raging around ABC. Does it want to be the voice of the black IT industry, or does it want to be the market leader?”Gajjar is quick to point out, though, that the BIT4M only has a ten percent stake in Blitec – and he himself is not a shareholder. What`s more, he says, the BIT4M has become “increasingly unhappy” with the direction taken by Blitec, which has managed to “put a great deal of distance between the original intent and what has transpired”.“Blitec has been managed by its own board and management team and obviously has been accountable to all the shareholders. BIT4M does not control its investment strategy in any way,” says Gajjar.
01 September 2002
By rights, Dr Hasmukh Gajjar should be in hiding. Never one to shy away from shaking up the hornet`s nest which masquerades as the South African IT industry, this time he`s kicked it over and danced a tango on the pieces.
Needless to say, the hornets are angry. Very angry. Death-threats-and menacing-late-night-calls angry. But Gajjar, chairman of the Black Information Technology Forum – now known by the snappier moniker BIT4M – is unbowed, unrepentant and unashamedly punting a new accreditation system he says will help the fledgling black IT sector stand on its own two feet once and for all.
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