Vodacom & Ericsson on participation opportunities for previously disadvantaged people in telecommunications

Small Business Development

31 August 2016
Chairperson: Ms N Bhengu (ANC)
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Meeting Summary

Vodacom South Africa briefed the Committee on the transformation agenda of its company. The presentation explained the ownership percentages with 13.91% under the South African Government and 21.09% being black ownership. The majority of the shares are owned by the Vodafone group which is one of the largest global telecommunications company. Vodafone has 438 million customers from mobile operations in 26 countries, partners with mobile networks in 55 more countries, and fixed broadband operations in 17 markets. The company employs approximately 90 000 people across all its markets.

Vodacom partnered with international promotional merchandise company Mace Promotions in 2014 to establish a local source of manufacture and supply of textile merchandising related articles. It has helped to set up and fund three sewing co-operatives in Ekurhuleni, Gauteng, to manufacture Vodacom-branded apparel for Vodacom South Africa.

The presentation explained that in terms of SMME Skills Capacity there are 53 black-owned SMMEs operating in the ICT sector currently on business skills capacity programmes with a geographical spread of five provinces - Gauteng, KZN, North West, Western Cape and Eastern Cape. The gender profile of these SMMEs is 33% female owned and 67% male owned; and 42% of businesses owned by youth. There is a specialised training programme for black women-owned SMMEs with Gordon Institute of Business Science (GIBS). The selection criteria in awarding stores in the purchasing of new stores, has the requirement of 100% black ownership, preferably 31% female. On the selling of an existing store, the requirement is 51% black ownership. The BEE Transformation Plan is in progress with 100% black ownership and preferred 31% female.

In terms of preferential procurement, that they have exceeded their score targets, achieving a beyond stretch score of 23.43 points as a result of continued focus on improving the transformation of their suppliers and consequent expenditure on BEE-status suppliers. Total recognised and measured procurement spend of R26.2 billion was R10 billion greater than the target, exceeding the required 70% spend with BEE-status suppliers by 41%.

The report concluded that this year, Vodacom was rated as the most empowered company in the ICT sector and the most empowered multi-billion rand company in South Africa. For the third consecutive year they have retained their Level 2 Black Economic Empowerment (BEE) contributor status, achieving a score of 98.25 points. This achievement reflects its commitment to implementing meaningful and sustainable transformation for its employees, the people of South Africa and the economy as a whole.

Ericsson South Africa explained that the core business of the company is to play a role in broadband roll out to support SA Connect and the National Development Plan (NDP),and in driving industry transformation in other sectors such as Energy, Transport, Safety and security, Media, Finance, Education, Water, and Create innovation networks.

In terms of ICT Empowerment in Africa, the company partnered with the University of Cape Town in its Master of Engineering (Telecoms) programme; designed in partnership with Ericsson Academy South Africa. It partnered with the University of Stockholm on capacity development of policy makers and Ericsson support with market insights. It partnered with the Communications Regulatory Association of Southern Africa (CRASA) and West African Telecommunications Regulatory Assembly (WATRA) to support the development of the national broadband plan framework and, is supporting the World Radiocommunications Conference (WRC-19) process.

The Ericsson South Africa Supplier Development Policy is based on Supplier Opportunity Identification; Beneficiary Sourcing; Beneficiary Selection; Beneficiary Communication; Beneficiary Contracting; Supplier Development Beneficiary Assessment; Beneficiary Support; Service Providers; Beneficiary Monitoring; Measurement; Reporting; and Preferential Payment.

For enterprise and supplier development (ESD), its Transformation Unit was established in June 2016. BEE consultants were on board for added support in June 2016. Collaboration with contract managers to direct ESD investments towards core SMMEs is continuous. Technical support and occupational health and safety (OHS) training was provided to 8 ASPs since 2014 and it is ongoing. Early payments and overheads costs were made to four supplier development SMMEs since 2014 and this is ongoing. Coaching and mentoring SMMEs on HR, finance, marketing skills, etc by ESA managers was done in 2016 and is ongoing. Training in ICT tools, processes and ways of working is ongoing.

The payment policy for beneficiaries is that preferred payment terms will be offered. Preferred payment terms will align with requirements to maximize scoring on the ESA B-BBEE scorecard. Typically, this will be less than 10-days after receipt of invoice. With regard to its BBBEE Transformation Project, they will review all its elements. The BEE spend in 2016 is on ownership; skills development; enterprise and supplier development, and socio-economic development.

Members welcomed the Vodacom SA presentation, but were disappointed with that of Ericsson SA, which did not provide details on the questions on transformation that were sent to the company before its presentation to the Portfolio Committee.

Members asked when did Vodacom decided to subcontract management to Ericsson, and what process did they follow, was a tender put out, and did they look at Ericsson’s BEE scorecard when taking that into consideration. Ericsson SA was asked to clarify the termination of the contract and Vodacom SA to give a breakdown of the R7.2bn which went to black owned suppliers; what was the format of the R112m spent on skills development; the names of the three cooperatives setup by Vodacom SA and their location; the reason why Ericsson SA is 100% white which is a negative in terms of demographics as it should not be seen as a racially exclusive organisation; why the Transformation Unit was only established in June 2016 by Ericsson SA; does Ericsson SA support only existing SMMEs or do they also assist new people who wanted to come into business; what the two companies were doing to reduce red tape so that small businesses and contractors could get into business.

Meeting report

Opening Remarks
The Chairperson noted that a company known as Mella Trading would be joining them in the meeting. Mella Trading is a contractor of Vodacom SA. It is a black owned company that provides telecommunication services. At some point Vodacom subcontracted the management of those contracts to Ericsson SA. Less than 10 months later, Ericsson discontinued and terminated the contract without explaining to the black subcontractor the reason for the termination of the contract. Also Ericsson SA did not pay the subcontractor for a period of four months, and even after the termination of the contract they only paid them for one month. When this matter was presented to the Chairperson, she contacted Ericsson SA to get the company’s side of the story. As she was on sick leave and not in Parliament, she wrote an email to Ericsson SA. And Ericsson SA responded that the email did not look like an official letter coming from the Chairperson although she had explained in the email that she was the Portfolio Committee on Small Business Development Chairperson.

The Chairperson then instructed her Executive Secretary to resend the letter with the letterhead of her office to prove that she is actually the Chairperson. After that Ericsson raised a confidentiality clause between the subcontractor (Mella Trading) and itself, indicating that the subcontractor had violated that confidentiality clause by approaching the Portfolio Committee.

 Again the Chairperson wrote to Ericsson to notify them that in terms of the South African Constitution Parliament is empowered to seek information from any person or entity, and if Ericsson was not going to voluntarily share that information, the Constitution empowers Parliament to summons anyone and any entity to come to Parliament if information is needed.

This meeting was sparked by that interchange and she had asked the Committee Secretary to shift the agenda they were supposed to deal with this week in order to entertain and put the current matter forward. The reason for the change is that when the subcontractor approached her, the contract had not yet been terminated, but there was still a letter of intention to terminate the contract. But if she had heard Ericsson side of the story, that situation would have been better understood. It is not the first time she would meet entities outside the parliamentary precinct because as public representatives they do meet with members of the public and entities. Members of the public are allowed to come to Parliament and to the parliamentary constituency offices to raise their concerns.

It is disturbing that as a Chairperson of the Portfolio Committee she was dealing with a company like Ericsson which is in the telecommunications space and was using its gadgets to communicate easily and efficiently but the response was not favourable to her. Mella Trading is not the only company that has approached the Committee, many companies and individuals have done so in the past. The Committee looks at their issues and deals with them on their merits in line with the policies of government.

Vodacom South Africa briefing
Mr Themba Kinana, Group Executive: Vodacom South Africa said that Vodacom Group is one of the Africa’s leading telecommunications companies providing a wide range of services. They are owned by the Vodafone Group 65%; South African Government 13.91%; Black Owned 21.09%; It is a Listed company on the Johannesburg Stock Exchange; in business since 1994 with a market cap of R228.15bn (approx. USD 14,1bn as at 25 Feb 2016); revenue of R77.3bn (approx. USD 4.7bn); and 65.1 million customers (as at 30 September 2015). Vodafone Group is one of the world's largest telecommunications companies. It is listed on the London Stock Exchange. Vodafone has 438 million customers from mobile operations in 26 countries, partners with mobile networks in 55 more, and fixed broadband operations in 17 markets. The company employs approximately 90 000 people across all its markets.

Ms Lynda Marthinus, Vodacom SA Executive: Broad Based Economic Empowerment, said that Vodacom partnered with international promotional merchandise company Mace Promotions in 2014 to establish a local source of manufacture and supply of textile merchandising related articles. Vodacom has helped to set up and fund three sewing co-operatives in Ekurhuleni, Gauteng, to manufacture Vodacom-branded apparel for Vodacom SA. Their co-operative incubator scheme seeks to create between 80 and 90 sustainable jobs for people currently dependent on social grants. In doing so they are promoting social upliftment through employment creation and alleviating dependency on social grants through the provision of monthly incomes. They have assisted SMMEs in meeting their minimum criteria such as health and safety compliance, technical skills development and vetting.

All the co-operative members live in townships and typically started with basic sewing skills and limited business experience. Through the partnership, the members have been trained and now have business relations with Mace that keep members gainfully employed.

Ms Marthinus said that for SMME Skills Capacitation, there are 53 black-owned SMMEs operating in the ICT sector currently on business skills capacity programmes with a geographical spread of five provinces - Gauteng, KZN, North West, Western Cape and Eastern Cape. The gender profile of these SMMEs is 33% female owned and 67% male owned; and 42% of businesses owned by youth. There is a specialised training programme for black women-owned SMMEs with Gordon Institute of Business Science (GIBS). The selection criteria in awarding stores in the purchasing of new stores, has the requirement of 100% black ownership, preferably 31% female. On the selling of an existing store, the requirement is 51% black ownership. The BEE Transformation Plan is in progress with 100% black ownership and preferred 31% female.

Ms Marthinus said in preferential procurement, they have exceeded their score targets, achieving a beyond stretch score of 23.43 points as a result of continued focus on improving the transformation of their suppliers and consequent expenditure on BEE-status suppliers. Total recognised and measured procurement spend of R26.2 billion was R10 billion greater than the target, exceeding the required 70% spend with BEE-status suppliers by 41%. Expenditure with exempt micro enterprises and qualifying small enterprises increased slightly to R2.9 billion (2015: R2.6 billion) as a result of consolidation efforts to ensure cost efficiency.

Their spend with suppliers who have more than 51% black ownership increased from R4.0 billion to R7.2 billion, exceeding the required target by 233%. Expenditure with suppliers with more than 30% black women-ownership increased from R1.5 billion to R5 billion, exceeding the target of R1.8 billion by 320%. In addition, they were once again awarded three bonus points for 15 calendar-day payment terms to qualifying black-owned small, medium and micro enterprise (SMME) suppliers. These fast payments amounted to R284 million paid within five days or less, representing R110 million more than in the previous year.

Ms Marthinus concluded that this year, Vodacom was rated as the most empowered company in the ICT sector and the most empowered multi-billion rand company in South Africa. For the third consecutive year they have retained their Level 2 Black Economic Empowerment (BEE) contributor status, achieving a score of 98.25 points. This achievement reflects their commitment to implementing meaningful and sustainable transformation for their employees, the people of South Africa and the economy as a whole. A key part of their strategy is to ensure that the companies they deal with also have significant black ownership and black woman ownership.

Through their initiatives to leverage Vodafone global purchasing power, it has ensured that its multinational suppliers have established a South African presence and employed a local workforce. In this process they have ensured that these multinationals invest in BEE strategies that are aligned with Vodacom’s transformation objectives. In the majority of cases, they have helped to increase the number of black women who have benefited from economic shareholding in these entities. Vodacom has been influencing the ownership restructuring of their key suppliers and increasing spend with black-owned and black women-owned entities. Vodacom has category-specific sourcing strategies that target specific BEE requirements. The impact of these strategies is evidenced in Vodacom’s excellent scoring in the preferential procurement element of the scorecard.

Ericsson South Africa briefing
Mr Mahomed Essof, Country Manager: Ericsson South Africa, noted the questions posed to Ericsson in a letter dated 25 July from the Small Business Development Portfolio Committee:
• Total number of outlets and shops serviced by Ericsson;
• Number of black owned or previously disadvantaged people companies contracted by Ericsson as opposed to white companies to be sub-contracted on the work given by telecommunications companies;
• Criteria used for awarding contracts and sub-contracts to those outlets;
• Total budget allocated to black companies or companies belonging to previously disadvantaged people;
• Availability and implementation of Capacity Building Policy in relation to enhancing black empowerment;
• The policy on 30 day payment to SMMEs and cooperatives.

Mr Essof said that Ericsson’s core business is to play a role in broadband roll out to support SA Connect and the National Development Plan (NDP),and in driving industry transformation in other sectors such as Energy, Transport, Safety and security, Media, Finance, Education, Water, and Create innovation networks.

In terms of ICT Empowerment in Africa, the company partnered with the University of Cape Town in its Master of Engineering (Telecoms) programme; designed in partnership with Ericsson Academy South Africa. It partnered with the University of Stockholm on capacity development of policy makers and Ericsson support with market insights. It partnered with the Communications Regulatory Association of Southern Africa (CRASA) and West African Telecommunications Regulatory Assembly (WATRA) to support the development of the national broadband plan framework and is supporting the World Radio-communications Conference (WRC-19) process with inputs and capacity workshops. They have collaborated with Smart Africa Alliance, driving Smart Cities Frameworks, and driving National Broadband Plans. They have partnered with the Africa Telecommunication Union (ATU) providing technology insights. They have also collaborated with the East Africa Communication Organization (EACO) in a technology and market trends seminar for EAC member state regulators.

The Ericsson South Africa Supplier Development Policy is based on Supplier Opportunity Identification; Beneficiary Sourcing; Beneficiary Selection; Beneficiary Communication; Beneficiary Contracting; Supplier Development Beneficiary Assessment; Beneficiary Support; Service Providers; Beneficiary Monitoring; Measurement; Reporting; and Preferential Payment.

For enterprise and supplier development (ESD), its Transformation Unit was established in June 2016. BEE consultants were on board for added support in June 2016. Collaboration with contract managers to direct ESD investments towards core SMMEs is continuous. Technical support and occupational health and safety (OHS) training was provided to 8 ASPs since 2014 and it is ongoing. Early payments and overheads costs were made to four supplier development SMMEs since 2014 and this is ongoing. Coaching and mentoring SMMEs on HR, finance, marketing skills, etc by ESA managers was done in 2016 and is ongoing. Training in ICT tools, processes and ways of working is ongoing.

The payment policy for beneficiaries is that preferred payment terms will be offered. Preferred payment terms will align with requirements to maximize scoring on the ESA B-BBEE scorecard. Typically, this will be less than 10-days after receipt of invoice.

With regard to its BBBEE Transformation Project, they will review all elements: the BBEE transformation unit; BBBEE consulting and training; and BBBEE systems. The BEE spend in 2016 is on ownership; skills development; enterprise and supplier development, and socio-economic development.

Discussion
Mr S Bekwa (ANC) suggested that they first interrogate the Ericsson SA presentation before they go to the Vodacom SA presentation.

Rev K Meshoe (ACDP) asked if he could combine his questions to both companies.

The Chairperson agreed but he should note that they will need to spend more time on Ericsson SA as suggested by Mr Bekwa.

Rev Moshoe thanked Vodacom SA for a very straightforward and clear presentation. He asked when did Vodacom decided to subcontract management to Ericsson, and what process did they follow, was there a tender that was put out, and did they look at Ericsson’s BEE scorecard when making a decision.

Rev Moshoe asked Ericsson SA to clarify the contract termination that the Chairperson spoke about at the beginning, as to why it was terminated without reasons, why payment was made only after four months, yet just for one month.

Rev Moshoe asked Vodacom SA for the breakdown of the R7.2bn which went to black owned suppliers. What is the format of the R112m spent on skills development and whether is it a formal class lecturing method or people are trained on the job. He asked for the names of the three cooperatives setup by Vodacom SA, and their location.

Mr N Capa (ANC) asked Ericsson SA to explain the reason the company is 100% white which is negative in terms of demographics as it should not be seen as a racially exclusive organisation.

Mr Capa said that Ericsson SA mentioned that it is not where it wanted to be in terms of transformation and there are some challenges they need to address. He asked how they will address those challenges because transformation comes with obstacles.

Mr T Khoza (ANC) asked Ericsson SA whether it prepares beforehand those with whom it wants to terminate the contract, or is it something that happens suddenly.

Mr Khoza asked why the Transformation Unit was established only in June 2016. Was it because they were going to come before the Portfolio Committee to explain transformation in their organisation?

Mr Khoza asked if Ericsson SA supports only existing SMMEs or do they also assist new people who wanted to come into business.

Mr Khoza appreciated the three-day payment that was indicated by Vodacom SA, and it should share that knowledge with the Committee so it could assist other entities to do the same instead of the 30 days payment. They also appreciated that Vodacom SA is looking at cooperatives development and it should speed up that process in terms of job creation.

Mr R Kruger (DA) asked what the two companies were doing to reduce red tape so that small businesses and small contractors could get into business and supply chain management.

Mr R Chance (DA) asked Ericsson SA how it was possible to achieve its suppliers represented by SMMEs from 0% to several hundred billions overnight. What has it done with its previous suppliers, have they disappeared or how has it incorporated them otherwise?

Mr Chance complained that there was no scorecard in the presentation. He asked if Ericsson SA complied with the DTI equity equivalent provisions in terms of legislation. How that is being adopted by the company in calculating the ownership component of the scorecard?

Mr Chance asked Vodacom SA whether it saw supplier development as principally for the benefit of the suppliers or as part of the company’s drive to become more competitive as a business.

Mr Chance asked if the strategic direction at the CEO level included the realisation of possible competitive benefits to developing its supply chain. Do they develop these supply chains with a view to the global supply chain, not just South Africa? The SA economy has to grow and build businesses that will be globally competitive and enter global supply chains so as to achieve the NDP goals.

Mr S Mncwabe (NFP) referred to the three sewing cooperatives Vodacom SA has created in Gauteng and asked if it has any intention of expanding that programme to other provinces, or was it just a pilot project.

Mr Bekwa said he was very disappointed with the Ericsson presentation because it did not reflect what the company was asked by the Committee in terms of transformation, and nothing is reflected in terms of the NDP in the presentation. Next time, Ericsson SA should come up with a presentation which clearly reflects the transformation agenda of the organisation and looks at the NDP.

Mr Bekwa appreciated the Vodacom SA presentation. But the figures on youth development for graduate and learnerships programmes are not reflected or clearly defined with regard to the money spent on skills development.

The Chairperson asked in terms of BEE status what Vodacom SA does to uplift communities. Show the Committee the model used in Gauteng.

The Chairperson asked why Vodacom stores have a low black ownership, and who funds these stores.

The Chairperson asked what stipulations Vodacom has with Ericsson when it shifted its supplier contracts to Ericsson.

The Chairperson asked for clarity on the R280m which is for socio-economic development.

The Chairperson said that there is lot of racism when it came to the issuing of contracts whereby black suppliers are racially prejudiced in getting those contracts. She asked what Vodacom is doing about this.

Mr Kinana replied that Vodacom is against any form of racism. It is in that context that it is where they are in terms of BEE, the empowerment of women, youth and so on. There will be challenges as in any other institution and it was a journey they were all travelling on. And in their relationship with the Committee they will learn more and be subjected to introspection from time to time and be criticised in order for them to grow.

Secondly, they pride themselves on the role they play in economic development in South Africa. They will see the numbers of SMMEs they have developed. They develop, support and engage which is the model they are using in Vodacom.

Mr Kinana said that they still have confidence in Ericsson which is indicated by the way they still engage with the company and working with them in whatever scale.

Mr Kinana said that the message of their CEO was that they were not going to stand as the brand of Vodacom and be negatively affected in any way. Therefore, they have said to Ericsson, everybody should be able stand up and ensure they take responsibility for all their actions. Vodacom accepted the responsibility that they should have put in monitoring mechanisms even after they outsourced, and it is a lesson they were taking from the meeting.

They have already agreed with Ericsson that they are going to have monthly sessions in assessing where they are in managing all those entities that had been outsourced to Ericsson in ensuring that where there are shortfalls and challenges, they help them. As Vodacom, they take full responsibility of the current situation because they should have put in those monitoring mechanism at the beginning. But also Ericsson should take responsibility for what happened within that contract.

They have also agreed as a team that that model of monitoring is not only going to reflect on one entity but will be broadened so that they did not come back to the same issue again. Lastly, they have agreed with Ericsson that they wanted to review that matter and agree on short timeframe within which to come back and give a report. They would consult the respective principals and see what best they could do to remedy that matter because they admit that something has gone wrong for both companies.

On cooperatives, Ms Marthinus acknowledged that the Ministry of Small Business Development started in 2014 when the Portfolio Committee came into existence. Their negotiations with the DTI started also about that time. Vodacom merged with the Department of Small Business Development in Ekurhuleni Municipality which is a new model. They would not do a national launch without knowing where their strengths and their weaknesses are. To roll out the project nationally they need to first fix their weaknesses so that they would not impact negatively on people’s lives in the other provinces. It is their first year so they have no case study to report on as to the real impact on how it will change lives. They should be given time to assess the impact of the new model and then engage further once they know how the model works.

The Chairperson interjected that Vodacom should have said they were piloting a project that would empower the nation because if they were saying they were empowering the nation but only reflect Ekurhuleni Municipality they are confusing the Committee.

Ms Marthinus apologised for that confusion.

Ms Marthinus said that BEE transformation and economic development is not ring fenced to give effect to just growth in South Africa. She does not believe to grow black owned businesses in this country serves the interests of the country only. They are becoming a one world whole nation and in effect all national policies are to drive it towards the global family.

Ms Marthinus suggested that the questions raised by Members of the Committee may require them to make a further presentation so they could come back and respond to the Committee at a later stage.

On the question of R280m for socio-economic development, Ms Marthinus said that Vodacom’s emphasis is on education for the youth of South Africa and on health, and the security of people which is their core community building focus. It does not lie in putting up a building and saying they have done great. It lies in empowering people with necessary resources so that they can grow their foundations properly. Vodacom’s focus is in developing e-learning portals where school children can access the curriculum, the guiding tools for how to comprehend the lesson being taught. It is about empowering the teachers of the very students with skills on how to effectively utilise this new ICT digital world. Therefore, that is where Vodacom’s development lies. It is about bringing the medical sector closer to rural people so that people who are suffering from TB, HIV, or any other illness do not have to get into taxis to get into a particular hospital. Instead it is about bringing that service to those affected people so as to assist them in keeping down the cost of basic services to citizens.

On the R7.2bn spent on black owned suppliers, Vodacom’s supply chain engagement is a partnership based one, and not a supplier client base because they know every owner of an entity or who is holding value in it. In this regard, it would be proper for the Committee to give them a 14 day period to clearly verify to the Committee who those owners are or the suppliers’ names and look at the demographical layout.

On the R112m youth skills development investment, Ms Marthinus said that 80% of their skills training is tertiary qualified training. The reason is to ensure they grow the core corporate skills, which is very much needed in the international telecommunications sector. The constant onsite business training is coming on a regular basis. On the job training is a 365 day approach. More importantly, because they are part of this global International Telecommunications Union (ITU), and part of the specifics are governed by the ITU body, they obviously need to ensure people have those global skills sets and knowledge, which is about a balance between qualified certified training locally as well as international based training. In the middle, it is training that is specific to, for example, to Ericsson or in any of their international based suppliers with specific products. And the third leg is the constant on the job training, which is both an online experience as well as the physical in-the-field space.

Ms Marthinus said that it would be their pleasure to come back and report on the three-day payment model in their SMME strategy.

Mr Kruger asked what Vodacom’s relationship or partnership is with the Sector Education and Training Authorities (SETAs).

Ms Marthinus replied that they worked very closely with MICT SETA. The request of Vodacom or any other company is the recognisable BEE training trend. Vodacom’s training amounts to a total of R180m to R200m, and that spend component is limited to recognition from a BEE angle, not the collective training event.

Mr Essof apologised on behalf of Ericsson SA about the manner in which the presentation was made because there was no intention to undermine the Committee.

The Chairperson interjected that after the first letter she had sent to Ericsson SA, she also called the company while on sick leave. Their behaviour was not acceptable because when Ericsson SA received letters and there was no direct exchange to explain the situation, one would end up with the kind of presentation they have presented to the Committee. Therefore, Ericsson needed to deal with the Senior Management of Ericsson SA to bring up their level of understanding about what Parliament is.

Mr Essof agreed with the Chairperson and promised that they will ensure that the entire organisation understands the seriousness of this matter, and that goes to the transformation of the organisation to know how to handle such situations. He really apologised for this matter and the impression it has created.

Mr Essof said that they will go back and rewrite the presentation which will include the matters raised by the Committee in the initial letter and submit it to the Office of the Chairperson.

Mr Essof responded that there were no racial connotations whatsoever in the company because it is in their constitution, in the code of conduct and code of ethics. In fact any racial attitudes or impressions or behaviour is a dismissal offence in their company, and every employee has to sign off to that globally, nationally as well as regionally.

Mr Essof said that in terms of where Ericsson wanted to be, they have been transforming in the last number of years. With the revised BEE Codes in 2013, they started adjusting and relooking at what they needed to do, realigning themselves accordingly. Obviously, ever since 2015 they have put lot of emphasis into this and saw the need to employ a specialist. Also during 2015, they have engaged some external consultants and took that globally. This was to ensure their global organisation knows what they were doing locally and have signed off on it, and that is a process to follow in itself.

Mr Essof replied on the question about contract termination that most of their contracts have a national expiry date. When they come to a national expiry date, they notify the supplier that the contract has terminated.

Mr Essof replied about creating a Transformation Unit only in 2016 for the sake of the Committee, that it was not true because they have had that since before Mr Essof had joined Ericsson, and the transformation journey has long been there within the company. With the Transformation Unit, they want to overachieve in what they needed to do in South Africa and the region. On BEE compliance, they have achieved on those ambitions and do that professionally in a most diligent and thorough manner.

Mr Khoza interjected by pointing out that in the presentation it is stated that the Transformation Unit was established in 2016.

Mr Essof said that what they meant there is that what Ericsson did was to appoint a dedicated person to look after the transformation unit. Previously, this transformation unit was a dual function but they saw a need to appoint a dedicated person who could concentrate not only South Africa but regionally as well.

Mr Essof explained that ownership of their company is 25.1% locally owned which is ever since he joined Ericsson SA. There had been a couple of periods where new shareholders came in, but otherwise they are 25.1% locally owned. Their plan is to move to 30.1% by the end of this year. But not only that, they plan to move to 51% black owned as well. Therefore, they were looking at every element of ownership because they did not have any equity level. They were looking at different ways of handling this and looking for a chart for the benefit of beneficiaries, perhaps by selecting graduates from universities, providing them with bursaries so that they complete their education, and bringing them in and impart exposure and skills from a corporate perspective.

Mr Essof replied to the question on strategic decisions at CEO level, saying that they have a regional team that operated and managed strategic decisions across the region, not only in South Africa. Obviously they have local requirements in certain territories and this is where they need to focus, and that process is ongoing. Therefore, the real issue is not in terms of the strategic decisions that they need to make as they already have made those decisions, which are in their strategic policy.

The Chairperson thanked Mella Trading for raising its concerns with the Committee because it afforded them the opportunity to talk about this. She was sure that both Vodacom SA and Ericsson SA understand how the Committee thinks from a small business perspective. This is not the last time they would engage on such matters because from where they speak they will not “continue as usual” because the majority of people are mere consumers and only a few are traders of goods. Therefore, they should not live in a country that excluded the majority of its citizens from the mainstream of the economy. Black South African use airtime and the majority of them are on prepaid. Therefore, the telecommunications companies should give opportunity to black traders to economically benefit from the telecommunications space.

The Chairperson thanked Vodacom SA for its presentation. She also thanked Ericsson SA for appearing before the Committee and requested the company go back and make a presentation that reflected the economic transformation of the organisation.

The meeting was adjourned.

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