The Adjustment for Gender – Exposed

Technical Article – Adjustment for Gender

The concept of “adjustment for gender” was included in the latest codes. Prior to that there were specific indicators for black people and black females in many of the elements.

The objective of the adjustment for gender is to recognise that black women play a more important role in the BEE scorecard than black men. We have tended to say that “Women are twice as important as men” on the scorecard.

On the old draft codes many elements had more indicators e.g.

Percentage of black people in management
And
Percentage of black women in management

Previously each indicator had its own target and earned points separately.

This is exactly how the ownership scorecard currently works:

Exercisable voting rights in the hands of black people is worth 3 points with a target of 25% plus one vote.
Exercisable voting rights in the hands of black women is worth 2 points with a target of 10%.

Therefore if a company is 25% or more owned by a black man, then that company will only earn 3 points for the voting rights indicator.

If the company is 15% owned by a black male and 10% owned by a black women it will earn 3 points for the first indicator and another 2 for the second.

However in the generic management scorecard the codes use the words “adjusted for gender”, instead of having a separate indicator like they have done for ownership. A possible reason for implementing the adjustment for gender is it helps reduce the number of indicators on the scorecard. It was reported that the minister specifically instructed the task group to simplify the scorecards. By including an adjustment for gender it has reduced the size of the scorecard.

The adjustment for gender is intended to include black women, not EXCLUDE them,  General principles of B-BBEE (Code 000, statement 000, paragraph 9 “Enhanced recognition for certain categories of black people) states that:

9.1 Black women should form between 40% and 50% of the beneficiaries of all elements of the Generic scorecard.

As will be seen later the mathematics that the codes use, as well as the verification guidelines do not follow this statement.

How does the Adjustment for Gender work:

The codes state:

Recognition ratio = B/2 + C
Where B = the percentage of black people in the category
And C is the percentage of black females in the category.
C is limited to 50% of the target.

Points are then earned via this formula;

Points = Recognition Ratio/Target * Weighting.

Lets us use a worked example: say directors

Voting rights of black board members adjusted for gender:

Target is 50%, and there are 3 weighting points for this indicator.

{tab Example 1}

If we have 10 members of the board, 2 black female and 3 black male the following applies:

We have 5 black board members out of 10
Percentage of black people in category = 50%
Percentage of black females in category = 20%
Recognition ratio = 50%/2 + 20% = 25% + 20% = 45%
Points to be earned is: 45/50 * 3 = 2.7 points

By inspection we can see that the reason for not obtaining full points is the percentage of black females is below targets, even though the total percentage of black people reached 50%

{tab Example 2}

Now take a second example where there are 2 black female and 2 black males:

We have 4 black board members out of 10

Percentage of black people in category = 40%
Percentage of black females in category = 20%
Recognition ratio = 40%/2 + 20% = 20% + 20%  = 40%                                                                  

Points to be earned is: 40/50 * 3 = 2.4 points

{tab Example 3}

A third example illustrates the 50% limitation rule. Let us assume that there are 6 black female and 2 black males:

We now have 8 black board members out of 10

Percentage of black people in category = 80%
Percentage of black females in category = 60%
However the rule states that you cannot have more than 50% of the target being black females in the category so the 60% is reduced to 25%

This is a mathematical adjustment to ensure that points earned do not exceed the maximum points available.

Recognition ratio = 80%/2 + 25% (60% is greater than 50% of the target) = 40% + 25% = 65%

Points to be earned is: 65/50 * 3 = 3 points (the maximum that can be earned.)

{tab Example 4 – The ERROR}

The fourth illustrates the error that the codes make in their algebra. Let us assume that there are 0 black female and 10 black males:

We now have 10 black board members out of 10

Percentage of black people in category = 100%
Percentage of black females in category = 0%

While the rules do state that you cannot have more than 50% black females in the category, they do not say the same for black males.

Recognition ratio = 100%/2 + 0% =  50%

Points to be earned is: 50/50 * 3 = 3 points (the maximum that can be earned)

{/tabs} 

This shows that using the adjustment for gender it is possible to earn full points by only having black males. This is in contradiction to paragraph 9.1

We believe this to be an error in the algebra of the codes. As a measurement principle the BEE codes do not award additional points to a company where they over exceed the targets. The adjustment for gender specifically awards points to females.

Our interpretation of the adjustment for gender is:

Half the weighting points are RESERVED for black women

The other half are RESERVED for black people.

In the example above we would say that 1.5 points are reserved for black people, and the other 1.5 points are reserved for black women. In the case of example 4, because there are no black women, the enterprise will only earn 1.5 points. On the other hand if all 10 directors were black women, the enterprise would earn 1.5 points under the category black people, and the other 1.5 points for black women, i.e full points.

This is exactly how the ownership scorecard works. Even if the enterprise is 100% owned by a black male, it will lose points for not having black female ownership.

 

Following the concept of “substance over form”, it is obvious that the codes WERE intended to allocate 50% of the points to black females and 50% of the points to black males. The algebra may be faulty, but any interpretation that follows the algebra at the expense of substance over form is more faulty.

The Solution

Where the rules for adjustment of gender clearly state:

percentage of black women is limited to 50%,

it should also have stated

percentage of black people is limited to the target % (50% in this instance).

This would have ensured that the algebra was always correct.

There are instances when this error can cause up to 7.5 points difference. For example employment equity on the QSE scorecard has an indicator – Black employees who are management adjusted for gender. It has a weighting of 15 points.

Take the example of a small black owned company that has only one black male manager. Our methodology would award 7.5 points, but other interpretations would earn the full 15 points. If the black manager were female both approaches would award 15 points.

{tab Example 4 – The Error corrected}

We now have 10 black board members out of 10

Percentage of black people in category = 100%
Percentage of black females in category = 0%

While the rules do state that you cannot have more than 50% black females in the category, they do not say the same for black males. It should however be limited to the target (50%).

Recognition ratio = 100%/2 + 0% =  50%
Recognition ratio = 50% (limited to the target)/2 + 0% =  25%

Points to be earned is: 25/50 * 3 = 1.5 points (the maximum was not earned)

{/tabs} 

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