Transformation remains a bitter pill

By SLINDILE KHANYILE – Business Report

PHARMACEUTICAL companies belonging to the Pharmaceutical Industry Association of South Africa (Piasa) say sourcing and retention of technical talent is the biggest barrier to their efforts of embracing transformation.

However, the companies are making progress in the areas of management control, skills development and preferential procurement.

This is according to recent research that was commissioned by the industry association, done by Transcend Corporate Advisors and verified by Nera, an accredited rating agency.

Through this exercise, 10 of the 18 Piasa members have obtained black economic empowerment (BEE) ratings for 2009, compared with three a year ago. Fourteen members participated, while one declined for merger reasons and the other three refused.

From 2008 to 2009 the average total score increased from 35 percent to 43 percent, an equivalent to a Level 7 score.

When compared with the national average of the JSE-listed companies, Piasa members scored comparably or above average in respect of management control, employment equity, skills development and preferential procurement.

Robin Woolley, a director of Transcend Corporate Advisors, said the pharmaceutical industry had not reacted strategically to transformation, but was more focused on the scorecard than the transformation of the value chain in the sector.

The report says a minority of companies had active talent management plans or talent management as a representation of transformation teams.

“A mixed response to the ownership questions was obtained because some companies felt that most companies are in a similar boat with respect to ownership and so, quite frankly, have not applied their mind to the issue.

“Very few of the companies interviewed (two) have started to think about practical approaches to equity equivalents,” said Woolley.

He praised companies’ achievements as far as socio-economic development was concerned, saying in many cases they exceeded targets set.

Piasa’s members include Adcock Ingram, Galderma and Bristol-Myers Squibb.

Other industry associations for the sector are Innovative Medicines of SA, which has 11 members such as Pfizer and Lilly. There is also the National Association of Pharmaceutical Manufacturers, which has 20 members, including Cipla Medpro SA and Ranbaxy, and Pharmaceuticals Made in South Africa (Pharmisa) with eight companies, such as Aspen Pharmacare and Litha Healthcare.

Stavros Nicolaou, the chairman of Pharmisa, said its companies had among the highest level of empowerment at ownership level. “Areas of improvement would include enterprise development and procurement, remembering of course the difficulties with procurement, given particularly that the single biggest item procured in pharmaceuticals, is that of raw materials, most of which are imported,” said Nicolaou.

Last year, Keith Levenstein, the chief executive of EconoBEE, said some multi-national pharmaceuticals firms used imports as an excuse not to comply with BEE legislation – an observation which the industry denied.

“The whole BEE process is voluntary and those companies that are motivated are those which do tender work. We realised that people had not started because when we began the process, only three companies had been rated,” said Vicki St Quintin, the chief operating officer of Piasa.

“The important thing was to get people started. As our members engage in the process, they find it is far less daunting a prospect than they thought. In losing their fear, they get better at implementing it and continue to improve. It is clear from the scores that those companies that have engaged in the rating process are achieving much more” she said.

Piasa will hold follow-up workshops to focus on skills development and talent retention and preferential procurement.

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