Implementing broad-based black economic empowerment

The figures that follow and that describe Old Mutual (SA)’s performance against the Financial Sector Charter were verified by On Track Verification Services. There were instances, however, where Old Mutual (SA) and On Track applied their own interpretations where inadequate definitions and measurement details existed in the Charter. When these areas are clarified the Old Mutual (SA) scorecard may be affected.

Clarification of definitions and scoring methodology used by On Track are contained in the “Scoring against the Charter” boxes at the bottom of some pages in this report.

Ownership and control

In April 2005 the Old Mutual Group announced a long-awaited black economic empowerment transaction whereby 13.6% of Old Mutual (SA) became black owned in a deal worth about R3.5 billion. The largest part of the deal in Rand terms is the staff component. Management participated through a Senior Black Management Plan and a Management Plan. In addition, every permanent staff member who did not participate in any management plan was given shares worth R7 500.

The empowerment partners were selected on two broad criteria: their sound track records and significant depth of skill in financial services; and because they embrace similar values to Old Mutual (SA).

Old Mutual (SA) wanted to provide a meaningful benefit to members of trade unions who are Old Mutual (SA)’s customers. Therefore 2.3% of the value of Old Mutual (SA) is housed in a new Education Trust, which aims initially to fund tertiary bursaries for the children of union members.

In addition, the deal aims to position financial services as a career choice among black professionals while at the same time improving access to financial advice and services for black communities. As part of the empowerment transaction, a trust was created which will be used to provide access to finance for black intermediaries establishing themselves in the financial services sector. This complements the work of the Academy for Financial Planners and the Selekane Brokerage (see skills development).

In terms of executive control of Old Mutual (SA) it is worth noting that black executives lead business units that produce over 50% of Old Mutual (SA) operating profits. In addition the Board composition at end-December 2005 was:

• Black: 35%
   
• Black women: 5.56%, and

Executive management was:

• Black: 24%
   
• Black women: 2%

The measure of control of Old Mutual (SA) is affected if directors appointed by the global Board and appointed to the local Board (Messrs Sutcliffe, Head, Clewlow and Nkuhlu) are discounted under the provisions of the Charter.

The changed picture is reflected below, potentially adding one more scorecard point:

• Black Board members: 45%
   
• Black women on the Board: 9%

For the purposes of this report, Old Mutual (SA) has decided to include the global directors in its control measurement.

The structure of the Old Mutual (SA) transaction

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Two of the company’s black executive management. On the left, Thabo Dloti who heads the investment cluster and on the right, Khehla Mthembu who is General Manager: Corporate Affairs.

Old Mutual (SA)’s Financial Sector Charter scorecard*

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Employment equity and creating a non-discriminatory workplace

The empowerment principle behind employment equity is to ensure that black professionals and staff are afforded the opportunities denied them as a result of discrimination over many years. Targeted recruitment offers people the opportunity to enter positions previously denied them. But this must be accompanied by a concerted effort to ensure all staff work in an environment that values diversity. Old Mutual (SA) has made significant progress in the last few years in realising these principles, as described below.

An integrated human resources development team is implementing several initiatives to ensure that the changing Old Mutual (SA) workplace delivers peak performance.

Complementing targeted recruitment, the Old Mutual Talent Manager implements a processing system to ensure a focus on developing and promoting internal talent across race, gender, and disability.

Old Mutual (SA) has appointed a Diversity Manager whose role it is to facilitate intercultural sensitivity, management action against racism, an inclusive workplace and generally to create a non-discriminatory workplace. The Diversity Manager identifies and addresses barriers to affirmative action, and highlights workplace activities and/or policies that are proving obstacles to transformation. Progress reports are presented to Executive Management and the Old Mutual Employment Equity Consultation Committee (which includes staff representative bodies) during the year, as well as to the Department of Labour. Various workshops are held to support diversity management.

Employment equity and diversity remain the cornerstones upon which the transformation of Old Mutual (SA) rests.

Old Mutual (SA) – Detailed employment equity profile (using Charter categories)

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Ragil Ratman and Aneline Rhoda (far left) and Jackie Stemmers and Maxwell Kubheka (right) are members of the consolidated Human Capital Development team. On the left is Dennis Beckett, a guest of the Management Encounters with Transformation dialogue series begun in 2005.

Skills development and learnerships

ADMIT is an accelerated development programme that identifies and fast-tracks high-potential young people from black communities who show the potential to become IT thought- and people managers and therefore provide Old Mutual (SA) with future mid-level IT managers. In addition, the highly customised mentorship programme LEAP will be introduced in 2006 to prepare existing black IT staff for senior posts. This investment has totalled R1.9 million over three years (2005: R1 million).

The Old Mutual Actuarial Transformation Programme was launched in 2001 and set out to identify and support black actuarial students through to qualification in the field. The programme began with 13 bursary holders and has since grown to 23 black students out of a total of 34 bursary holders. A notable success of the programme has been the qualification of the first black woman actuary in South Africa. The programme has built on this milestone with another two women actuaries qualifying in the last year. The first seven graduates have all commenced full-time employment in various Old Mutual (SA) business units. The total investment since inception of the programme amounts to R6 million (2005: R1.67 million).

In support of the company’s overall transformation initiative, the Retail business segment introduced the Graduate Accelerated Programme (GAP) which aims to develop talented graduates into Assistant Divisional Managers (ADM’s) within three years. The GAP participants undergo extensive orientation and then work within various business units to further their technical understanding of the business and shape their leadership competencies. In the year under review there were 11 graduates on the programme.

The Training Outside Public Practice (TOPP) programme aims to identify and train mostly black Chartered Accountants, an area of skills development which poses a particular challenge to the South African industry. Last year, Old Mutual invested R2.4 million in the programme, on 7 trainees and 12 bursars. This initiative is supplemented by the organisation's involvement with the Association of Black Accountants of South Africa (ABASA), an association devoted to promoting the profession to black students and providing the relevant support.

The Old Mutual Academy of Financial Planners was established two years ago to provide quality training to carefully selected black professionals wishing to start a career in financial planning. The first of its kind in the country, the Academy offers an “earn while you learn” programme through Old Mutual (SA)'s Selekane brokerage which was set up to enable students to fast-track their careers under the guidance and supervision of managers. While students have Old Mutual (SA) bursaries, Sanlam and Metropolitan provide product and systems training to students, who may decide to include these companies among their portfolio of assurers. In 2005, Old Mutual (SA) invested R4.6 million in the Academy, with an aggregate three-year investment of R16.3 million. In June 2005, 29 independent black brokers graduated from the Academy.

Old Mutual Broker Distribution has provided R1.4 million in loans to facilitate the development of black broker trainees, and has directly invested a further R2 million in the training and development of black sales staff who are potential managers.

In 2005, the Old Mutual Business School offered learning options under four key themes that address the knowledge and skills needed to grow as an individual, develop change resilience, lead people, and harness the potential workforce.

“Invest in yourself” offers a suite of options for personal development recognising the individual employee as the critical heart of the organisation and as Old Mutual (SA)’s primary source of competitive advantage. “Making change happen” recognises the fluidity of the competitive environment and develops Old Mutual (SA) employees’ ability to change, to operate in an open environment, responding rapidly in an organisation that is flexible, innovative and learns quickly. “Lead effectively” aims to enhance the capabilities of Old Mutual (SA) leaders at all levels and to entrench an holistic leadership framework that addresses their primary role – to tap into and unleash the energies, passions and potential that exists within the organisation in the execution of the corporate strategy. “Celebrate diversity” helps employees recognise and appreciate differences between themselves that transcend race and cultures, including personalities, thinking, learning and working styles.

The company’s procurement and enterprise team have a focus on small and medium enterprises. The rationale is that a thriving SME marketplace will drive employment and entrepreneurship, two commodities vital to South Africa’s resurgence.

Two of Old Mutual (SA)’s SME partners are pictured. On the left, Dolores Kilshaw from Key Stationers which provides the Old Mutual (SA) Head Office with its stationery needs and on the right, Durell Platt from the Indibano Coffee Shop located at Old Mutual (SA) headquarters.

Through the Amathuba Learnership Project, the first intake of 84 learners – matriculants with no previous work experience who are trained in the Old Mutual (SA) workplace – graduated during 2005, and a second intake of 200 began service in 2005. Both groups were sourced from around the country.

Learners are provided emotional support, trained in the skills required by financial institutions, and given personal mentorship. The intention is for Old Mutual (SA) to have trained a number of learners equal to 4.5% of its workforce by 2008.

The Old Mutual Business Administration Learnership Qualification (at National Qualification Authority Level 4) was created in cooperation with the Services and Insurance Sector Education and Training Authorities to address the need for a high-quality, entry-level, accredited learnership qualification.

Pictured on the left are three key members of the company’s empowerment financing team: Derrick Msibi, Mark Gevers and Jacci Myburgh. On the right is Ben Kodisang, Managing Director of Old Mutual Properties.

In addition, two new leadership programmes were introduced to build the Old Mutual (SA) pipeline: the Leadership Development Programme facilitated by the Gordon Institute of Business Science for emerging leaders, and the Postgraduate Diploma in Management Practice offered by the UCT Graduate School of Business for middle and senior leaders. An important addition to improving our delivery capability is the introduction of the internationally accredited Prince 2 project-management suite of learning programmes. Talented managers are supported through study loans and at the company’s cost to complete various external training programmes, including the Master of Business Administration (MBA) and the Postgraduate Diploma in Management, conducted in collaboration with UCT’s Graduate School of Business.

As at the end of December 2005, Old Mutual (SA) had invested 7.7% of payroll (R186.1 million) in training staff at the Old Mutual Business School, with 3.56% of payroll invested in developing skills among black staff. More than 61% of all staff had undergone some form of training during 2005, with a total number of 28 859 courses undertaken by black staff.

Procurement and enterprise development

Old Mutual (SA)’s procurement team set out to consolidate the upsurge in preferential procurement achieved over the last three years (see table below).

During the year more than R140 million made up of some 23 000 invoices was paid to black small- and medium-sized enterprises (SMEs). To assist these suppliers with their cash-flow requirements, Old Mutual (SA) endeavoured to pay them within 14 days. During the year Old Mutual (SA) made its target in respect of 76% of the suppliers concerned: 47% were paid immediately, 17% were paid within 7 days, and a further 12% were paid within the 14-day timeframe.

Moreover, in keeping with the company’s commitment to assisting mostly black SMEs, 178 new black vendors were loaded onto the Old Mutual (SA) supplier database, representing an aggregate annual spend of R15 million.

Affirmative procurement

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This year Old Mutual (SA) will measure all suppliers on broad-based BEE performance in line with the dti Codes of Good Practice.

Old Mutual (SA)’s procurement team has facilitated partnerships between large and small companies, particularly in the area of auditing. Larger audit firms were encouraged to identify and partner with smaller black audit firms to create relationships that made skills transfer possible, and heightened the visibility of smaller firms in the broader market. One such partnership was facilitated in the award of the audit of the Old Mutual Orion Fund, a contract worth just under R1 million in audit fees. In this instance, KPMG won the contract, and elected to work with SAB&T.

The procurement team has also been instrumental in creating opportunities for other SMEs, such as AV Alliance that was awarded a R350 000 contract to renovate the Old Mutual (SA) auditorium and successfully worked together with Old Mutual (SA) teams to complete the work within budget and timelines.

Access to financial services

Access to financial services as defined in the Financial Sector Charter is achieved in two ways: through products that are affordable and relevant to South Africans in the LSM 1 – 5 range, and through consumer education. The latter is intended to ensure that people are empowered to make worthwhile financial decisions.

Agreement was reached late in 2005 on a suitable product for the life assurance industry, but this was too late to be considered for scoring under the Charter in 2005. Nevertheless, Old Mutual Group Schemes has already made available products to this market and counts over 600 000 of its 800 000 customers in the low-income category (earning between R2 500 and R8 000 gross income a month).

Consumer education has long enjoyed sponsorship by Old Mutual (SA). During 2005, SABC2 aired the Old Mutual (SA) sponsored Big Five Secrets of Financial Management series. This sponsorship amounted to R2.1 million. Old Mutual (SA) continued its Soul City sponsorship at a cost of R3.1 million. Soul City includes financial education as a theme throughout the series.

Empowerment financing

During 2005, Old Mutual (SA) facilitated empowerment transactions worth R2.2 billion (R1.9 billion for companies more than 50% black owned, and R276 million for companies more than 25% black owned).

Infrastructure is fundamental to the continued growth of the South African economy. In turn, a strong South African economy is key to the objective of an “African Renaissance”, which our government has made central to its foreign policies. Old Mutual (SA), as a major investor in, and manager of, infrastructural assets plays a major role in enhancing the country’s infrastructure.

At the end of 2005, Old Mutual (SA) managed R5.02 billion worth of infrastructure assets at market value (2004: R4.9 billion). As at the same date, commitments and direct investments into infrastructure made by OMLACSA amounted to R2.2 billion at market value.

Based on an interim assessment of contributions, R119 million can be counted under Charter criteria. There are still issues that require resolution by the Charter Council and which may affect which amounts can be used and scored against.

Corporate social investment

The Old Mutual Foundation is the main contributor to corporate social investment in the Group.

The past year was the second year in the Old Mutual Foundation’s three-year medium-term strategy.

The Foundation successfully invested its full R20 million budget in three long-term flagship projects, two new initiatives, and a programme of general donations. The table below is a summary of those investments.

The Foundation team aims to add value to communities through a concerted focus on sustainable development, HIV/AIDS orphans, and education. In addition, staff have been encouraged to participate in volunteer activities through long-standing internal initiatives such as the Staff Community Builder Programme, the “Adopt” an Orphan initiative, and the Staff Charity Fund.

The Rural Economic Development Initiative (REDI) network has grown both in the number of champions who act as catalysts to initiate projects in their areas, and in the number of communities affected. Some excellent new businesses (mostly rural) have been supported, and a number of food security programmes implemented, enabling communities to begin to address other developmental issues.

Corporate social investment through the Old Mutual Foundation

More and more orphans are being identified and included in the AIDS orphans projects in partnership with Nurturing Orphans of AIDS for Humanity (NOAH), Heartbeat and, more recently, with Children of the Dawn (previously a small initiative within REDI).

The new initiatives piloted by the Foundation last year (and described in the 2004 Corporate Citizenship Report) are beginning to demonstrate their worth. Through the “Product 2 Market” initiative, for instance, numerous people have been trained in organic farming and they are now being assisted to access genuine fresh produce markets. The result is an income for some families – in several cases for the first time. Also, 18 master craftsmen came to Cape Town to receive six weeks of intensive training in product development, marketing and sales skills during 2005. They returned to their communities to share their learnings and will provide products for the “Product 2 Market” initiative in Darling Street in central Cape Town starting in 2006.

The “Out of the Box” schools environmental education programme already has 116 institutions using the provided resources. The SABC has shown an interest in including some lesson plans designed for use in school classrooms in their “Beyond the Classroom” programme on SABC2 and has already filmed one such lesson.

Rural Economic Development Initiative (REDI)

REDI serves 20 communities through its focus on creating local economic development opportunities and providing holistic community development/support initiatives. These initiatives range from providing capital to startup and existing micro-enterprises, to facilitating the renewal of school facilities, and providing support for AIDS orphans.

The initiative is financially sound and therefore well positioned to continue making a difference to communities on a sustainable basis. REDI has successfully met its fiduciary responsibilities and is a benchmark for similar agencies.

In 2006, a final amount of R2.8 million will be allocated to the REDI network. Thereafter the Old Mutual Foundation will work with the network to fund specific sustainable development and/or welfare projects undertaken by the network.

The AIDS Orphans Programme

The programme continues to expand. The Old Mutual Foundation now supports orphan projects in seven provinces: Gauteng, Free State, KwaZulu-Natal, Eastern Cape, North West, Mpumalanga, and Limpopo. A total of 16 671 children are now supported through these projects, either directly or indirectly, through partnerships with NOAH, Heartbeat, Children of the Dawn, Uthando, Helping Hands, and others.

The Staff Volunteer Programme

The programme is designed to provide resources and donations to initiatives in which Old Mutual (SA) staff members are involved as volunteers. During 2005, a total of 106 projects were approved via the Staff Community Builder Programme, resulting in an amount of R1 806 250 being allocated to the community through the work of volunteers.

Group Schemes again proved to be the business unit most active in promoting staff volunteerism, followed by the Personal Financial Advice (PFA) unit.

Staff members can also elect to make donations from their monthly salaries, and have these deductions made payable to organisations supporting abused children, HIV/AIDS, the elderly, and/or animal welfare.

These deductions are matched rand-for-rand by the Foundation.

A total of 20 organisations were supported through the Staff Charity Fund this year, with R374 121 being distributed.

Since the inception of the volunteerism programmes in August 2002, Old Mutual (SA) staff have donated just over R1.8 million.

General donations

In 2005, community development donations were made to hospices and hospitals, welfare organisations, and a further 38 projects operating in the areas of skills development, providing food security and equipment for income generation.

In total, 15 projects received funding from the general ad hoc fund totalling R0.6 million, whilst three projects totalling R0.2 million were funded out of the Chairman’s and Managing Director’s fund. Substantial donations were made to the Tsunami disaster, the Cape Philharmonic Orchestra, the SA Youth Ministers project, and to the Transnet Foundation’s Phelophepa Health Train.

New initiatives

The “Out of the Box” environmental education programme piloted in 2004 in 20 schools in Gauteng is now being implemented in 116 primary schools in four provinces: Eastern Cape, Gauteng, KwaZulu-Natal, and Western Cape. There are 750 teachers on the programme, impacting on some 25 000 learners. Each teacher on the programme has received a resource kit designed to enable teaching across subjects with environmental education at the core. The programme was designed with grades 4 – 6 (intermediate phase) in mind, however in most schools both senior and foundation educators attend the workshops.

Four service providers assist the Old Mutual Foundation in delivering the programme to schools. They are ECO Schools, the Maths Centre, the Primary Science Programme, and the Schools Development Unit (SDU).

The “Product 2 Market” project was developed in partnership with the Cape Craft Design Institute (CCDI) to facilitate sustainable development with special reference to black economic empowerment. A budget of R2.0 million was allocated to this project in its first year. The project's aims are:

• to create access to markets for crafters;
   
• to encourage economic growth and empowerment;
   
• to offer ongoing training and development; and
   
• to exhibit crafts and products.

The small-scale farming project, in partnership with Organic Farms Group (OFG), began in 2005 with projects established in KwaZulu-Natal, Limpopo, Western Cape, Gauteng, and Free State. Numerous training programmes have been undertaken with excellent results and with good relationships having been built between Old Mutual (SA), the Foundation, and various government departments. Some commercial successes have already been recorded where food security projects have become financially viable.

Old Mutual (SA) is deeply involved in community issues, supporting teaching in areas around the country such as Gugulethu. Particular attention is paid to supporting the teaching of mathematics, science and environmental management.

Business units and corporate social investment

While the Old Mutual Foundation is the principal corporate social investment practitioner in the group, various business units have built up long-standing community relationships of their own, and have developed strong track records for community giving.

The table below summarises the corporate social investments made by Old Mutual (SA) business units.

CSI spend by Old Mutual (SA) business units