HUMAN
CAPITAL


HIGHLIGHTS

  • Morale has remained strong amidst a difficult period of transition
  • Over 200 long-service awards made to loyal employees, representing 4 130 years of working with Altron
  • Following the success of our community ICT training centre in KwaMashu, KwaZulu-Natal, our CSI committee opened another similar centre in Soweto, Gauteng

CHALLENGES

  • Maintaining our empowerment status under the new B-BBEE ICT Sector Code
  • Transformation at senior management levels and market perceptions of management profile
  • Scarcity of core business talent and industry-specific skills




PERFORMANCE SUMMARY

2017:
total
Core Non-core 2016:
total
Core Non-core 2015
Total permanent employees 10 219 8 206 2 013 12 676 8 362 4 314 12 049
Corporate 57 57 40 40 117
Altron TMT 8 445 8 149 296 8 709 8 322 387 7 712
Altron Power 1 717 1 717 3 927 3 927 4 220


2017 2016 2015
Group employee turnover rate (%) 1,90 1,64 2,24
Total training spend in SA (Rm) 87,5 86,5 110,3
Group B-BBEE contribution level (ICT Charter) 2 2 2
Total corporate social investment (Rm) 8,4 10,4 10,7

MATERIAL ISSUES

Altron is founded on its people, who are the driving force behind our success as a group. As we continue to streamline our operations, our human capital remains an important priority.

In 2017 Altron’s goal in this respect remained unchanged: to build and maintain a diverse, loyal, performance-driven workforce that is innovative and effective and which reflects Altron’s collaborative values and culture. Our three material focus areas within human capital address these key issues: transformation, human resources and company culture.


OUR APPROACH

We value superior intellectual capital and we work to attract and retain talented, skilled employees from diverse backgrounds. In return we prioritise our employees’ satisfaction and well-being and support their ongoing learning and professional development. In this way we aim to promote a stable, effective workforce that is able to drive the future growth of the group.

STAKEHOLDER ENGAGEMENT

Regular and candid engagement with our employees is critical to our ability to create and maintain a collaborative company culture and to ensure the happiness of our workforce. This has been particularly important during the recent times of challenge and change faced by the group, where job security has been a key concern amongst our employees. As our most important asset, our employees’ feedback is encouraged and carefully considered in how we operate.

We engage with our employees through a variety of events, internal newsletters and publications and communiqués. These include regular letters from the chief executive, intranet communications and our quarterly internal group magazine, Perspective, which provides regular updates on news and business and individual achievements of both companies and employees throughout the group. We use forums such as staff meetings and events, road shows and presentations to receive feedback.

Altron also subscribes to “Tip-offs Anonymous”, an independently run service that enables employees to report illegal actions and ethical misconduct (see “Ethics Review” here for more detail). We have found that this provides an important channel for employees to freely express a broad range of recommendations and concerns regarding workplace and management.

FEEDBACK ON 2016/17 COMMITMENTS




KEY RISKS

RISKS KEY MITIGATION STEPS
  • The pre-existing shortage of relevant skills within the industries in which we operate as well as the retention of current skilled employees
  • Bursary programme and targeted skills development initiatives to grow and maintain talent pipelines
  • Transformation, particularly at senior management levels, as well as lack of transparency relating to transformation initiatives, creating incorrect market perceptions
  • As positions become available within the group we source and promote talented black candidates where possible
  • The new Altron group selection committee will monitor and manage a strategic succession planning replacement strategy
  • Retaining current B-BBEE levels to ensure competitive advantage
  • We have analysed our group operations in reference to the new ICT Sector Code requirements and have prioritised group spend and resource allocation to work towards regaining a competitive empowerment level across our operations

TRANSFORMATION

Business context

For Altron, transformation is about more than meeting B-BBEE regulatory requirements. We believe in driving empowerment, but we also see diversity as a catalyst for innovation and an important competitive value proposition. We are therefore committed to building a diverse workforce that reflects the diversity of our clients, our partners and society. This means bringing together a mix of skills, experience, culture, gender, age and race. We therefore take a deliberate, strategic approach to recruiting, developing, retaining and promoting black talent at all levels.

Pursuing our transformation agenda has been challenging this year. During November 2016 the amended B-BBEE Code of Good Practice for the Information and Communication Technology (ICT) sector came into force (the “ICT Sector Code”), requiring immediate compliance.

As at the time of printing of this report we continue to trade on our valid certificates issued before the gazetting of the amended sector codes. However, the impacts of the new code are already felt throughout the group. This new regulatory environment, in addition to the difficult period through which the group has come as a business, will pose a significant challenge to achieving our transformation targets and retaining our existing rating going forward.

Our performance

We are proud of our transformation performance this year and, with Level 2 B-BBEE ratings across the group, we consider ourselves to be a leader in the industry. However, like our peers within the industry, the new ICT Sector Code will negatively affect our performance and our ratings, and will result in significant additional expense for the group in order to maintain a competitive empowerment level.

At a B-BBEE Level 2 against the previous ICT Sector Code, we were confident in tendering for contracts. At a lower empowerment level, however, there are many more competitors in the marketplace. Altron – like all of its peers in the ICT industry – therefore faces enormous pressure to address the new requirements quickly, in order to retain its competitive advantage.



B-BBEE

Altron’s B-BBEE status is an upward consolidation of the B-BBEE status of each of its operating subsidiaries and divisions. Each is independently responsible for the results of their certification, which is assessed and verified in June each year.

In June 2016 Altron was rated Level 2 across the group, with all operations performing as expected. At the time of publishing this report the 2017 B-BBEE assessment is under way, with results expected in June 2017. Due to the increased requirements of the new ICT Sector Code we anticipate that – as will be the case for most of our peers – our group score will change to a Level 4.


In response to the code we have analysed each of our operations in reference to the requirements of the new codes to establish where and how we can regain points on the scorecard. We anticipate that some businesses may attain a Level 4, or even a Level 3. Across the group, we are determined to achieve at minimum a Level 4 and we are comfortable that this will be achieved.

In 2017 the group’s performance against the five scorecard elements was as follows:

Ownership

Our main equity partners in our core operations are Southern Palace Group, which holds a 25% + 1 share of Altech Radio Holdings; Power Matla, which holds a 25% + 1 share of Altech UEC South Africa; and Thebe Identity Investment Corporation, which holds a 25% + 1 share of Altech Netstar.

Management control and employment equity

Black representation at top and senior levels of management remains a challenge for Altron and it is an area in which we recognise a need for improvement. In our interactions with customers, particularly government and state-owned enterprises (SOEs), it is particularly important that the go-to-market management profile of the group is sufficiently diverse, reflecting a range of senior black and female employees, to ensure future business opportunities with those entities that rely on our empowerment ratings.

While we are determined to drive transformation at management levels and throughout the group, there are key factors that affect our ability to make short-term, meaningful change. Most significant of these is that turnover at Altron is very low, particularly at senior levels. While we are proud of our employees’ long-term commitment to Altron, this means that there are few opportunities to fill vacancies with black talent.

Another factor that has remained relevant in 2017 is the limited growth or downscaling of many of our operations, which means that we are unable to bring in many new employees. As positions do become available within the group, however, we source and promote black candidates where possible.

We are also cognisant that our transformation imperative must be implemented strategically, with care and balance, as we must retain appropriate skills and experience at our top levels. To this end, in October 2016, we launched an Altron group selection committee, chaired by the chief executive. This task team has identified the top 125 management-level employees throughout the group and will monitor and manage succession planning and employment within those positions centrally and strategically over the next five years. We envisage that this strategic replacement strategy will, in time, result in a solid and sustainable top management level at Altron that is diverse in skills, age, gender and race.



Skills development

Note that this section refers to skills development for purposes of B-BBEE. See more on Altron’s broader approach to skills development and ongoing training initiatives for employees here.

We are currently one of the strongest performers in the industry in terms of our investment into skills development for empowerment and our learnership programmes. In 2017 we spent R87,5 million on skills development across the group (2016: R86,5 million). R73,2 million (84%; 2016: 83%) was spent on training and developing black talent.

Since our decision to exit the manufacturing sector we are now predominantly a services-based group and salaries are our biggest expenditure. This makes a payroll-linked spend target, which is the measure against which B-BBEE points are allocated in this scorecard element, particularly burdensome for Altron. Our current spend renders us compliant within the new ICT Sector Code, but we remain under pressure to increase our spend and take additional measures to achieve our targeted B-BBEE points under the new code.

Bytes People Solutions (BPS) offers external training and learnerships to the ICT industry. BPS is both well placed to absorb learners into employment within its own operations, as required by the ICT Sector Code, and maintains a pipeline of skilled and qualified candidates to fill entry-level positions throughout the group. Where surplus learners exist they are quickly absorbed by other customers or suppliers of the group due to the high demand for ICT skills.

Enterprise and supplier development

Procurement is a prioritised area in the new ICT Sector Code and one that remains a challenge for Altron as the group procures the majority of its products through its international strategic partners. Locally we continue to channel our procurement spend to suppliers whose empowerment score is a minimum of Level 4, and in this respect we are satisfied with our performance. We recognise that room for improvement exists, however, and we aim to focus on encouraging and supporting black enterprises.

Socio-economic development

Altron’s socio-economic development programmes have always been a highlight of our performance. Our focus in this area is creating and running ICT-based skills development programmes for unemployed people. Our community investment is an important demonstration of our company values and our commitment as a group to building a better South Africa for all.

Previously, our corporate social investment (CSI) was operated at a business level and supported by a group CSI policy. In 2017 we established a committee within Altron TMT, which administers the entire group’s CSI spending within one central fund. This allows us to identify and invest in larger projects with higher impact potential and enables us to better monitor and measure the outcomes and impacts of our investments.

This year our multimedia ICT training centre in KwaMashu, KwaZulu-Natal has continued to perform exceptionally well in its fifth year of operation. Each year the centre accepts 50 unemployed youths from the surrounding areas into a 12-month full-time learnership programme, which provides training in end-user computer and ICT skills. Altron funds the cost of the training and the operation of the centres, as well as a stipend for each learner. Every year more than 95% of the programme graduates are employed – either absorbed into Altron’s own operations, or into external roles within the neighbouring industry. This year 100% of our graduates found employment with a major retailer.

Building on our success, in October 2016 we established a second training centre based on the same model, in Soweto, Gauteng. We had planned to install a centre in Alexandra, but relocated to Soweto following a land-claim eviction order in June 2016, which was disappointing. Nevertheless, our new centre, which is based in the Soweto Empowerment Zone at the Old Putco Building in Diepkloof, has been operational since October 2016 and we look forward to another 50 graduates completing our programme in the latter part of 2017.



In each of our centres we partner with PROTEC (Programme for Technological Careers), a leading non-profit organisation that empowers youth with educational support in mathematics, science, technology, engineering and life skills. Bytes People Solutions presents the accredited IT learnership programme. PROTEC runs a library within the centres, attached to each of Altron’s computerised training rooms, and offers maths and science tuition to school learners. Within Altron we run an ongoing book drive throughout the group for employees to contribute books to the centre libraries, which enables our staff to be a part of our community investment.

As part of our drive to further establish these centres as community training hubs, in 2017 we installed a fully equipped science laboratory in the KwaMashu centre, to assist in PROTEC’s science lessons. A full-time science teacher has been appointed and the laboratory has been operational since January 2017.

Our monitoring and evaluation has shown that our centres are achieving the desired results. The PROTEC learners’ results have improved significantly and the youths that complete our ICT training programmes are consistently employed. Between our KwaMashu learnership programme and the Soweto Empowerment Zone, Altron will be placing 100 graduates per year into the formal economy. Going into 2018 we look forward to seeing the successes of our new expansions, to building on our existing and newly formed strategic community partnerships, and to continuing to invest in developing skills for the future.

HUMAN RESOURCES

Business context

Altron operates in a scarce skills environment, which is currently being exacerbated by difficult economic conditions. In addition, as we focus exclusively on the technology side of our business, developing and nurturing ICT and technology-related core skills and creating skilled talent pipelines from which we can draw is more critical than ever. This is not only fundamental to our long-term human capital strategy; it is also our responsibility as an active corporate citizen (see our skills development performance in relation to our B-BBEE targets here).

Altron also faces stiff competition in the “battle for talent”. Young, skilled professionals in the ICT industries are seeking excitement and creativity, and in recruiting this new generation, Altron competes with far bigger, international companies that can offer unparalleled benefits and incentives. We are therefore constantly looking for ways to attract talented employees and work actively to nurture our internal talent pipelines.

As we complete a period of transition, it is important that we continue to manage our workforce in a manner that inspires high performance and captures employee loyalty. Happy, engaged employees are productive employees.

Our performance

At year-end Altron’s continuing operations employed 10 219 permanent staff. 8 206 (2016: 8 326) of these employees are within our core operations, whilst the remaining 2 013 (2016: 4 314) employees are within our non-core operations.

Our overall headcount reduced this year as a result of the closure, sale and downsizing of certain operations, particularly Powertech Cables; closure of offshore operations within Altech Multimedia; and the closure of Altech Autopage, although some of the employees of the latter were successfully transferred to other divisions within the group (see “Reducing our workforce” here).

Total permanent employee headcount by group company
(core and non-core combined)

2017 total SA Offshore 2016 2015 2014
Corporate 57 57 40 117 79
Altron TMT 8 445 8 025 420 8 709 7 712 8 247
Altron Power 1 717 1 701 16 3 927 4 220 4 578
Total 10 219 9 783 436 12 676 12 049 12 904

Our group-level shared services model, which was implemented last year, has effectively centralised the human capital management function at a group level. As part of the centralisation process we have moved our systems onto a single human resources management system (HRMS), which will provide an efficient group-wide platform for human capital management and payroll.


Attraction and retention of talent

In 2017, following the closure of Altech Autopage, we had to abide by certain conditions set by the Competition Commission. This required us, within the 12-month period following the sale, to place first those employees affected by the closure elsewhere within the group before looking to recruit external candidates. That mandatory period has now ended, so we can begin looking forward again to drawing in new outside talent.

Our bursary programme remains an important part of our future talent pipeline, assisting the group to fulfil its requirements for critical scarce skills, such as technical and engineering skills, sales and marketing skills, innovation skills, key accounts expertise and value-adding human resource support. In 2017 we awarded eight additional bursaries, bringing our total active bursars for the year to date to 22.

Upon graduating, recipients are placed within the group on a year-for-year work-back agreement. This enables them to gain practical experience in the technology industry and provides Altron with a constant stream of trained, talented young employees.

Our group turnover rate remained very low at 1,9% (2016: 1,64%), with a marginal year-on-year increase due to organisational changes. This represents a strong record for the group, particularly in the technology space where turnover rates tend to be relatively high, and during a period of restructure.

As part of attracting and retaining our key talent, we guarantee each of our people a generous remuneration package. We aim to compensate general employees at the 50th percentile, and executives and specialist-skills employees between the 50th and 75th percentiles for our sector. We make adjustments as necessary following annual benchmarking exercises against the IT and executive salary benchmarks published by the consulting firm Deloitte. For senior management, short-term management incentives include performance-related bonuses and share incentives.

Our general salary increases are linked to CPI and take into account the industry average. In 2017 the group gave an average 6% raise to its employees.

Core skills and talent management

At a group level we regularly review each business’s operational objectives and requirements so as to invest effectively in appropriate training and skills development initiatives to ensure that our people are well positioned to meet the swiftly changing demands of the technology industry. In 2017 our full-time permanent employees in South Africa received a total of 493 983 hours of training at an average cost of R8 944 per employee (2016: R6 820).

Altron directs most of its internal training and skills development interventions through the Bill Venter Academy, which is managed by Bytes People Solutions. This “corporate university” is part of Altron’s long-term transformation and diversity strategy. The academy focuses on leadership and management skills, as well as programmes that build capacity and technical skills, which are delivered according to the current operational requirements of the business. Examples include customer services, sales enablement, project management, and scarce and specialist skills.



A proud history of long service

Altron is enormously proud of the group’s history of long-standing relationships with our employees. Every year we make a substantial number of long-service awards to many of our loyal employees.

2017 was no exception, with over 200 awards made this year across various categories (10, 20, 30 and 40 years). Most notably, five employees received awards for 40 years of service to Altron.

In total, this year’s awards represent 4 130 years of working with Altron.



South African employees received a total of 493 983 hours of training at an average cost of R8 944 per employee


In 2017, 39 of our current employees (25 of whom are black) completed various training programmes through the academy, including the Certificate in Key Account Management, New Managers Development Programme, Senior Leaders Programme, Systems Engineering Programme and Management Advancement Programme. Forty-seven employees (2016: 65) graduated from the academy.

While it is critical for Altron to nurture and develop IT skills within the business, it is also important that we continue to understand and address our customers’ needs in an all-inclusive way and, therefore, that we focus equally on developing leadership and management skills within the business.

To drive this aspect of our strategy, in September 2016 we launched the group’s Business Development Advancement Programme (BDAP). We hired seven people under the age of 30 with a tertiary education and broad post-graduate business experience, with the intention that they will operate at the front-end of our businesses, communicating with and understanding our customers’ businesses – and their customers – in a holistic way. Going forward, we intend to expand the programme to 20 young people.

Altron also runs a Young Presidents’ Club for young, under-40s managers within the group, with the aim of understanding their career aspirations and working to match those with the group’s direction as a business, and enabling these young professionals themselves to invest in Altron’s story. Currently the AYPC consists of 20 individuals, of whom seven are black and nine female.

Health, safety and wellness

A safe, healthy, happy workforce is a productive and effective workforce. While on-the-job safety poses a much lower risk to the group following the exit of our manufacturing operations, ensuring our employees’ well-being remains of utmost importance.

In 2017, as part of our group centralisation and shared services processes, we implemented a standardised employee wellness and benefits system. Every employee is now registered with ICAS (Independent Counselling and Advisory Services, a division of AXA PPP), an employee well-being programme that provides counselling, guidance, and otherwise facilitates and assists employees with their day-to-day wellness. All permanent employees are also part of a medical aid programme with access to a variety of benefits.

The number of injuries reported this year was 66, down from last year’s 86. No fatalities were reported during this year.

COMPANY CULTURE

Business context

Altron remains committed to driving its “one company” culture throughout the group, which reflects its values and encourages innovation and collaboration. In turbulent times within the business it is more important than ever to unify our workforce under a shared vision and culture. However, uncertainty within our operations has made this a challenge.

Our performance

Altron’s goal is to create a collaborative, entrepreneurial working environment, where its employees are happy and engaged. Our 5+1 value system remains firmly in place and is driven throughout the group, from new employee inductions to executive levels. As we continue to rationalise the business, however, encouraging a united outlook among our employees has been challenging. Moving out of this period of refocus and into a new period of growth, we expect that a cohesive company culture will develop organically.




Contributing to our one-company strategy, we are in the final stages of developing a central group induction programme that will be delivered online. This will ensure that all new employees are welcomed into the group as a whole, rather than separately into each business. This platform is expected to go live within the next reporting period.

Reducing our workforce

Closures and disposals of non-core operations have affected a number of our employees this year. Most significant of these was the disposal of Altech Autopage at the end of the 2016 financial year, the disposal of the Aberdare Cables operations within Powertech in June 2016, and the closure of NOR Paper (a division of Bytes Document Solutions) also in June 2016.

The Powertech Cables operations were sold as going concerns, so most employees remained within those companies. Following the closure of NOR Paper, 11 employees were absorbed by the group or our channel partners and suppliers within the sector, but many exited the business. Altron was successful in redeploying 109 of its Altech Autopage employees elsewhere within the group.

Aside from ensuring the smooth transitions of our employees, the biggest challenge we now face is maintaining morale and confidence among staff in our non-core operations, who naturally feel uncertain about their futures. As we continue to dispose of non-core operations into 2018, we will ensure that our communication with those – and our other employees – remains candid and prompt, and we will work to redeploy as many employees as possible within the group.


LOOKING AHEAD

Transformation remains a key challenge, particularly in terms of management control and employment equity. While there is no “overnight fix” to this, we will continue investing in our mid- to long-term strategies to diversify the group. Immediately, we intend to continue to invest in skills development – a top area of focus for Altron – and to increase our commitment to supplier development. This too will take time and, like many aspects of empowerment, will be made more challenging by the new ICT Sector Codes, but we believe that we are on the right path to achieving our transformation targets.

We will continue to prioritise and to support our people – through professional development, upskilling and career guidance, as well as by ensuring their wellness and satisfaction at work. Going forward it is important that we continue to communicate with all our staff regarding our discontinued operations and to support those who are directly affected. It is also critical that we motivate and drive the human capital within our continuing operations, which, although healthy, are themselves operating under difficult market conditions.

We believe that our employees like to work for Altron: it is an exciting business, with a bright future and it is important to us that our people are an active part of our journey as a group. We will continue to prioritise our people, keeping them informed, motivated, remunerated and including them in the prospects of the business.