BEE ‘is meant to make life easier for businesses’
Aug 1, 2010 12:00 AM | By MARGARET HARRIS
Rather than complicating the lives of the owners of small businesses, BEE compliance is intended to make life easer for them and encourage entrepreneurism, according to Keith Levenstein, the CEO of EconoBEE.
The process of becoming BEE- compliant is less onerous for small businesses than it is for larger enterprises. Companies with turnovers of less than R5-million a year need only apply for a certificate and will receive one automatically. Companies with turnover between R5-million and R35-million need qualify for only four of the seven elements: ownership, management, employment equity, skills development, procurement, enterprise development and socio-economic development.
Businesses with turnovers of more than R35-million must meet all seven requirements.
So, for a black-owned small business, ownership would be a good element to pursue; a white family-owned business, however, would have to try to qualify in terms of one of the other elements.
Small businesses should make the most of their status once BEE-compliant, says Levenstein. For example, tell your big clients that you have your certificate: that will put you ahead of other non-compliant competitors, and the big client will benefit by earning points towards its enterprise development score.
Johann Hendriks, network development manager at tyre-fitment company Hi-Q Automotive, says that all of Hi-Q’s 170 franchises are now BEE- compliant. Hi-Q is the franchise division of Goodyear.
Hendriks helped each of the franchises in becoming BEE- compliant.
He said: “Hi-Q is committed to the process of broad-based black economic empowerment, and the process is receiving high-priority attention at all levels of the organisation.”
Hi-Q approached BEE consultancy mPowerRatings to help get all franchises up to speed.
Levenstein likens becoming compliant to getting your driver’s licence – rather than a TV licence.
To get a driver’s licence you need to have had some training to increase your chances of passing.
Levenstein says that a consultancy like EconoBEE “teaches clients to read”, in the sense of helping them through what could appear to be a maze of legislative requirements.
Once you have decided which four of the seven elements to qualify for, you can begin doing what needs to be done to get the points.
This is where consultants and training courses can be extremely helpful.
When it comes to procurement, for example, Levenstein says the rules are lenient to the point of allowing a company to import almost all its stock while scoring points for the products it does buy locally.
Once you have earned all the points you need to qualify as BEE-compliant, you will need to approach a verification agency to get your certificate.
Levenstein says: “Like an accountant looking at your books, the verification agency will confirm that your score is correct.”
The certificate is valid for one year from the date of issue and you will need to get a new one the following year.
The question most small companies ask when they consider becoming BEE- compliant is: “How much does it cost?”
The only answer is: “It depends.”
It depends on the size of your business, the type of business you are in and the level of compliance that is required. Levenstein says: “It is a bit like asking ‘How much does giving your children a good education cost?’ Most people will agree that a good education is an investment in your children’s future and not a cost at all.”
Whatever costs you incur in the process of becoming compliant, getting the process wrong will be even more costly.
Levenstein says: “Business needs to learn about BEE to implement BEE properly.
“This could be as little as a R1200 training course … Ongoing consulting for the first couple of years is usually a good idea, and can cost from R1500 a month to R5000 for a large business.”
Once a business has earned enough points to make it compliant, it needs to get a certificate from a verification agency.
Levenstein says agencies usually charge based on the company’s annual turnover and how long and how hard the verification process will be.
“Verification costs start at R6000 going to R50000 for large companies and much more for giant corporations. This is an annual expense,” Levenstein says.
Some of the elements of compliance have specific targets. For example, in an effort to encourage entrepreneurship, a small business must spend 2% of its profit after all deductions on other small BEE-compliant companies to earn 25 enterprise development points.
“If a company makes R1-million net profit after tax, it will need to spend R30000 to earn 50 points on enterprise development and socioeconomic development,” says Levenstein.
Companies need to take into account the time and effort required to become compliant.
“Procurement has no financial target, but requires a company to collect BEE scorecards from its suppliers and to calculate its procurement spend with each supplier. This is a time-consuming task for large companies but could be quick, easy and no cost for small businesses that have one large supplier with a good BEE score,” Levenstein says.
The best way to view BEE compliance is as an investment and not a burden. “A good BEE strategy and implementation should achieve more sales and profits for the business and a higher equity value for the shareholders.”