April 2015 was by far every BEE Verification agency’s busiest period. With as much as 60% – 70% of all companies going through a rating around that time period. Now that the “big April rush” is over we have more time to offer our insights into what will happen next.
The most popular questions from businesses of all sizes has been;
How will I be affected?
The Amended Codes will have a profound impact on your business. Since the new codes are more difficult, the most obvious change is that your BEE level will drop a number of levels. The change in the level is not the only affected area. Your spend on Skills Development will need to increase, but now includes non-employees which makes Skills Development a little easier – albeit more expensive. The Procurement side of Enterprise and Supplier Development is the other big impact element. The procurement targets have increased. Although the increase isn’t large, the change to the points to levels table will make procurement much harder. The average supplier will have a multiple level drop in their scorecard. As a result, you will need to focus heavily on purchasing from high level companies or creating them through supplier development.
Will BEE continue?
B-BBEE is far too important to disappear. The majority of South Africans are not represented in the Economy. Until that happens or until it begins moving in an appropriate direction we will still have B-BBEE.
As a key point – if B-BBEE in its current form fails, then we will have a new form of B-BBEE which could be far worse. Many years ago we wrote an article – The alternative to BEE is BEE.
In summary, the basic principles of B-BBEE remain very achievable. Customers will continue asking for and expecting a high BEE score and perhaps most importantly, government tenders will continue following the PPPFA which uses the B-BBEE level to award points on the tender calculation.
What will my customers require on the Amended Codes?
At this stage it is a very philosophical question which has a more philosophical answer. A Level 4 on the old codes is not equal to a level 4 on the new codes. It therefore isn’t practical to ask a supplier to continue maintaining a level 4 score using the new codes. Even if in future it is possible to once again achieve that score.
On the other hand your customers want to maintain their own BEE score because their customers require a high level. In order for them to achieve their procurement targets they need to purchase from high level suppliers.
Therefore the most likely scenario is that customers will continue asking for high BEE levels – even potentially higher than they have been because they want to achieve their procurement targets. We suspect they will continue purchasing from existing suppliers for the first few years but this will slowly change as more high level compliant suppliers start competing.
If I don’t have a BEE Scorecard will I be awarded business?
B-BBEE has always been voluntary. If you don’t have a good scorecard, or one at all, then you still can be awarded business – just less of it. As the old saying goes “if a customer asks you to jump – you say how high”. Customers want compliant suppliers because they place their business at risk by not having a high score. Suppliers scores affect their score. As a result the average purchasing decision will factor in a BEE scorecard. At some point if the scorecard is not satisfactory, the purchasing decision might change to a more compliant supplier.
Can I get a compliant score on the Amended Codes?
Absolutely. The Amended Codes are more difficult but not impossible. In some instances, the Amended Codes might become easier than the old codes. In summary, the average business who makes a meaningful attempt at becoming compliant will be able to get at least a level 8.
What is needed to achieve a compliant score?
In some respects very little. Good companies implement good activities simply because it makes business sense. That would include equitable employment, developing staff skills, purchasing responsibly, supporting the businesses you buy from and developing the communities that you operate in.
Although the elements names might be different to normal business transactions, it remains quite easy to implement those types of activities to achieve a compliant level. The key lies in reporting appropriately and where you are short, planning early to recover the missing points.
What is outstanding?
The Verification manual which is intended to give guidance to agencies/auditors.
Sector codes for specific industries who have decided that they require an alternative code to follow when implementing B-BBEE transactions.
The majority of the rest of the codes have been gazetted, but there is still confusion over many issues and how to calculate and interpret them. dti/SANAS/IRBA give little guidance and often when they do, it is inconsistent with other notices.
Is there a way around this?
Better understanding, better preparation and more commitment. We are hosting various sessions to help businesses cope with the Amended B-BBEE Codes – Practical Implementation of the Amended Codes, Amended QSE Codes, Half Day practical scorecard workshop, Executive Summary of the Amended Codes and Supplier Days. In addition to training we have scorecard software to quickly and effectively manage the scorecard calculation process internally. Alternatively if you are too busy for an in-house solution then we have a comprehensive managed service to effectively outsource technical and time consuming tasks.