Are you ‘BEE’ Motivated – EconoBEE Newsletter May 2008
Are you ‘BEE’ Motivated?
Many companies fear BEE – they seem to think that it is a requirement to “give away” 51% of their businesses, or maybe even worse, close down and leave the country.
Fortunately BEE does not require you to give your business away or close it down. In fact complying with BBBEE (broad based black economic empowerment) as it was intended hardly requires you to change your business – you can earn many points just by doing exactly what you are currently doing, but by being aware of what you are doing. We always say “Your business may be more BEE compliant than you realise.”
Many business owners do not realise that they are already taking various actions that have resulted in their businesses being BEE compliant. All they would need to do is begin documenting those activities and earning BEE points.
BEE is not the “ogre” that it is made out to be. It does not set absolute numbers for you to reach or make unreasonable demands. Rather it encourages you to become compliant by earning points, often by doing the exact things you are already doing.
Firstly you do not have to “sell/give away” your business. “Give away” is actually frowned upon. You also do not need to dismiss all your existing employees and employ others.
You do need to make BEE decisions that make Business Sense and you do need to make a profit.
Your customers will be far happier if you can tell them you are compliant. This will result in improved customer relationships, retention and ultimately profits.
So, how do you know if you are compliant? If your annual turnover is less than R5 million you are automatically BEE compliant to level 4 or even higher. If your turnover is above R5 million, you will need to look at each of the indicators to gauge whether you have taken actions related to them, and in so doing, earning points.
Below are three common areas where points can be earned.
Do you donate money to charity? – Socio-economic Development.
Do you assist other people in their businesses? – Enterprise Development.
Do you spend time, money and effort training your staff? – Skills Development.
In all the above cases, you have probably earned BEE points and are on the way to becoming compliant.
We visited a client recently, who was very concerned (and negative) about BEE. At the end of the meeting he stated: “I realise that it’s not that hard to become complaint. I am now “BEE motivated” to aim for 85 points.”
Our aim is to ensure that our clients become BEE Motivated, see the benefits of becoming BEE compliant and as a result make a profit!
“I need a BEE certificate!”
We often get asked to produce a BEE certificate for our clients. We see this as the last step of a reasonably simple process to becoming BEE compliant. There is no point in getting a certificate if you don’t know what that certificate means, or how to improve your BEE score.
“There is no point in getting a BEE certificate if you do not maximise your points on that certificate or if you don’t understand how to earn those points.”
Take a detailed look at any certificate you have ever received from a supplier, or one produced for you. You should know the implications of that scorecard and be able to answer at least the following questions:
What do BEE levels mean?
What does BEE recognition percentages mean and how do they affect you?
What does “value added” supplier mean, and is your business one?
How do you explain your scorecard to your customers in the best light?
What are your targets?
How do you increase your scores?
Recently the Financial Mail produced a survey of the BEE scores of various JSE listed companies (Financial Mail, 4 April 2008). The results were amazing in the disparity of BEE scores of the companies. Adcorp had the highest score of just over 80 points. Our valued client, Massmart, was highest in the retail sector. Many companies however were well below 30 points – the non-compliant level, with one, AECI, reporting just 0.43 points – not a very explosive performance! Of course they have more points than this – they just do not know it! They only reported their narrow-based scorecard and only earned points on the management element. If they had made a bigger effort to understand the codes, and how to earn points they could have achieved 30 points! Any company in that list that did not achieve the full 15 points for enterprise development and another 5 for socio-economic development did not understand the codes!
Our recommended process is so simple:
Learn about BEE
Look at where BEE is likely to affect you
Look at the indicators
Collect documents around the indicators where points can be scored
Do an initial calculation to find out how many points you have achieved
Design, then refine your strategies, profile and policies around BEE
Spend time and effort and earn the points
Do a final self rating – must be signed once you are completely happy with it
Look for ways to find more points on the scorecard
Not mandatory – get an independent organisation to sign off your scorecard (Auditors or Rating Agencies) and produce a BEE certificate.
BEE Doesn’t Need to Change, it Needs to be Implemented
BEE is a long journey, it is not something that can “just happen”, although when properly implemented does not require you to change your business. If you want to implement BEE you need to look at it from a long term view point – the key being – implement it properly to avoid costly business mistakes.
The Business Report published an article quoting deputy President Phumzile Mlambo-Ngcuka.
The article reads “We are not proposing changes … We [just] need to implement [them] better.”
She said BEE’s failure to address income inequality was because of business’s “obsession about [ownership] … Other areas were neglected and need to be pushed harder.”
These other areas included aspects of the BEE scorecard, such as human resource development, support for small businesses, affirmative procurement and corporate social investment.”
Eskom Updates Procurement Policies
Eskom recently changed its narrow based, wrong, interpretation of BEE Compliance to a more broad based one. Although this is a change that should have been introduced when the codes were originally published, it is a big step forward for businesses and BEE Compliance in general.
Report Back – Seminars and EconoLog Launches
Our EconoLog Launch breakfasts went off very well. We have had the opportunity to speak to many of SA’s Corporates/Businesses and Entrepreneurs.
We have also had a tremendously successful range of seminars in Johannesburg, Durban and Cape Town. Every delegate that attended our seminar left with a solid indepth knowledge of BEE Compliance. Our delegates leave the seminar with confidence to implement BBBEE in the most business effective manner.
If you missed this last round of seminars keep visiting www.econobee.co.za where we will advertise the next schedule of dates.
If you missed our breakfast give us a call and we can arrange a demo of the system for your company.
Looking forward to seeing you soon.