B-BBEE is NOT a box ticking exercise

Original publish date – Fri, 17 Sep 2010 12:11:20 +0000, Keith

Many people often refer to B-BBEE as a “box ticking” exercise. They use this to explain why B-BBEE can’t work, doesn’t work, won’t work. Some use it to justify the need for a change in B-BBEE policy.

The fact of the matter is B-BBEE is no box ticking exercise. You do not earn BEE points by ticking various boxes. B-BBEE is a policy that measures the success of many transformation indicators. It is similar to a company’s financial statements. No one wold say that producing financial statements is a typing exercise, or that applying for a loan a box ticking exercise. If a company has an annual turnover of R1 billion and a net profit at R75 million, then while the financial statements may only show numbers, those numbers have huge meaning and a long story behind them. To turnover R1 billion implies people have worked hard to find customers, make sales, produce goods or services and supply them to their customers. To make a profit means careful analysis of costs and turnover.

In the same way a company that states “Level 2”, is not just writing something on a piece of paper. It means that the company had made serious efforts in many areas – ownership, management, employment equity, skills development, procurement, enterprise development and socio-economic development to achieve that level 2. It may have spent R750 000 on donations to charity. t may have spent R3 million on staff training. It may have contacted 3000 suppliers to request their own scorecard. It is not an insignificant amount of work that a company must have performed in order to reach its level 2. It is definitely not ticking a box on a piece of paper.

The financial statements give a good indication of the financial well-being of a business. The statements are not perfect – there could be errors, or the full story may not be included in the statements. Items such as customer goodwill are not easily measurable, and external factors are not always taken into account. By and large the financial statements reflect as best the financial situation of the business as can be expected.

The same again goes for a B-BBEE scorecard. The scorecard tells a story – how transformed the company is. It is not always entirely accurate and sometime ignores aspects of transformation that some companies consider important. It is based on nearly 40 indicators, and is a far better indicator of the progress that a company is making than a subjective assessment.

It can be argued that some indicators are allocated have too much importance on the scorecard, or too low an importance. It can be said that some of the weightings are too low, or the targets too low and easy to achieve. It can be said that the rules and interpretations are too loosely defined. If any of the above is true, all it means is that by discussion and negotiation those rules should be changed, the weightings and targets adjusted. It does not mean that B-BBEE needs an overhaul, or that the concept of a scorecard is wrong. If we need more indicators, we sohlud add them. If B-BBEE is too complicated, with too many indicators, some should be removed.

As it stands the scorecard covers those seven elements, with nearly 40 indicators. Many of those indicators are closely linked to other indicators making it more difficult to front or misrepresent the score. Each indicator and element certainly does provide an excellent indicator of the progress  that a company is making and helping there country towards true transformation.

Almost every complaint about B-BBEE can be answered by looking at the indicators, for example “It enriches only a few”. Not so – if only a few people are involved in an ownership deal the company will only earn a few points. The only way to earn lots of points is by working on all the elements.

The indicators award points for diverse activities, such as “black new entrants” – including people in an ownership deal who are “new entrants” i.e.have not done any big deals previously. Points are awarded for employing black disabled people, and bonuses for training those disabled people. Points are awarded for purchasing from small businesses, black owned and even black female owned businesses. Points are awarded for helping small businesses and donating to certain charitable institutions.

If one had to try to identify what is needed to transform the country, they would probably come up with the exact B-BBEE policy that we have – and it is no box ticking exercise.

 

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