BEE Costs for Small Businesses to Escalate Sharply

Press Release – for immediate release: Johannesburg – 10th December 2007 

Small businesses are going to find that they will have to pay a lot more to become BEE compliant in 2008. A secret document produced by the dti shows that all companies with an annual turnover of more than R5 million will need to appoint an accredited verification agency each year to produce their scorecard. Until now the dti has been saying that it wants to assist small companies by cutting red tape. The latest proposals show that a small company cannot produce its own self-assessment of its own BEE score, but must get its BEE scorecard assessed.

“This flies in the face of dti’s statements that it wants to help create more small businesses, and to remove red tape.” says EconoBEE’s Keith Levenstein. Each bit of extra red tape or admin cost is going to result in businesses failing rather than succeeding. Even though the intention of this document is to ensure more BEE compliancy, the unintended consequences of this policy will be to decrease the numbers of companies trying to comply.”

“dti says there is a good reason for insisting on outside verification – ensuring that companies do not front, and we agree that that is a problem. However, the dti solution is a bit like using a tank to kill a fly.” says Levenstein. There are far better ways of reducing fronting than simply putting a charge onto the company. SARS for example have a policy of reducing paperwork and have successfully increased the tax base and overall support for them.

“It seems as if this is more a policy aimed at providing verification agencies with extra business than with reducing fronting. The most important point that dti seems to ignore, or even mis-understands is that for BEE to succeed it must win the hearts and minds of those businesses who suddenly, at the stroke of a pen are going to have to pay thousands per annum extra. 

“It s quite ironic that dti expects small businesses to pay up, when dti is making no discernible effort to get ESKOM, TELKOM, major members of the cell phone industry, the banking industry to even produce a BEE scorecard. For example the major banks have decided to ignore the BEE codes of good practice and are choosing to rate themselves on the un-legislated financial services scorecard. At the same time dti does nothing about ensuring that government itself is following the BEE codes of Good Practice.”  concludes Levenstein

 

Keith Levenstein is CEO of EconoBEE – a B-BBEE consultancy.
For more information please contact EconoBEE, division of EconoServ
Tel: 011 483 1190
Email: info@econobee.co.za

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