Draft Government Policy: B-BBEE, not BEE – EconoBEE Newsletter 20 Aug 09

EconoBEE – Newsletter August 2009
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Dear Name

Extra special EconoBEE Newsletter – B-BBEE, Not BEE

Draft Government policy reconciles PPPFA and B-BBEE Act

EconoBEE welcomes the announcement that the National Treasury has issued a draft document aimed at reconciling the PPPFA with the B-BBEE codes.

The Broad Based BEE act is an ingenious act designed to encourage greater black participation in the SA economy. One major flaw has always existed, implementation. Government and businesses in general implemented B-BBEE as if Ownership and Management were the only criteria for implementation. This incorrect implementation of B-BBEE, more specifically called Narrow Based BEE cased much discomfort and even hatred of BEE as it did not achieve what the Broad Based BEE Act originally set out to achieve. Narrow Based BEE opened a very unfortunate avenue for companies to take on a black partner without truly empowering black people.

Broad Based BEE implementation is changing. Narrow Based BEE deals cannot continue while South Africa needs true empowerment.

The impact of a newly revived Broad Based BEE scorecard as well better implementation in particularly on Governments side will cause B-BBEE to develop SA as it was intended.

Our president Jacob Zuma recently addressed members of the Confederation of Black Business Organisations (CBBO) and was quoted as saying;

Government needs to improve the implementation of Broad-Based Black Economic Empowerment (B-BBEE) in South Africa’s business sector

Government is of the view that the B-BBEE framework should reinforce skills and rural development, enterprise and social development while it must also attend to issues of job creation through procurement and entrepreneurship.

The National Treasury has now issued a draft notice reconciling the PPPFA with the B-BBEE codes. This is a landmark achievement for Broad Based Black Economic Empowerment. Once complete, the reconciliation will remove a major barrier to B-BBEE implementation and encourage more businesses to participate in a genuine way while also giving a true incentive to improve ones’ Broad Based BEE scorecard points.

The “old” PPPFA (Preferential Procurement Policy Framework Act) dictates how government should issue, adjudicate and award tenders.  It is based on an 80/20 split for tenders below R500 000 or 90/10 principle for above that limit. Using this principle a tender would be evaluated by allocating 80 points to the tender itself – price, product, service, guarantees etc. 20 points would be allocated by using “HDI status and the achievement of the RDP goals”. Effectively it meant that tenders were awarded using the old narrow based method. A company’s BEE status meant nothing – only ownership and management were taken into account.

The draft regulations now state that those 10 points or 20 points are based only on your BEE level. Now all companies can be measured equally and will only need to comply with one piece of legislation when implementing B-BBEE. They have also increased the 80/20 threshold to R1million. So, if a company tenders for government business and it has achieved level 4, then it is automatically allocated 12 points out of the 20. If it is non-compliant then it earns zero points on the tender adjudication but importantly is not disqualified from the tender. On the other hand if it is level 1 then it earns 20 points on that tender. For tenders above R1million the 90/10 principle applies. The 10 points are allocated based on BEE level. A level 1 company earns 10 points, a level 4 gets 5 points and a non-compliant gets zero points.

Gift to all readers – B-BBEE Tender Points Calculator

Inlight of this major landmark, achievement we have prepared a B-BBEE to PPPFA points calculator

Get access now

“With minor exceptions, this is exactly what we have been asking for more than 4 years. The main difference is that a company’s B-BBEE score is now used in evaluating their tenders, rather than the unscientific and arbitrary manner, usually based on the now discredited narrow based format.

“A good scorecard will now become more important, and more useful to businesses, many of which had to try to comply with contradictory requirements.” Now more than ever before B-BBEE Points = Business and = Government Business.

“This will have the effect of encouraging businesses to become B-BBEE compliant and get a good scorecard based on broad-based principles because those companies will now see the opportunity of getting business that was previously denied to them. A good scorecard now means a lot more than simply having black ownership, since black ownership on its own does not ensure a good broad-based score. It will certainly mean that more majority white owned companies do get government business, but only those with good broad-based scores. The B-BBEE score is a good indication of how much transformation has taken place in a company, and we believe that those companies that have genuinely made an effort and succeeded do deserve to get the credit for their sustainable actions.

This positive move should motivate businesses, and start removing the stigma that BEE is only about enriching a few at the expense of the rest.

Broad Based BEE, The DTI and The Treasury can be praised for developing a system that is measurable through an objective scorecard which can be achieved through many different elements and compared fairly from one organization to another.

It is now time to support the correct implementation of Broad Based BEE to make a lasting, genuine contribution to true empowerment. The alternative could be far worse.

Understanding Preferential Procurement results in Business – The Procurement Journey

B-BEE Procurement is undoubtedly the most important element in the correct implementation of B-BBEE. The reason for this is that it encourages more businesses to implement B-BBEE. It does this by encouraging businesses to ask their suppliers for a B-BBEE scorecard. Importantly procurement is not law and does not carry a legal penalty, but uses a far more powerful mechanism – Economics. Suppliers have a competitive advantage if their score is higher than their competitors.

Preferential procurement encourages procurement opportunities to be made available to B-BBEE compliant suppliers. It is the immediate reason for companies and government entities to request B-BBEE scorecards from suppliers and potential suppliers and the B-BBEE cascading effect begins with preferential procurement.

Companies can easily earn and continuously improve their points by preferring to procure from B-BBEE compliant suppliers. However in most cases earning points and calculating the preferential procurement score can be an administration irritation. This undoubtedly is happening because enterprises and government departments do not have an understanding of Preferential Procurement and also do not have the proper systems in place.

With an understanding of preferential procurement and a system aligned to B-BBEE initiatives, private companies and government entities can begin the improvement of preferential procurement.

It is no surprise that our upcoming BEE Procurement and Enterprise Development Conference coincides with the draft PPPFA Regulation, join us to ensure you understand preferential procurement, overcome the administration irritation and ultimately improve your B-BBEE points to ensure you get the tender you deserve.

BEE Procured – Preferential Procurement in minutes

BEE Procured is simply the best BEE procurement management tool on the market. By booking for the BEE Procurement and Enterprise Development Conference you will get your very own license of BEE Procured (worth R2500)

Early, Early Bird Special ending this Friday

The early, early bird catches the worm specialBook before 21 August 2009 and in addition to BEE Procured get your very own license for EconoBEE V3 (worth R2500)
The early bird special is still onBook and pay 2 weeks before your attendance and get a 10% discount
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Already understand BEE Procurementclick here to see a demonstration of how best to produce your own BEE scorecard and satisfy your customers.

Remember

BEE Points = Business

That’s it for the time being.
Regards

Keith and the EconoBEE Team

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