EconoBEE Newsletter – October 2006
BEE – Where to Start
Many businesses ask us how they can start implementing BEE. BEE is a process and the key is to understand the requirements. The starting point is education. We always emphasise that no business should have a “gut-reaction” and make uninformed decisions. Once you understand the act, and the codes, BEE becomes far less intimidating, far less emotive, allowing you to make the right decisions.
We have seen far too many businesses making rash decisions and implementing BEE wrongly – like the company who appointed their driver to be a director. It did not help the company – they were fronting and did not get more business – it did not help the driver – he did not even know he was a director, and it did not help the BEE cause.
The true starting point is to educate yourself properly – via our web site, or even attending our popular 4 hour BEE workshop.
Skills Development “Double Benefit”
by Gavin Levenstein
Every company needs to pay some money for training so they keep their staff well trained and ahead of the competition. Currently you are paying your SDL of 1%. That is a considerable amount of money and you most certainly do not want to waste it. You want it to work for your business. The training should be directly related to the business/employee and should be directed towards staff who are eager to learn. The staff sent for training should achieve success in the course.
Spend this money to keep your staff productive and make a bigger profit.
Good companies are already spending more than their 1% on training. In the BBBEE codes you are rewarded for spending that money on black employee’s. Skills Development is worth 20 points on the scorecard. Scheduling training that makes sense is earning you BBBEE points.
The generic codes are asking for 3% of your payroll spend to be spent on training of black employees. (Some companies are way above those targets). The dti want the majority of the spend to be spent on critical and/or core skills. (Again it makes sense to keep it specific to the employee’s job). They are also asking you to bring on learners. (It is an excellent opportunity for a student to get true job experience. They are very grateful and therefore committed to the job). Learnerships don’t cost the company that much money. In all cases black women can be double counted so you get more points when you organise training for black women. Lastly you can also achieve some points for producing documents like BEE strategies, a non-discrimination policy and even simply employing a skills development facilitator.
Skills training in your business will always be vital. Let us put the amount of money you need to spend into context – every year you give your staff a 5 to 10% salary increase. The target is for you to spend only an extra 3% of payroll. That is money that is going to be spent to grow the business, make it more productive and ultimately more profitable.
Without getting carried away, you can achieve 20 points on your scorecard by spending money to benefit your company at a cost that is lower than your annual payroll increase.
The codes aren’t out but you can still operate
The new codes were supposed to be released in June 2006 and Government has been holding off the release up until now. With plenty talk about the lack of new codes, comes tremendous confusion. Questions are asked – “What should my business do in order to become BEE Compliant? If I do comply with the current codes and it changes am I still compliant?”
All these questions are very valid and anyone’s answer is simply a best guess. What we do know is the new codes will be simplified making it easier to both achieve and prove that you do in fact have those points. When the new codes are released, we believe that the concepts will remain the same and that the terminology and understanding will also be unchanged. If anything, the codes will become more descriptive and considerably easier to understand. The Codes of Good Practice is really made up of targets. This can cause some confusion but in general it is only a target and can quite simply be changed and recalculated.
Question – “With new codes on their way is it then a good idea to start doing something now about BBBEE?”
The answer is a categorical – “Yes”. Broad Based Black Economic Empowerment is a long term process. Along the way some of the targets might change and some concepts could be adapted.
BEE is working
by Keith Levenstein
I’ve recently returned from a trip to Hazyview in Mpumalanga to help an organisation with BBBEE consulting. I was very impressed with the growth in the area. Hazyview, as well as Nelspruit, is growing – building operations are evident throughout the town/city. I remembered Hazyview as a small “one-horse” town. It is no longer. Shopping centres, with big chains have invested in the area. On Saturday morning, the queues into the banks and the ATMs were 50m long.
Our task in Hazyview was to help a hotel/country estate with BBBEE education and to advise them on various BBBEE initiatives. The manager spent some time explaining to me how the estate operates and what he is doing to grow the business. We usually tell clients that they are probably more BEE compliant than they realise, and this was a case in point. The hotel is already BEE compliant! Decisions made were good business decisions, but they also made BEE sense.
Report back on Tax and structuring BEE Deals workshop – 21st September 2006
by Keith Levenstein
We were treated to an insightful talk today on the above topic. Cathy Bryant explained that share ownership is an important aspect of the BEE scorecard. It accounts for 20% (plus 3 bonus points) of the scorecard, and if you achieve the full 20% you may inflate that score by 25%.
She explained the various methods of achieving this, via
- Employee share options
- Employee ownership partners
- Direct shareholding
- Social empowerment partners
- Black empowerment groups
Each has its own pros and cons, and in some cases a company may need to use multiple methods of reaching targets, such as direct shareholding and employee ownership.
That’s it for the time being.
Keith and the EconoBEE Team