Forward Thinking Companies will benefit most from BEE
Published by BBQ Scorecard.
By Gavin Levenstein & Cornilius Parwaringira
BEE is now into its sixth year. The Codes of Good Practice have transformed into the codes that were approved in December 2006 and gazetted in February 2007. The Codes of Good Practice for the first time allow companies to objectively measure their BEE compliance level without looking only at ownership. They accomplish this using an ingenious scorecard system that looks at all manageable/measurable aspects of the business and award points for achieving certain targets. Many companies have since taken this transformation of BEE measurement as a great opportunity.
In an economic environment that demands companies to come up with new initiatives to boost profitability and gain market share, prudent companies are taking advantage of BEE as an easier way of getting business. This is while some business owners continue to cry foul about BEE. They fail to come to terms with the reality of BEE and the fact that the likelihood of it going out of the picture before achieving its goals is almost non-existent. The idea of BEE sounds very political yet it should be remembered that the reason it is there is because of a wrong political ideology. Thus, instead of focusing on the negatives of BEE, wise businesses should shift focus towards the opportunities that it presents. This bearing in mind that politics will remain to exert some kind of influence on how business and the economy run.
Forward thinking business owners realize that BEE is a good opportunity to grow the business. I have seen many businesses double or triple their turnover after they discovered the vast number of business opportunities that come with implementing BEE initiatives. Companies who are failing to embrace BEE are losing on business tenders with the government. This is especially so with smaller businesses. It is an indisputable fact that government still controls many public entities that often gives contracts to private entities. One of the most salient requirements for any business to get the work is BEE compliance. That is the reason why many start-up businesses seek BEE status documents right at inception. When doing business with Government they will insist on a BEE status (regretfully sometimes based on the PPPFA and not BBBEE).
Apart from the government, many companies prefer to do business with suppliers who have a good BEE status. This is because they will earn points on their own Preferential Procurement element if they buy from a company with a high BEE recognition level. Thus, having more points on the BEE scorecard greatly increases the chances of getting business ahead of competition. The forward thinking business owner is always thinking of new, better and more innovative ways of staying ahead of competition. That is what business is all about. BEE is such an opportunity. In the current global financial crisis companies can make some strides towards achieving good BEE status so that they increase their prospects of getting more business and offsetting losses emanating from the crisis. Attaining a good BEE status becomes one of the least costly methods of getting more business. There are many ways of getting points on the BEE scorecard without necessarily using money. For instance, instead of storing unused old computers, they can be donated to charity organizations thereby earning the donor some points under Socio Economic Development. By simply giving business tips to small businesses a company can earn points on the Enterprise Development element. Once the company attains a good BEE status they can use it as a marketing tool and clinch the fewer business opportunities that remain as a result of the global economic turbulence.
It is no surprise therefore that many listed corporates are making a big effort to improve their BEE status or participate in BEE transactions. Some corporates are spending millions in deals even though they are not awarded many points immediately. They realize that BEE is important but they also realize that for them to keep markets open and sustain the growth of their business they need to improve their BEE status.
BEE is a Business Opportunity that when used well enhances a business’s growth opportunities not only in terms of financial gains. Where a company needs to improve the Black employees statistics for employment equity reasons, they might consider doing away with some automated tasks where human beings can fit in without lowering the productivity of the operations. This means the company can employ more Black employees, transferring into the growth of the company. Employing new people with the correct attitudes and motivation can greatly increase the potential of the company to earn more profits. In so doing the company makes sure that they are also in good books with labour representatives who are opposed to the substitution of human beings with machines. However, all this should be done without any divergence from sound fundamental business principles.
A good corporate citizen always thinks about the welfare of the communities around it. Many communities in South Africa need help in many areas like housing, education, food, health and general care. We have in the country many children orphaned by HIV/AIDS. The mixed economy system currently in operation coupled with inflation makes it difficult for some community members to access basic commodities and services. Now that BEE encompasses more empowerment elements such as Socio Economic Development, companies can take advantage of it to increase their good name in the community. Having a good reputation among individual members of the society mean potential job candidates will likely prefer working for the company. The company can take advantage of this and capture the best candidates in the labour market. Many people would be happy to be associated with a company for the good work it does in the community. So, donating to charity gives a company an opportunity to improve on its social responsibility duty while earning BEE points. The community would also enjoy using products of a company that cares for the underprivileged. That is the reason why some products advertise that a portion of the price goes towards assisting needy members of the society.
Companies get more points for buying from businesses with annual turnover of less than R35 million. Apart from buying from smaller companies, a company can take the opportunity and mentor them so that they grow. This is Enterprise Development. As these small companies grow they will develop a good and amicable relationship with the company. The forward thinking companies know that if they help their small suppliers grow they would possibly get products cheaper with better service because of a better relationship with the suppliers. The cleverest of these businesses have made business sense out of their BEE status. I often see companies spending time and money helping and working with a black business trying to encourage them to grow their business. This also opens new markets and helps grow their own business. They also know that if they encourage their supplier to get a good BEE score they can maximize their own points.
Another opportunity exists on the Skills Development element. Well-trained employees are paramount in any business. Training takes place almost daily for some businesses. While striving to earn more points on the Skills Development element a company can use it as an opportunity to improve the efficiency and effectiveness of their workforce. At times companies fail to reach their targets on tasks because employees have not enough skills on the job. BEE should therefore work as an opportunity for a company to update their employees’ skills base.
We are seeing BEE transactions everywhere. BEE is a massive business opportunity. BEE is all around us. A forward thinking company is already and always thinking about BEE. They want to beat the competition and maximize the BEE points in their company.
They will attend workshops to get the best understanding of BEE and then they will create a BEE scorecard and commit themselves to reaching the targets. They will use the best companies to help them achieve their BEE targets. They will make the best decisions that make the most sense and they will do everything they can to make sure their business continues expanding.
Gavin Levenstein is a director of EconoBEE. Cornilius Parwaringira is an expert BEE consultant at EconoBEE. EconoBEE assists organisations understand the impact of BEE compliance on their business and implement BEE in the most effective manner. Contact them on 0861 11 3094 or visit their website www.econobee.co.za to get more information.