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Preferential Procurement Fundamental Principles – EconoBEE Newsletter – 11 April 2013

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Preferential Procurement fundamental principles

Preferential Procurement on the scorecard is one of the most valuable elements. It is worth 20 points on the generic scorecard. Conceptually it is the single most important aspect in the codes. The very intended consequence of Preferential Procurement is that each company will be required to ask each supplier for a scorecard. Each scorecard in turn results in a new “domino effect” being created in that new suppliers are asked for a scorecard constantly.

The impact of this simple thought – ask for your suppliers scorecard who in turn will ask for their suppliers scorecard – is that without a scorecard, business in South Africa is not as easy to come by.

We have a massive database of BEE scorecards – now over 34 000. I am constantly amazed at how a large supplier of a client of ours during our call to that supplier (part of the managed service we offer our clients) denies the impact of BEE to their business.

We have a unique view of the procurement process because amongst others our clients data is calculated and stored on our system. We can then cross reference the amount of spend with that supplier vs all of our clients. Unsurprisingly suppliers who are non-compliant or have made little effort tend to lose business with our customers – either by spending less each year or eventually nothing at all.

Those same suppliers are quite adamant that they have lost no business because of B-BBEE. I find it quite interesting because losing business is easy to measure in one sense ie business you had minus the business you now have equals the difference. On the other hand proving that other companies have business that you lost due to your lack of or poor BEE status is harder to prove.

Using some deductive logic – a competitor who has received more business as a result of a scorecard had to have received that business from somewhere. If the business with a good score grows while a business with an unsatisfactory score does not it clearly implies business was not awarded to them because of a BEE status.

The Procurement model works so effectively because the alternative method of earning points for other elements is spending money. All that is required for procurement is a simple email/telephone call to a supplier asking them for a scorecard – a service we offer. The next step is that a small amount of action be taken towards the non-compliant supplier in favour of a compliant supplier which is absolutely happening. Over enough time non-compliant suppliers will be phased out.

Becoming BEE compliant is easy, provided the right advice is given, the right tools are used and ultimately prepared properly. Our trained consultants can assist you with all aspects of B-BBEE or simply assist with preferential procurement, implement B-BBEE better while spending significantly less time on each element and earning more points.










Ensure a Successful BEE Campaign

True empowerment and transformation should be one and the same. All too often companies spend money to ensure they earn points and we all know that the solution to South Africa’s economic problems is not money – it is skills which turn into jobs which turn into business. Not to mention spending too much money is expensive nor in line with sound business practice.

A great example of how to ensure your BEE contributions are done right is Socio-economic Development.

Defining Socio-economic Development;

“Socio-economic Development Contributions consist of monetary or non-monetary contributions actually initiated and implemented in favour of beneficiaries by a Measured Entity with the specific objective of facilitating sustainable access to the economy for those beneficiaries.”

Social development contributions should result in future economic growth. This is very much in line with the Act’s objective to increase the amount of black participation in the economy.

  • A school student will in future gain access to the economy. As a result that student will be a good target for SED spend.
  • Business sense should imply sponsoring a school student who in future could work for you. It is therefore smart to carefully select students who have the right aptitude and skills. You can also offer some form of mentorship to help the student pass all their exams.
    • This form of contribution becomes continuous because everyone benefits enough to justify the spend.
  • In future once the student is employed you may send them on formal skills training which will help them be more productive.
  • Eventually after years of assistance, mentorship and development that student could become a manager in your business.
  • The expectation of commitment and loyalty has been instilled from a young age while being carefully groomed to achieve success.

Stories like the one above although potentially farfetched do exist. In my view it captures the essence of what needs to be achieved through B-BBEE by developing mutually beneficial relationships which encourage more  participation in the economy.

Each year money needs to be spent. Although money needs to be spent it does not imply that the spend cannot make business sense and as a result earn points and profits. The millions of unemployed people looked at from a different perspective are a gold mine of future productive employees.










Preparing for the Verification rush

The financial year end is possibly the most important date for your BEE verification. All information for Skills Development, Preferential Procurement, Enterprise Development and Socio-economic Development falls within that period. Practically this means that if you haven’t done any BEE activities and your year end has come to an end you cannot earn additional points for that element. (Fortunately the codes do allow you to do activities and still earn points if you run out of time – contact our consultants to assist with this as it is more complex).

Most companies have a February financial year end and will try and have a verification done within the next 6 months. Verification agencies on the other hand plan on doing verifications for all 12 months and as a result have huge capacity problems over this time period. We have seen verifications take as much as 3-6 months over this part of the year. As an aside note: could your business survive without a certificate for 6 months?


Although February marks the end of the data gathering process for most, we should rather start our preparation before the financial year actually comes to an end. In this way we are able to get our verification started before the big rush.

If on the other hand you are only starting your preparation now this is what you need to do.

The amount of time it takes to get verified is a factor of the amount of data that needs to be verified, the experience of the analyst and ultimately the capacity of the agency.

Step one: Prepare properly.

  • Verification is very much a paper process.
  • The more proof the easier it is to go through verification.
  • Know exactly how many points you have earned before going through the verification.
    • Self assessment is key to ensuring you understand where, what, how and when.
  • Prepare proof in line with your pointable activities – proof is only required to earn points.

Step two: Verification

Once your data is ready, approach a number of verification agencies. Although the intention is for all agencies to follow the same standards, the reality is they don’t. Some agencies will ask for more stringent information while others might inspect a greater quantity of information.

  • Shortlist agencies who have strengths in your sector.
  • Determine the lead time from audit to certificate – ensure that it is in line with your requirements.
  • Question the agency, the staff of the agency and references supplied.
  • You have the right to question the agency if you do not agree with their interpretation – although better yet do this before appointing them to ensure you have no last minute surprises which costs you points.
  • Ensure senior employees are present or available during the audit to guarantee quick data availability if need be.

All in all a well prepared scorecard can save tremendous time when going through verification, take stress away from staff who can focus on growing your business and most importantly ensure you have a scorecard for all of your customers.










Revised Codes – Exaggeration or Necessity

The Revised codes have been on the top of our “whats new list” since October 2012. As many businesses now know much of the codes are being rewritten or newly introduced as part of the revised codes. The impact of which could be quite substantial and could see companies scores dropping multiple levels.

Fortunately indications are it will still take time to be gazetted before it can be used for scorecard and verification purposes.

The status quo therefore remains unchanged – focus on the current codes, prepare as best you can and go through verification as if nothing has changed. If you have been told otherwise or are concerned about technical aspects rather contact us and we will try and answer all of your queries.










Let our consultants save you time on B-BBEE.

Preferential Procurement – Save Time by using the BEE Procured database containing over 30 000 BEE Certificates.
Procurement Managed Service: Our consultants can phone your suppliers for a BEE certificate – Managed Service.





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While there is demand for a B-BBEE Scorecard someone will be taking advantage, shouldn’t that someone be you…

Want us to manage your BEE Process – Managed Service.

Turnover below R5 million – find out how to get your BEE Exemption.

Is BEE procurement a pain? Sort it out quick and easy – BEE Procured.

Need a scorecard – produce one yourself – EconoBEE V3.

EconoBEE Newsletter
11 April 2013

In this issue

  • Preferential Procurement fundamental principles
  • Ensure a Successful BEE Campaign
  • Preparing for the Verification rush
  • Revised Codes – Exaggeration or Necessity

In other news

About EconoBEE

EconoBEE is an expert BEE consultancy. EconoBEE helps businesses Become BEE Compliant, prepare for verification, earn maximum BEE Points and ensure that they achieve the BEE Level they need to get more business.

Our services include BEE Management Systems, Training, EME Pack, Complete Managed Services; consulting and advisory and Procurement Solutions.

As leaders in the industry we are driven to help maintain and develop knowledge in the BEE industry.

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Gavin and the EconoBEE Team

Executive summary of B-BBEE

Turnover below R5 million per annum – automatic BEE status

Turnover above R5 million per annum – you need a BEE Scorecard. Our workshops, scorecard tools, procurement manager or a complete managed services will be best for you.

Your time on your business, our time on your BEE status


Through our managed service avoid the BEE distraction and let our consultants implement Broad-Based Black Economic Empowerment for you.

10 Strategic Steps to B-BBEE!

We have prepared an easy to follow guide “B-BBEE in 5 Minutes” and “Crash Course to BEE Verification” which explains BEE in a simple step by step approach.

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