The Excuse Letter – EconoBEE Newsletter – 16 April 2014

EconoBEE - BEE Points = Business

The Amended B-BBEE Codes are still a major talking point. Despite a small 6 month delay, implementing the Amended Codes needs to begin as soon as possible.

Backtracking slightly – a few years ago when the ICT codes were issued many clients were worried about how the new ICT codes would impact them. We said that if they prepared properly they would get more points, if they didn’t prepare they would get dramatically less points.

Fast forwarding – the Amended Codes are seen to be much more difficult. No doubt some of the targets have increased. However, even with targets in elements like Skills Development doubling, it is still quite plausible to maintain a high score. In fact, our view is that if you are properly prepared you will get more points on the Amended Codes compared to the 2007 Codes of Good Practice. Why?

We have already developed a solution to calculate and strategise a scorecard for the Amended Codes for our many clients. Through that calculation we have found a very interesting trend. Clients who have previously done well on the old codes will do better from a points perspective on the Amended Codes.

Firstly, the Amended Codes allocate 118 points compared to 107. Most of those points are on Skills Development, Preferential Procurement and Enterprise Development. Management and Employment Equity are reduced – however the sub-minimum of 40% has been removed, meaning some clients will actually earn more points on Employment Equity indicators.

Secondly, given enough time to adequately plan and implement activities consistent with the Amended Codes, your score almost certainly is going to result in a successful level. A good example is Skills Development where the target has increased to 6% from 3%. However if you elect to still spend 3% you will only lose 4 points. You can gain 4 points through learnerships with unemployed people and gain another 5 for either employing those people or helping them find jobs. All in all you will get more points.

Elements like Procurement (supplier and enterprise development) will be the most challenging. The good news for most large companies is that they have already worked hard on trying to find suitable suppliers. It will most likely be the biggest challenge to find adequate black owned suppliers. However you will find many black owned suppliers will be level 2 or 1. The implication of that is that the spend is inflated by either 125% or 135%.

Finally, start preparing now for the Amended Codes. At this moment in time we have adequate time to implement all the activities needed to maintain your BEE points. Our Managed Service is an ideal solution for any business wanting to be pro-active when implementing B-BBEE. Through a long term view we are able to continuously keep track of progress, advise on important changes as and when the changes happen and ensure success through every single transaction.

Visit our website or contact 011 493 1190 for more information on our Managed Service.

 

The Excuse Letter

A major reason for producing a good BEE scorecard is to satisfy clients. The higher the score the better the chances of your company being awarded business.

Achieving a good scorecard takes considerable amounts of effort and commitment. Suppliers would need to appoint a verification agency to do an audit or a consultancy to assist them attain that high score. Once appointed the supplier would ask for a confirmation letter or an in-progress letter to confirm to their client that something was happening.

We call this the “Excuse Letter”.

Unfortunately we see a company issuing an “excuse letter” far too often. The letter says something like “we are in the process of getting a BEE certificate”. Sometimes the letter is issued by an accredited agency that confirms the company is in the process of being verified. Some of these letters have a cut-off date – stating  that the letter is valid for three months from date of issue.

The letters mean nothing, other than a promise of obtaining a valid certificate.

Far too often a supplier uses the letter as a substitute for a genuine certificate when they have no intention of getting a certificate. Just this month we saw a letter issued by a reputable agency dated April 2012 that stated the agency is currently verifying the company. Obviously something happened that stopped the process because the company still does not have a certificate and it does not take 2 years to verify a company.

Two years is not the longest time we have seen companies using the same excuse letter with a promise of issuing a genuine certificate.  If my supplier gave me a meaningless promise I would be wary of any other promise he made to me, and I probably would not continue buying from him.

In contacting the companies they usually confirm that they are no longer in the process of verification. This makes their excuse letter a serious fronting indicator. Fronting is a deliberate misrepresentation of their BEE status. If they are saying that they are in the process of becoming compliant, but in reality have decided to do nothing, this is a misrepresentation of their BEE position. Penalties for fronting are up to 10 years in jail and/or 10% of the company’s turnover.

On a much more positive note: we are beginning to see many companies electing to reject any “excuse letter” in favour of other already compliant suppliers. Those companies now realise that if a supplier hasn’t managed to get a compliant scorecard by now then they likely won’t have one in three months like their letter suggests. 

We suggest that, companies who don’t have a current valid scorecard and want to give their valuable clients a commitment, give a commitment in the form of an internal fully calculated preliminary scorecard. It might even make sense to create a secondary profile out of the scorecard data. Practically you will then give your client a scorecard that is equally as unacceptable from a verification viewpoint, however in our view. Shows a significantly greater commitment which is far more likely to result in a verified scorecard.

If you have been in the process of verification for a number of years please contact us on 011 483 1190 and talk to us about our Managed Service so that we can help you progress from “in process” to “verified”.

 

 

 

 

 

 

 

 


Let our consultants save you time on B-BBEE.

Preferential Procurement – Save Time by using the BEE Procured database containing over 50 000 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 R10 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
 16 April 2014

In this issue

  • The Excuse Letter

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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Fax: 011 483 1195
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Regards
Gavin and the EconoBEE Team
 

  
Executive summary of B-BBEE

Turnover below R10 million per annum – automatic BEE status

 

Turnover above R10 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

Tip:

Amended Codes preparation needs to begin immediately. Through our managed service prepare early and gain a competitive advantage.

 

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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