TOP FIVE BEE INTERPRETATION MISTAKES: PROCUREMENT

Eleanor Roosevelt wisely said; “Learn from the mistakes of others. You can’t live long enough to make them all yourself”; and in business learning from ones’ own mistakes could amount to considerable outlay.  Expert BEE consultants, EconoBEE have used their vast experience to compile a list of the top five mistakes that businesses make when interpreting the procurement element on the BEE scorecard in order to save you the time, and money, of making them yourself.

1.                   In calculation of BEE procurement, companies should consider their total annual expenses.  A common error would be basing the procurement calculation on expenditure incurred only with BEE compliant companies.

2.                   For suppliers that are either more than 50% black-owned or 30% black female owned, recognition of BEE procurement spend would be based only on their black ownership.  A common misconception would be calculating the procurement spend with these suppliers based on their BEE levels against the 50% black-owned or 30% black female owned targets.

3.                   Companies often misinterpret the aspect of imports as exclusions from the procurement calculation.  Some may justify their exclusion of imported goods on the basis of cost.  Imports may only be excluded in the procurement calculation if:

a.                   They are imported Capital goods or components for value-added production in South Africa provided that:

  • There is no existing local production of such capital goods/components.
  • Importing such capital goods/components promotes further value-added production within South Africa.

b.                  Imported goods/services that:

  • Carry a brand different to the locally produced goods/services.
  • Have different technical specifications to the locally produced goods/services.

4.                   Companies may mistakenly exclude labour broker expenditure from their procurement spend.  According to the BEE Codes of Good Practice, outsourced labour expenditure is included in the procurement calculation.

5.                   Capital expenditure may be mistakenly omitted as part of procurement expenditure.  Capital expenditure should be included.

Keep a look out for more of the reliable and quality advice offered by EconoBEE as they breakdown the top mistakes made by companies interpreting each of the elements of the BEE scorecard.  Alternatively, visit their website at http://www.econobee.co.za/ or contact one of their professional consultants at 011 483 1190.

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