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 socio-economic development element on the BEE scorecard in order to save you the time, and money, of making them yourself.
1. The targets for Socio-Economic Development spend are 1% of Net Profit After Tax for both Generic companies and Qualifying Small Enterprises (QSEs). Companies may misinterpret the targets as a percentage of annual turnover.
2. A common misconception among companies is generalizing all charitable donations as Socio-Economic Development spend. For a company to claim the full value of a charitable contribution as Socio-Economic Development spend, the beneficiaries must be at least 75% black.
3. Further to the above, not all Socio-Economic Development contributions are recognized at the full value (according to the Benefit Factor Matrix). For instance, direct costs incurred in supporting Socio-Economic Development will be recognized at 100% of the contribution value, whereas overhead costs supporting Socio-Economic Development are recognized at 80% of the value. A mistake would be considering all Socio-Economic Development contributions at their full value.
4. Companies may still recognize a portion of Socio-Economic Development spend if beneficiaries may be less than 75% black. For instance, 35% of the contribution value may be recognized if the beneficiaries are at least 35% black. A common mistake is that if beneficiaries are not 75% black, no points will be earned.
5. Cumulative Socio-Economic Development spend should be measured as a percentage of cumulative Net Profit After Tax in calculation of points earned. Companies may sum up Socio-Economic Development spend from previous years, and mistakenly calculate it as a percentage of one year’s Net Profit After Tax.
Visit the EconoBEE website at http://www.econobee.co.za/ for more of the best BEE advice. Alternatively, contact one of their professional consultants at 011 483 1190.