USING B-BBEE TO IMPROVE YOUR BOTTOM LINE
By Keith Levenstein, CEO of EconoBEE, experts in B-BBEE and development of the BEE scorecard.
Many businessmen view B-BBEE as an administrative annoyance; and it is also misconstrued as one which could cost you the majority share in your business. A more optimistic view of the B-BBEE is an opportunity to grow your business and ultimately improve your bottom line. When all factors of your service / product are equal to that of your competitor, such as price, quality and reliability – your B-BBEE rating could be the major deciding factor in the deal.
The challenge to many business decision makers is that they do not fully understand the requirements of the BEE scorecard and as a result there are various misconceptions surrounding black economic empowerment. Commonly businesses feel that BEE is a burden that consumes many hours of admin. The tragedy is most of these businesses don’t realise that the required admin task already exists internally and that producing a BEE scorecard is often an easy task that genuinely results in sustainable growth.
For example, enterprise development encourages business to invest in black owned businesses. The eligible spend need not be a cheque writing exercise but rather a low level business investment resulting in potential profits as a result of the small contribution. Common forms of investment can be found in discounts on existing products or even an exchange of services and infrastructure which result in a small share of the business. The underlying business approach is not to give money away but rather to assist with business development and growth. Not only will your contributions assist a business grow but it will also create a sense of trust in your business because of your contributions for enterprise development. You will also be rewarded with points on your scorecard which further sweetens the deal as your customers will now be able to claim additional points on their scorecard which ultimately assists them earn more business.
Further to the example, businesses, in varying industries, are being asked for a BEE scorecard as using a BEE compliant service provider contributes to their scorecard in terms of the preferential procurement element of the scorecard. Preferential procurement is the major mechanism used to encourage more businesses to comply with the broad based BEE legislation. With this in mind, the incentive to produce a scorecard is the need to compete and surpass competitors and not a government law which forces compliance. In this case, a better scorecard than a competitor can result in extra business.
Sadly, skills development in South Africa needs major improvement. As a result training is vitally important for businesses if they want to keep clients satisfied. Apart from skills development being a good way through which one can earn BEE points, it can have further positive consequences which makes absolute business sense. The quality of a business is often quite difficult to determine. Multiple businesses tender for the same job and simply comparing pricing is not sufficient to make an informed decision. As an example; a wholesaler selling technical products replies to a tender, providing their pricing and product details along with their BEE scorecard; which shows that they have spent the requisite amount on skills development. This implies that the company is actively training and improving the quality of their staff. Well trained staff have extremely positive, far-reaching, practical results. This compared to a company who has not spent any money on training implies their staff are not up to date with latest trends and perhaps will not be able to properly support the products they are trying to sell.
Ensuring that you understand the composition of the broad based BEE scorecard and the business impacts relating to the scorecard will help you to make focussed decisions and take directed action to successfully build your scorecard. Forward thinking and recognising the opportunities that lie within each element will ensure that your company’s bottom line, even if only slowly at first, will begin to rise.
Making use of the professional services of a consultancy such as EconoBEE could make all the difference in identifying the factors and activities; in which your company may already be involved such as enterprise development, that would positively contribute to your business’s scorecard.
For more information on EconoBEE and services they offer visit their website www.econobee.co.za or call them at 011 483 1190.