Archive for February, 2009
BEE is not Scary
A big perception about BEE is that it is a big unknown which could cause you to give away half your business. This point was once again very high on a recent clients BEE thoughts. He did not want to give away his business yet he thought he would have no choice. He also thought his customers would stop buying from him and he would be forced to close his doors.
This unfortunately caused him great stress yet it is not true.
His customers want a Broad Based BEE scorecard. This is something he not only can comply with but as he was a small business he can get a very good score.
My point is, BEE is not scary. It makes sense for your business. My advice is, attend a short course, it will clear all the BEE myths and as we like to say leave you BEE ‘Motivated.
Differences in interpretation
Posted by Keith in Verification on February 24th, 2009
There are now 11 SANAS accredited verification agencies, and there are about 25 different interpretations. Not only do agencies differ amongst themselves, but consultants within agencies have differing opinions.
If a business has an income of R1000, and has costs of R900, then all accountants will calculate the same profit figure – R100. Yet when it comes to verification, or even calculation of the scorecard everyone has a different way of doing things. Today, we spoke to the dti over their own method of calculation. They recognised they had made a mistake but said we were the first company ever to identify the error and complain.
The same goes for an accredited agency with whom we had a difference of interpretation. They asked us to supply a ruling from the dti, which we duly did. They also said that they had never been asked about this issue ever before.
It would be laughable if it did not involve a miscalculation of 15 points on the scorecard. Could it be that your company has received 15 points less than you deserved because your agency made a mistake/interpreted the codes differently? How come no company, other than ourselves has challenged a scorecard? Or have you challenged a score you were given? Let me know.
Strength of a Black Business
A database of black owned business will help in the implementation of BBBEE. However black businesses also need to play their part. Using SWOT analysis, a powerful and simple tool, used in the first stage of strategic planning and that helps a business focus on key issues, 50% black ownership and a good BEE score is a strength to a black enterprise. This strength should be used to take advantage of the opportunity that has been presented by preferential procurement and enterprise development.
Black owned enterprises especially EMEs and QSEs that have good BEE scores are not realising and utilising their status to their advantage. A 50% black ownership and a good score incorporated in the marketing and sales activities should not only result in better chances of getting the much-needed business, but will also make the business a candidate for enterprise development.
You can tell a lot from a BEE Scorecard
In my industry I am often sent a BEE scorecard, just today I received one from a potential supplier.
Equity Ownership 23.00
Management & Control 9.50
Employment Equity 3.10
Skills Development 1.10
Preferential Procurement 12.23
Enterprise Development 15 00
Socio-economic Development 3.27
They were a generic company which means they are above R35 million. They were black owned and did very well on ownership and management which is natural.
Their employment equity was low as was their skills development. I wondered why their employment equity is so low, it is easier to find a black employee because there are more black people in SA than white. Similarly it does not give me confidence that they earned 1 point out of 15 in Skills Development. Do they spend no money on training. This point is something that I just cant seem to understand they did so well on Ownership and Management but almost nothing in EE and Skills.
Procurement and Enterprise Development they did well in which means they are fairly active in buying from compliant suppliers and in helping small businesses grow.
SED they did not reach their targets. SED are amongst the easiest points to earn, why did they not get them?
In summary, this organisation did well – I am however concerned about dealing with them because of the amount they spend on training.
R41 billion worth of BEE deals in the balance
Today’s issue of The Financial Mail explains that due to the economic meltdown, R41 billion worth of BEE deals may be lost. Many listed companies used the fact the the JSE is rising as a method of helping their BEE partners finance the purchase of their shares. They also use dividend payout as a method of finance. With the JSE dropping, the strike price (i.e the discounted price that the shares were offered to the new partners) is now higher that the actual share price. This has thrown many deals into disarray.
It does not mean that BEE is in disarray – only one element – ownership – has a problem. Companies can, and in the current economic climate, should, worry about the other elements. When the JSE improves ownership will be in vogue again.
Speculation – Free Market VS BEE Verification
Posted by Gavin in Verification on February 20th, 2009
On occasion I will receive an email from other consultancies/verification agencies or a question from my clients saying what is happening with self assessment. The last one I received said they thought that since accreditation is finalised self assessment would be phased out in time.
Importantly they are not saying it is not allowed, they are speculating that in time it will be phased out in favour of accreditation. I believe that the market will move in the other direction and see accreditation as an unnecessary issue. A business would rather choose his auditor with whom he has already built up a good relationship and has an audit standard qualification.
The DTI and businesses in general have proven time and time again that self assessment is the most effective form of producing a BEE scorecard. Unfortunately it is no surprise that verification agencies and those associated with them want to see self assessment “phased out” because it takes away from their task as consultants or reduces the need for verification. The same example stands with the charters because it will make BEE more complex which in turn will result in more business.
Finally, I am a firm believer in the free market – let businesses decide what they want. Government (The DTI) is here to facilitate the transaction but it is businesses job to implement BEE. Although BEE is a social act it is very much driven by the forces of the market, this can easily be proven by looking at the Preferential Procurement Element – you need a scorecard because you want business. Procurement is the only real form of push that businesses have to implement BEE and it works, for the same reason that self assessment is an important part of Black Economic Empowerment.
Self assessment is needed, as is a high level of credibility to ensure accuracy.
Let businesses decide how much they want to spend on verification and give them to tools to make their own decisions.
Where are the black businesses?
The codes allocate extra points for black owned (50%) or black women owned businesses (30%) for procurement. Also you can earn enterprise development points by supporting those types of businesses. Yet so many people I see cannot find these businesses. I visited a client two days ago, and recommended that they do something fast – their year-end is 28 February – one week away. The easiest way to earn extra points is by supporting black owned (50%) or even 25% black owned businesses, and paying their invoices COD! However many businesses do not have back owned suppliers or do not know that some of theirs suppliers fall into that category.
It’s a shame that too few black owned businesses exist and too few advertise their competitive advantage – what they can do for their own customers.
Is there a database of black, and especially black women owned businesses that we can all refer to? Should we start such a database?
ICT Charter
Reports are that the ICT charter has missed its deadline again. I continue to wonder why industries continue to have charters. So far no charter has been finalised – some are quite far down the line, but none has maded it to the final gazetting stage.
The transport charter is a huge document – they have created sub-charters for every industry within the tranport industry – even including forwarding and clearing!
All it has done is delayed the process, and given some good business to consultants and lawyers. We ourselves have been involved in the legal charter – but we told them their charter will never be gazetted if they are going to change the definitions. In the end they published it as a “social charter”, hoping to get law firms to adopt it, but realising that the codes of good practise should be used instead.
Now, 2 years later theICT charter is still not ready, and unlikely to ever be finished – sounds a bit like the IT industry – they never seem to finish any program they start! Yes, a bit harsh, since I was in the IT industry for many years before starting EconoServ in 2000.
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