Archive for March, 2009
Recently I watched a TV programme that asked the youth to give their views and feelings towards BEE. According to the youth it depends on whether you are black or white. The feelings ranged from BEE being considered unfair to youths since they were not part of the apartheid and to its promotion of discrimination through rewarding others based on race or gender and not merit. There are various arguments for and against BEE, however the important fact is that the economic imbalances in the country need to be addressed.
I believe proper implementation of BEE will positively play an important role in molding the youth who are the future of the nation. It is often said ability is of little account without opportunity. Giving the poor black children the opportunity to go to better schools through socio-economic development or helping young black entrepreneurs through enterprise development certainly breaks the cycle of poverty.
Skills development, which is at the core of BEE, also gives the black young people the opportunity that they would otherwise not have due to poverty or discrimination. Skills development improves the employability of the youth and if companies have well-targeted skills development initiatives and learnerships they will be able to close the skills gap in the long run.
The goal of BEE is not to make life difficult for anyone. It is about affording opportunities to those who did not have them before. It is also about making life easier for those businesses with an annual turnover below R5 million. Making huge demands on them will be like militating against investment and national prosperity. One potential client of ours is an EME (businesses worth less that R5 million annual turnover) and needs all the support he can get in order to thrive. I have always said patriotic huge corporates should take it upon their shoulders to make sure such businesses prosper.
Fronting has and probably always will be a big issue. Unfortunately when money is involved you will always get someone at some point in time willing to step over a few boundaries to get rich quick.
Fronting in BEE terms is a misrepresentation of your BEE status and a company in Cape Town has done just this according to a recent article. This business tendered for a job worth R40 million in the name of a BEE front. An investigation then occurred. He later plead guilty and was fined R1 million.
I find this particularly interesting and should serve as a warning to all companies fronting. The time will come where a rival bidder will catch you out. On a positive note (talking to the masses) if you suspect a company of misrepresenting their BEE score, report them.
Large corporates in South Africa are failing to absorb the swelling number of candidates looking for employment. This is due to various factors. The most recent one being that they have felt the impact of the global economic meltdown more than the the small enterprises. Most processes in large firms require much more advanced skills and expertise. The other reason is that it is easier for huge corporates to employ from internal sources instead of going to the external labour market.
On the contrary, small businesses have been employing many potential job candidates. This is because they do not have the money to pay very skilled and experienced employees. They do not have the manpower to head-hunt or advertise widely. They do not have complicated processes that require very skilled people. As a result, they can afford to recruit newly qualified graduates. In so doing they are playing a critical role in reducing unemployment and poverty levels.
In view of this, large corporates can play their part by supporting small enterprises, most of which are Black-owned, and earn points under their enterprise development element of the scorecard. The support may not be directly monetary but it can be helping them market their products and services, training their employees, paying COD and allowing discounts. The small enterprises’ capacity to absorb more people from the labour market will be boosted as a result. By so doing the BEE goals will be met sooner rather than later and the economy will grow at a better rate.
We often get a call like the above. The client wants a BEE rating or certificate. We always explain that we are not a rating agency and ask if the client already has a scorecard. Invariably the client will say they have no scorecard, which is why they are phoning us! It is quite confusing.
We then have to explain you don’t get your company rated, as many people perceive a rating – it is getting your existing scorecard verified.
As much as they might want it, a company can unfortunately not ask someone to come in and give them a rating – they have to work towards building up the scorecard. With our help we can identify those business activities that earn points, and calculate the points the company has earned. We can also help the company identify strategies to increase and optimize those points. However, in the end, the points are a reflection of the company’s own activities and decisions.
We have always said that our clients are more BEE compliant they realise. I consulted for a client yesterday. They are generic and hoped to be at level 5. In the end, we discovered that they had undertaken a lot more activities that earned them points. In many cases people say that they undertook a project because it made sense to do so, not for points. That doesn’t matter – your reason for doing something does not disqualify you from earning points for that project. At the end of my consulting I said to the financial director. “If I can get you to 80 points – level 3, will you take me to McDonalds and buy me a burger?? He smiled and nodded his head “.. in Mauritius.” I continued.
Today I received an email from our business contact in KZN, Nofesa.
It was an email forwarded from the Services SETA who are offering a grant to companies who are BEE Compliant.
The BBBEE EME Certificates Project: This is for the levy paying SME’s with an annual turnover of less than R5million. They will be awarded with SSETA funded certificates and all they need to do is fill in the attached Interest form.
2. The BBBEE R5000-00 Discretionary Grant: This is for levy paying companies with an annual turnover of above R5million. They will be getting a R5000-00 grant if they are BBBEE Compliant and have a certificate that was issued in the last six months. The letter explaining the whole process and the requirements has been attached.
I always get amused/annoyed when I read in the media of XYZ (Pty) Ltd, a BEE company. What exactly does a “BEE company” mean?
I take it literally to mean that the company is BEE compliant, i.e. maybe it is level 4 or 3, or even 2.
Of course this is nonsense, a “BEE” company in the eyes of the media is simply one that is black owned.
There is a definition in the codes “BEE controlled company”. This is a company that has more than 50% voting rights in the hands of black people.
A “BEE owned company” on the other hand is one that has more than 50% economic interest in the hands of black people.
In the interests of accuracy I’d like to see the press refer to these companies by their true categorisations.
We wrote recently that some verification agencies have been accredited and some not yet. We wondered if this will cause a rift amongst those verification agencies who are accredited and those who are not.
Well, ABVA have issued a letter to their members confirming that they will hang their members out to dry if they do not get accredited, or at least get a pre-assessment letter by 30 June 2009.
The letter from ABVA states that the dti has reached a position which will be communicated to the marketplace shortly.
This letter has already caused a stir in the marketplace.
Our position has always been to follow the codes – to date accreditation has been encouraged, but is not mandatory. As at today the BEE codes and verification guidelines still allow for both self-rating and independent rating.
We await with interest the dti’s response and whether it will corroborate the ABVA statement.
Socio-economic Development is one of the noble and good ways to earn BEE points. The key principle of Socio-economic developments is for enterprises to carry out initiatives that result in the beneficiaries having sustainable access to the economy and hence reduce the poverty barrier. However it involves costs to the enterprise since the enterprise should spend 1% of its Net Profit After Tax to earn all the points available.
In this period of recession where budgets are tight and management of costs is imperative, it is prudent for companies to align their social development programs that include corporate social investment, corporate social responsibility and marketing programs with their BEE targets and initiatives. We always say BEE initiatives should be implemented within the context of sound business principles. So I encourage businesses to incorporate and align their BEE activities with business goals and strategies. If your business strategies are linked to your social development campaigns the enterprise can earn the BEE points required whilst the enterprise market its image, brands or services and gain respect from government and customers.