Posts Tagged B-BBEE
Your BEE scorecard is one of the essential tools required to ensure your customers are satisfied and you grow your business. However the problem is it can take a tremendous amount of time to prepare a complete scorecard, in particular Preferential Procurement, trying to get a copy of every suppliers BEE scorecard. It is also hugely difficult to calculate how many points each supplier is worth. The rest of the scorecard can also take unnecessary time and cost money collecting documentation.
Steps to a successful BEE Scorecard:
The rationale: Each business needs a BEE scorecard because their customers need a scorecard.
Start with a simple solution – understand the scorecard in its simplest form
- The elements
- The indicators
- The targets
- How the scoring works
This works really well and certainly encourages more businesses to comply. The difficulty though is not only producing a scorecard that satisfies everyone but also finding cheap and easy points that help you beat your competitors score.
The next step: Earning cost effective and easy points
- Track the areas where you have already earned points – ie Skills Development
- Find creative ways of earning additional points
Finally prepare a report. Make sure you have a competitive score. If it is below your competitors score, make sure that your score is at least compliant and then use your competitors score to benchmark your next years target score.
A word to the wise. BEE contributions are taken retrospectively like an accounting audit. If you did not reach your target this year you will have to wait until next to improve you score. Unfortunately you can’t wait until you have an audit to reach your targets.
There is a misconception held by some companies that are Black owned that they do not need to go through the compliance process. Such companies feel that the fact they have a high percentage or even 100% Black ownership and management they have met the B-BBEE requirements.
All companies in South Africa need to work on the B-BBEE scorecard. Ownership alone constitutes 20 points on the Generic scorecard (scorecard for companies with annual turnover of more than R35 mil) and 25 points on the QSE scorecard (scorecard for a company of between R5 mil and R35 mil annual turnover). Earning full points on the ownership element for either a Generic or QSE entity without points elsewhere does not make them B-BBEE compliant. The broadbased nature of the B-BBEE scorecard means all companies have to train their Black employees, buy from B-BBEE compliant suppliers, help other Black owned businesses to grow, donate to charity apart from other initiatives if they are to be labelled as truly empowering. This will speed up the process of emancipating the disadvantaged in South Africa.
What those Black owned companies that feel it unnecessary to work on the B-BBEE scorecard are doing is to drag and frustrate the process towards economic parity among the South African racial groups.
Tony Leon has written an interesting articles in the Business Day in discussing BEE and Moeletsi Mbeki. Amongst others Leon states:
“The taproot of Moeletsi Mbeki’s discontent is that BEE, as commonly practised, “creates a small class of unproductive but wealthy black crony capitalists” and thus strikes a blow against the emergence of genuine entrepreneurship.”
I wonder if Leon is correct is his assertion that Mbeki’s concern is about “BEE, as commonly practised…”? Either way many people are concerned about the way “BEE is commonly practised”. Does this imply that since some people choose to call their actions “BEE”, but do not practice it as required, then the entire B-BBEE policy is flawed? If Lance Armstrong teaches me to ride a bicycle, but I choose to use a car instead, do we blame Lance Armstrong, or the bike, or myself for not implementing riding bikes properly? Just because a company implements a system that someone dislikes, why blame B-BBEE for that action? If the company says it is taking that action in the name of BEE, does it make that action a proper BEE action? In which case, I’ll bring my car and win the Tour de France, because I choose to call driving a car, “riding the Tour de France”. In the case of me winning the cycle race, the organizers can and will disqualify me. Do we disqualify every company and every person who states that they are BEE compliant, or taking actions in terms of the BEE codes, but end up not doing so? When a company states that a particular position is a quota position do we blame BEE, or the company for doing it wrongly in the name of BEE?
I’m not at all concerned about “BEE as it is commonly practiced”. BEE can only be practiced in one way – the way defined by the concept of implementing B-BBEE – the codes of good practice, and the EconoBEE way of implementing it. I’m concerned about people practicing something (let’s call it “anti-BEE”, but stating that they are in fact practicing and implementing B-BBEE).
Who, or what should we blame? Not B-BBEE because most people, when they understand it do agree that B-BBEE is a good policy. Rather let’s blame those companies that contribute to Mbeki’s feling that it “creates a small class of unproductive but wealthy black crony capitalists” and thus strikes a blow against the emergence of genuine entrepreneurship”.
Given the priority of staying as competitive as possible, companies need to exploit all existing opportunity channels. This requires a knowledge and understanding of possible environmental impacts on your business.
In the South African business environment, BEE compliance plays a significant role particularly to those companies dealing at a business-to-business level. Your clients will require you to produce evidence of your BEE compliance status, without which they will opt to do business with your rival.
How do you address this problem? One of the largest sources of competitiveness is a customer-needs driven approach. Identifying and satisfying your clients’ needs provides the necessary competitive edge. Therefore, getting the proper BEE documents is not a choice for those companies with such clients who require such evidence. In such a scenario, a company’s competitiveness is based to an extent on its BEE score.
Therefore, how competitive is your business without evidence of its BEE status, in a market where such evidence is held with high regard?
I’ve done quite a bit of work with the mining industry recently. The mining charter (which is an act, and not a BEE sector code) sets targets for mining houses to get their mining licenses renewed. The deadline is July 2009, so there is going to be lots of excitement soon.
The mining charter is not broad-based, does not follow the codes and virtually only requires 26% black ownership to comply. It does have other requirements, but they are so tenuous as to be meaningless.
The biggest complaint most people have about BEE is that it is not sufficiently broad-based and does not benefit the people whom the act intended. The mining charter falls into this category.
Now I was wondering how to change this: Ideally the mining charter should become a sector code as part of the B-BBEE act. The way to get a new charter and then sector code is to start with the industry itself . The following groups need to come together to ask the dti minister to start the process;
- The mining houses and mines
- The Chamber of mines
- The unions
- The responsible government department (ie. DME)
They need to prove to the minister that they represent the main and majority interest groups in the industry.
I then realised that there is almost no chance of this happening. Let’s only look at the mines that condemn the mining charter. Would they be happy going to a proper scorecard? Not likely! The few that do not have their licenses will obviously jump at the opportunity. The majority that have, will see this as a way to prevent easy access to the industry. They will feel that they have had to “make sacrifices” to get their 26% ownership . Of course if they had to now fill in a scorecard with a decent target of say level 3, they may find that they fall short. Many ownership deals are not worth that much on the scorecard, and many mines have not looked at the rest of the scorecard, so would have a bad score.
The other role players would probably be even less likely to support a move to a broad-based scorecard.
Sad to say, but I doubt that the mining charter will become broad-based and follow the B-BBEE codes any time soon.
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.
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.