Posts Tagged R5 million turnover
Every company in South Africa has procurement spend. When the codes of good practice talk of procurement they include even the milk for the staff members’ tea, the paper for printing, the office fan, to mention but a few instances. More often companies tend to ignore the smaller amounts spend from their procurement calculation. This has led to some companies claiming that they are net importers and so they will not get any points under the Preferential Procurement element of the scorecard. The fact that imports are eligible exclusions from the scorecard calculation makes it sometimes even easier to score more points. Even more pleasant for a company that imports the majority of their procurement is the fact that the small amount of local procurement is likely going to be from small suppliers. The small suppliers are likely going to be EMEs (businesses with annual turnover below R5 million) or QSEs (businesses with annual turnover between R5 million and R35 million). For procuring from these businesses an entity’s spend gets an enhancement because such procurement counts under two indicators. More still, it makes the calculation of Preferential Procurement points easier to follow and also easy to get scorecards from the fewer suppliers.
The B-BBEE codes have encouraged the growth of small businesses (those with annual turnover below R35 million) and Black owned businesses through the element of Preferential Procurement. Generic companies (companies with annual turnover of more than R35 million) earn 8 points for spending just 25% with suppliers with annual turnover below R35 million as well as Black owned and Black women owned businesses.
This certainly encourages large generic companies to buy from suppliers who need support to grow leading to more empowerment of the more deserving entities and individuals. The growth of any company heavily hinges on the number of customers that they have. Having customers in the form of large corporates is more desirable for any small business because they have more capacity to pay for orders.
In other words, there is a benefit to the generic companies in the form of getting more BEE points while helping the sustainability of the smaller businesses.
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.