SMEs: Tackle Your B-BBEE Status to Ensure Long-Term Business Success
Until businesses adopt transformation in a more meaningful way, government will continue to shift the legislative goalposts.
Innovative BEE Solutions Business Unit Manager, Hansie De Waal, says keeping abreast of changes to the regulatory landscape can be challenging for small and medium enterprises (SMEs).
“Just when they feel they are meeting the B-BBEE requirements – as they relate to their operations – the codes are amended, and certification needs to be renewed under the revised codes and relevant sector code.”
In the 18th Commission of Employment Equity report, chairperson of the Commission for Employment Equity, Tabea Kabinda, says that two decades since the introduction of the legislative framework aimed at transforming the country’s economy, South Africa is “still nowhere near celebrating effective implementation of transformation legislation. We cannot even begin to contemplate the implementation of a “Sunset” clause on this legislation.”
In March 2018, the Minister of Trade and Industry issued draft proposed amendments to the codes that, if accepted, will result in Broad-Based Black Economic Empowerment (B-BBEE) recognition of bursaries for black students to study at higher education institutions and improved B-BBEE recognition of job creation for black youth through the Youth Employment Initiative (YES Initiative). The codes will also mean large enterprises (R50m-plus turnover) can be rated level 2 or level 1 B-BBEE based on black ownership of 51% or 100%, applying the flow-through principle.
In addition, in June 2018 the Department of Trade and Industry published draft proposed amendments to B-BBEE definitions as well as revised Enterprise & Supplier Development Code 400 wording.
De Waal says when SMEs do not have the knowledge or capacity to deal with their scorecards and B-BBEE status, they should consider appointing a reputable service provider to help manage their scorecards.
“A poor B-BBEE rating can threaten the sustainability of businesses, leading to a loss of existing business and the inability to win new business. This, of course, often means a loss of revenue,”
he adds.
The amendments to the codes still apply, but there are a few aspects that De Waal feels need to be emphasised.
“Since January last year, all B-BBEE accreditation needed to be renewed under the revised codes and verified through a South African National Accreditation System (SANAS)-accredited Verification agency. Smaller businesses with an annual turnover of less than R10m are automatically deemed level 4 businesses under the Act and exempt to comply with the Qualifying Small Enterprise (QSE) scorecard,”
says De Waal.
Businesses with a turnover of between R10m and R50m are legally compelled to apply for a small enterprise scorecard unless it is 51% black owned, in which case it is exempted from the scorecard and is automatically deemed a level 2 BEE business. In these instances, all that is needed is a sworn affidavit.
Looking more closely at the five B-BBEE scorecard elements, De Waal suggests SMEs get on top of their scorecards if they want to achieve long-term business success and avoid losing out on winning their next business tender.
“SMEs (with a turnover of between R10m and R50m) need to comply to four of the five elements.”
Black Ownership is compulsory, and the two priority elements are Skills Development, and Enterprise & Supplier Development (including Procurement). Business owners can choose to direct their focus on either Skills Development or Supplier & Enterprise Development. The other two elements are Management Control and Socio-Economic Development.
With regards to Supplier & Enterprise Development, companies must purchase from suppliers with a valid BEE status and mainly from companies with at least 51% black ownership.
“Notably, the recipients of Supplier and Enterprise Development must be separate entities,”
notes De Waal.
He suggests SMEs invest in registered learning programmes to fulfil their Skills Development scorecard requirements.
“With President Ramaphosa’s emphasis on the YES initiative, it would be prudent for businesses to see how they can align with it. From a socio-economic development, 75% of the beneficiaries must be black South African citizens, women, disabled people, youth and people from rural areas.”
“B-BBEE is here to stay for the foreseeable future. The sooner businesses start to embrace the principles and make more meaningful changes to how they are structured and run, the sooner we can celebrate real transformation in South Africa and the easier it will be to conduct business,”
concludes De Waal.
