Firstly B-BBEE ( BROAD BASED BLACK ECONOMIC EMPOWERMENT) is a very broad topic and has various elements which encompass it.
We will focus on the most important element of B-BBEE which is a tool that many businesses can use to benefit for B-BBEE and that element is known as Enterprise Supplier Development (ESD) which is (A combination of Preferential Procurement, Supplier Diversity, Supplier Development and Enterprise Development programs to service business needs. …Supplier Diversity is the proactive business process of sourcing products and services from previously under-used suppliers.)
Firstly the Broad-Based Black Economic Empowerment (B-BBEE) is one of the most misunderstood concepts in South Africa, we have worked with a lot of white owned companies and some hates B-BBEE because they think its objective is to take from them and give to Africans, Indians and Colourds.While on the other side there are also a lot of black people have love-to-hate on B-BBEE because they think it is a policy meant to benefit few politically connected people and some directors of large black owned companies are not happy with B-BBEE because there a many white owned companies who are benefiting from B-BBEE while theirs are non-compliant despite being 100% black owned.Today we clear this up and discuss how entrepreneurs can position their business to benefit from B-BBEE through Enterprise Supplier Development.
Now let’s clear that myth that B-BBEE is meant take from whites and give to blacks. B-BBEE looks beyond black ownership of the company in fact Enterprise Supplier Development element of BEE has more B-BBEE points than the ownership element.B-BBEE is a transformation policy seeking to address the injustices of the past and both blacks and whites owned companies are benefiting it.
Let’s start with SMMEs, SMMEs with turnover that is below R10m are all B-BBEE compliant by default whether black or white ownedhowever to rectify the past injustices 100% black owned SMMEs achieves the highest B-BBEE status (the level 1)and 51% black owned SMMEs achieves or level 2 while the 100% white owned SMMEs are sitting on level 4 which a favorable status and most large companies black or white owned are struggling to achieve level 4 after spending millions of rands in trying to improve their B-BBEE status.Also note that there are white owned SMMEs that can still do a lot in order to improve their level 4 and become Level 2 or Level 1.
It is also important to note that large companies with a turnover above R50m whether black or white owned are both non-compliant with B-BBEE unless they comply with all other elements of B-BBEE.There a lot of black owned company directors which are not happy with the B-BBEE policy because they lost big business deals to companies that are majority white owned companies due to B-BBEE.There are many large white owned companies which have better B-BBEE status than black owned companies and as a result they win contracts from government and other businesses because of their B-BBEE status while black owned companies are not getting contracts because of having poor B-BBEE status.This is because B-BBEE looks beyond the ownership element. There are other B-BBEE elements which businesses must invest in beyond just ownership of the company.
These elements are:
- Management control (Looking at the race and gender of your employees based on South African demographics),
- There is Skills Development, Enterprise Supplier Development (which we are focusing on today)
- Socio Economic Development (Which looks at your CSI contributions).Therefore if you are 100% black owned company with a turnover that is above R50m and you employ white people only, buy only from white owned companies and making donations only to white charities then you will not be B-BBEE compliant because B-BBEE looks beyond just ownership. Your business must contribute to society based on the demographics of the country.
So now now we will look at how one can their position business to benefit from B-BBEE.
1. As Bonmas Consulting we believe that first step to position your business for any benefit including B-BBEE is to start by solving a problem in the market.We do not believe that you need be a #metoo business that does not have any value proposition or solve any problem. Your B-BBEE status may get you few orders but many businesses and government entities are just not going to buy from you on the basis that you just B-BBEE compliant. Hence we see many businesses and government departments still buying from white owned or foreign owned companies without a compliant B-BBEE status leaving B-BBEE compliant companies on their database it’s because those companies are unique and they solve a problem that is not just solved by anyone in the market.The needs are not going to change just because there is B-BBEE.We all know that when we go shopping for anything our objective is to address the need more than it is about the B-BBEE status, that is true even in businesses, they will spend millions to buy something from China or US just to solve their business needs without even thinking about B-BBEE. Therefore we believe your business must still solve a problem in the market and B-BBEE must be an added advantage.
2. Look for opportunities using B-BBEE your advantage– We Believe that just because you have a compliant B-BBEE status that does not mean you should stop knocking on doors. Every opportunity you want for your business is on the other side of the door therefore you need to continue knocking and hustling as an entrepreneur.
– You must have basic understanding of B-BBEE and use this to your advantage by knocking on your potential clients doors with a value proposition that solves their business problems and also helping them to achieve a good B-BBEE status.
– I.e. All larger companies are required by B-BBEE codes to spend 80% of their procurement on suppliers that have a B-BBEE status of level 1-4. This is big , it gives you an opportunity to check the B-BBEE status of your potential clients or make a proposal to sell them your products or services that will add value to them and also show them how by buying from you how this will improve on their B-BBEE.
– Larger companies are also required to spend 3% of their profit in developing SMMEs with B-BBEE status between Level 1-4 this can be in form of giving SMMEs grants, loans, capacity and helping those SMMEs to become their suppliers. This is also an opportunity for you, you can propose to larger companies on how it will benefit them in a long run to make you their Development beneficiary.Here again #metoo business is not going to influence any large companies to share any portion of their profit with you. You need to propose a win-win solution of working with you otherwise if it is only about B-BBEE they can choose any company they prefer. They must have a reason to work with you and make you their development beneficiary
3. Be B-BBEE CompliantLike we have already said you need to be B-BBEE complaint in order to benefit for B-BBEE. SMMEs are automatically B-BBEE compliant, you can post your questions to us to ensure that you have all in place the required documentation to prove your B-BBEE compliance.And larger companies are required comply with all the BEE elements. Bonmas Consulting is provides solutions to some of the largest companies in South Africa helping them to become B-BBEE compliant. We provide one of leading BEE solutions in country. To get help from us you can just email: firstname.lastname@example.org
Like we said at the beginning that B-BBEE is very broad topic and in this blog we tried to summarize it focusing on how you can position your Company to benefit from B-BBEE