BEE Procurement - the new landscape

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bbbee.jpgBEE is changing. It’s less a box-ticking exercise and much more a strategy focussed on sustainability and real change. Under the New Codes of Good practice SA should experience truly broad-based black economic empowerment, writes Jenni Lawrence of Grant Thornton Verification Services in this month’s SmartProcurement.


Since the Broad-Based Black Economic Empowerment (B-BBEE) Act was gazetted in 2004, the only constant in this emotive legislation has been change. Some say the intended change is taking too long.


This perceived slow pace of transformation has led to a debate about removal of statues, land invasions and service delivery protests, 11 years after the advent of BEE.


The amended Codes of Good practice, partially gazetted in 2013, are aimed at speeding up transformation, which also elicits an emotional response. With the increased focus on black ownership, the further dividing of ‘black’ into racial sub-groups and the introduction of scoring penalties for failing to reach certain targets, some businesses are feeling the pressure and predicting gloom.


Black-owned businesses with a turnover under R50-million now have no requirement to contribute to any BEE elements or initiatives: they are automatically granted a high BEE level, which essentially gives them a free pass to do business with whomever they please. “About time” say many of these business owners, who questioned why they were tasked with contributing towards the very legislation that was intended to benefit them.


Ultimately, it is larger businesses and those with less than 50% black ownership that will need to pick up the slack.


One of the most difficult targets to achieve under the amended Codes will be the enterprise and supplier development element.


Under the previous Codes companies had to spend 70% of their procurement spend with BEE rated suppliers to score 12 points. To score an extra three points only 9% of this had to be with black-owned businesses. Compare this with the amended Codes where 80% spent with BEE suppliers earns you only 5 points, and if 40% of this is spent with black-owned businesses, you earn a further 9 points.


“Where are we to find these black suppliers?” businesses may ask. The amended Codes appear to shift the responsibility for creating and developing black-owned businesses away from government and onto business at large. Points are awarded for developing potential black-owned suppliers to become viable suppliers, for awarding them three-year contracts and for contributing towards creating jobs within these suppliers.


Will these changes to the amended Codes see significant change that the youth of our country are clamouring for? Maybe, but not rapidly.


Is BEE intended to appease the unimpressed youth? Perhaps not intentionally, but creating employment could go a long way towards calming the tension, frustration and dissatisfaction currently seen in our country.


With points now awarded for training unemployed people, or those other than your employees, we see where this creativity may be applied. Apprenticeships for potential staff of a budding new supplier will improve your skills development and supplier development scores. It is easy to see the return on investment from this type of contribution: it benefits your company, your potential new supplier and the learner. So expect to see fewer large equity transactions and more meaningful skills development and supplier development initiatives.


Developing other businesses while still running your own is not going to happen overnight. But with some planning, some trial and error, some initiative and collaboration, it will happen. And as these black-owned businesses grow and expand, as we become less reliant on imports and as the unemployed become employed, transformation will be happening.


Contact Jenni Lawrence of Grant Thornton on Jenni.Lawrence@za.gt.com

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