Article by Lebohang Thulo (SME South Africa)
The good news is that if you are an SME owner BBBEE is far simpler and less onerous to implement than you may think.
According to LFP Group CEO, Louis Pulzone, there are seven key elements to consider in terms of BBBEE for the SME and it is vital that companies start to align their initiatives from the early business stages.
“Complying from the get-go and allowing BBBEE compliance to form part of your overall business strategy creates a positive image from the outset and reduces your admin in the long run.”
Louis notes that as these companies grow, more support will be needed but in the interim, it’s critical that we change business owners’ mindsets on BEE compliance.
“Gone are the days of BBBEE compliance being a costing exercise. BBBEE was implemented to promote an equal economy for all and is set to create a more competitive and inclusive landscape. By investing in people, we reap the rewards of a skilled workforce set to propel the economy.”
Here are seven ways BBBEE will impact your business:
When selecting ownership, it is important to consider structure. This is accounted for by the percentage of equity held by black people within a business.
“There is still some resistance to this BBBEE element by some business owners and as such, government incentivises several additional elements. Depending on your business, it’s important to consult with a BBBEE expert in this regard,” Louis says.
2. Management control
This takes into consideration the black participation at a top management level. A single appointee at this level can often have a significant effect on a BBBEE score.
“It is vital that such appointments be a hundred percent legitimate or you will be breaking the law.”
3. Employment equity
This refers to the percentage of black staff employed by a company. The implementation of an employment equity strategy is generally implemented as a long-term commitment to transformation. If you employ black people at any level, and especially black females, it is certainly worth including this on your BBBEE scorecard.
4. Preferential procurement
This refers to the BBBEE status of your suppliers. Although it is one of the most admin intensive ways in which to earn points, preferential procurement is a relatively easy way to score BBBEE points. It requires collecting the BBBEE certificates of every supplier.
“The more empowered your suppliers the more points you can earn on your scorecard.”
5. Enterprise development
Compliance with this element is relatively easy as it requires no restructuring. Enterprise development (ED) is designed to create sustainable small black-owned businesses. Qualifying small enterprises (QSEs) are required to contribute 2% of their net profits after tax towards ED beneficiary businesses.
6. Socio-economic development
Socio-economic development (SED) is grassroots development that brings black people into the economy as active participants. QSEs are required to contribute 1% of their net profits after tax towards SED beneficiary businesses. To earn BEE points from making contributions to charities or similar organisations, black people must constitute at least 75% of the beneficiaries supported by the organisation. In order to avoid unnecessary admin and complications when being audited, make sure that the organisation that you support has been issued with a beneficiary analysis certificate which examines the demographic composition of beneficiaries.
7. Upskill to improve your BBBEE status
QSEs need to spend a minimum of 2% of their annual wages on training. The BBBEE codes require strict adherence to labour legislation such as compliance with the Skills Development Act and registration with a SETA before earning points. Upskilling employed, unemployed and disabled persons will only benefit the economy and your business. “It remains one of the most cost-effective ways to earn maximum points,” concludes Louis.