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Why B-BBEE doesn’t work

For many large companies and black owned businesses, B-BBEE doesn’t work.  It’s just too much trouble.  If the business of business is business, then it shouldn’t be about taking your valuable time trying to get your head around the opaque jargon and language of the legislation that is meant to empower black people.  So, large numbers of black businesses, corporates and even state-owned entities don’t make the effort to participate in Broad-Based Black Economic Empowerment.

The B-BBEE Codes of Good Practice are so dense with technical terminology that the document defeats all but the most diligent of law students.  Let me demonstrate: In South Africa, a business is considered to be small when it employs 21 to 50 people.  The owner of a small manufacturing business, would probably have to pay a lawyer and an accountant to explain: “B-BBEE Procurement Spend from all Empowering Suppliers that are Qualifying Small Enterprises based on the applicable B-BBEE Procurement Recognition Levels as a percentage of Total Measured Procurement Spend“.

And these Codes, that are almost impossible for the average businessperson to understand, keep changing.  In Government Gazette 38765 of 6 May 2015, the “…Minister of Trade and Industry, hereby amend[s] the amended Codes of Good Practice gazette 36928…” of 2013.  Of course, there are also sector-specific codes too.

If, as the Department of Trade and Industry says on its website, “The fundamental objective of the Act is to advance economic transformation and enhance the economic participation of black people in the South African economy”, then why do we make it so difficult for black businesspeople to do so?

How many small business owners, and the companies and corporations that want to do business with them, really understand what these terms mean: B-BBEE procurement recognition level, B-BBEE procurement spend, BEE status level, Benefit Factor Matrix, Designated Group, Discounting Principle, EME, Empowering Suppliers, Exempt Micro Enterprise, Generic Enterprise, Generic Scorecard, Measured Entity, minimum threshold requirement, NPAT, Preferential Procurement, Priority Elements, QSE, Qualifying Small Enterprise, Sector Specific Programmes, subminimum, Superior Contributor, Supplier Development Contributions?

If you want to do B-BBEE business, you have to comply with the legislation, and for most people this means you have to pay a lawyer to sort out your paperwork.

There is an easier way though.  If you have a small business – especially a black business – then this is all you really need to know:

  • Many large companies do business with black-owned businesses to maintain their own BEE level so that other companies will keep on doing business with them. The better the BEE level of a company, the more points their customer earns and the more attractive they in turn are to their clients, who also want to earn BEE points.  Show companies your BEE affidavit
  • One of the scorecard priority elements is ownership. Small businesses that are over 50% black owned, are automatically BEE level 1 or 2.  That’s great for their customers because they earn points based on the BEE level of their supplier.  If a company buys from a level 1 or 2 business, it gets bonus points to contract with other big companies and government.  Make sure that your business is at least 50% black owned

for other useful articles, see also SME South Africa


  • Big companies must comply with all five B-BBEE scorecard elements, one of which is Enterprise and Supplier Development (ESD). When they help their suppliers to be better businesses, they earn BEE points.  Invite your customer to help you with ESD; everyone scores
dictionaries
  • Lastly, for big companies to claim ‘Procurement Spend’, their supplier must have ‘Empowering Supplier’ status. Again, most small black-owned businesses automatically qualify.  Let your customer know this

Tell your prospective customer that you can help them to meet their B-BBEE scorecard requirements.  Get them to sign you up, and you’re B for away

How does a small business prove its BEE level to a customer company?  Just download and complete the DTI affidavit and have it certified at a Police Station.

Can you make B-BBEE work for you – despite itself?

2017/03/13

CC BY-SA

Click here if you want to discuss how you can make B-BBEE work for you

Rick Ed
Rick Ed
Business advisor and mentor

3 Comments

  1. Excellent article…we will never know exactly why things are made so difficult. Reading government gazettes has become my past time to stay abreast with legislation..my motivation is to match black suppliers within established value chains…not an easy feat if we cant speak the BEE language. Decoding the hectic language of the codes and providing strategies that assist HR practitioners and other key stakeholders to make sense of BEE is what I like doing. Still believe we can make an awesome team and am hoping you see the value of possible synergies. I need mentoring and consulting Rick! Still new at this and have much to offer. Can we resume where we left off last year and talk?

    Ps sorry about your car…hope everything is soughted

    Regards,

    Russell