Are you an Exempt Micro-enterprise (EME) which has recently moved above the R10m annual turnover threshold and now have to get your head around B-BBEE?
A Broad-Based Black Economic Empowerment (B-BBEE) plan is a key part of any Access to Market strategy to win new business in South Africa.
A good B-BBEE rating is also often a prerequisite when wanting to apply for incentives out of the Department of Trade, Industry and Competition (DTIC) – this could include the Black Industrialist Scheme (BIS) and other sector specific incentives.
It can often be daunting to move from the basic affidavit to having to plan a full-blow strategy for the year that will see you achieve a certain rating.
In this post, we try and outline some basic pointers that you as a business owner should consider when looking at a B-BBEE strategy and answer some of the questions that arise when we engage clients.
Do I need a B-BBEE consultant?
In the same way that you would engage an accountant or tax specialist, it is strongly recommended that you engage the services of a reputable and experienced B-BBEE consultant.
We often come across small businesses who attempt to come up with their own strategies only to find that they do not understand the applicable B-BBEE codes and how they apply to a specific or sector.
What is the difference between a B-BBEE consultant and a Verification Agency?
There is an important distinction here and both will be a key part in your B-BBEE strategy.
The consultant is the person who will help you build a B-BBEE strategy whereas the Verification Agency will be the auditor who will effectively issue you with your B-BBEE rating at the end of the financial year.
Think of it a bit like your accountant and your auditor.
Should I invest in B-BBEE software as part of my B-BBEE strategy?
It is important to remember that your B-BBEE rating is dynamic and will be dependent on a number of different factors including your Net Profit After Tax (NPAT) and your headcount / payroll.
The amount that you spend on Skills Development will be directly linked to your payroll. The amount of profit you are generating will directly inform the amount that you need to spend on Enterprise and Supplier Development (ESD) each year.
An investment in B-BBEE software to work alongside your accounting system will mean that you can directly track in real time what you are required to invest.
Can I participate in B-BBEE even if I don’t have black ownership?
As a small and growing business, the idea of giving up ownership in your business will not always sit well with entrepreneurs who are starting to see the fruits of their labours.
A common question is whether or not you can achieve a rating without having black ownership.
The answer is “Yes you can” – remember that many of the multinationals in South Africa struggle to comply with the ownership elements on the scorecard.
You can make use of DTIC incentives such as the Youth Employment Service (YES) which allows you to jump up to 2 levels on your B-BBEE scorecard through the creation of youth jobs.
There are property asset swaps, employee share schemes and a variety of other mechanisms you can utilise to help you get recognition here.
I don’t have black suppliers – what does this mean for me?
The idea behind B-BBEE legislation is to broaden access to the economy and open up supply chains to allow more small businesses to have a share in the pie.
But as a smaller business, you might only have a handful of suppliers that you make use of or there may only be a handful of players that you can utilise.
Don’t despair! There are a variety of ways that you can tackle this part of the equation.
A simple example but you can utilise a Money Market fund operated by a black-owned asset manager, secure an investment return and get B-BBEE recognition without having “Spent” anything.
There are a number of solutions where you can pool your funds with other small businesses into funds specifically dedicated to Enterprise and Supplier Development (ESD).
Can you help me get started with a B-BBEE strategy?
Through our network of Problem-Solvers, we have a variety of service providers who will help you with:
– Enterprise and Supplier Development (ESD) solutions that will make meaningful change in your business and have genuine social impact
– Cutting-edge B-BBEE software that will help you make the right decisions at the right time
– Access B-BBEE incentives such as the Youth Employment Service (YES)
– Advice around access to various Department of Trade, Industry and Competition (DTIC) incentives for industrial and manufacturing businesses
– Socio-Economic Development (SED) solutions that align with the values of your organisation
If you would like to discuss in further detail, please do not hesitate to contact us.