BBBEE is a passport to doing business in South Africa. But if you leave it too late, or don't plan it properly, things can go dramatically wrong.
The trick is to put a long-term plan in place that is in line with your business strategy and which will improve your BBBEE rating gradually, but consistently.
The BBBEE Codes of Good Practice give due recognition to BBBEE efforts that might only yield results in the long term (such as enterprise development), and any business that adopts a well-planned, logical approach to BBBEE should be able to reach a respectable rating on the scorecard.
When considering your broad based empowerment profile, start by assuming that if you are a white-owned business you might be more empowered than you think, and if you are a black-owned business you might be less empowered than you think.
Only when you examine all the elements of the scorecard in detail will you know for sure where your strengths - and weaknesses - lie.
For many SMEs, building up a good BBBEE profile starts with indirect empowerment and socio-economic development, so start at the bottom of the scorecard and work your way up.
Any marketer or sales director will agree that "if you can't measure it you can't manage it" - and this is particularly true for BBBEE.
You need to grab as many scorecard points as possible, so every BBBEE action must be clearly quantifiable.
A starting point for any self-assessment is to use the systems you already have (such as an accounting package, your supplier database, etc) to highlight BBBEE-related items and report on them.
What are you aiming for?
There are different levels of BBBEE compliance, with Level 1 being the ultimate goal:
Level 1 contributor: 100+ points (135% compliance)
Level 2 contributor: 85-99 points (125% compliance)
Level 3 contributor: 75-84 points (110% compliance)
Level 4 contributor: 65-74 points (100% compliance)
Level 5 contributor: 55-64 points (80% compliance)
Level 6 contributor: 45-54 points (60% compliance)
Level 7 contributor: 40-44 points (50% compliance)
Level 8 contributor: 30-39 points (10% compliance)
Non-compliant contributor: Less than 30 points (0% compliance)
Remember that black ownership earns bonus points. For example, an exempted micro enterprise is automatically regarded as a Level 4 contributor.
However, if it is more than 50% black-owned it will be promoted to a Level 3 contributor.
Also bear in mind that of all the seven elements of the scorecard, ownership is the only one that does not require ongoing monitoring.
Once a BBBEE transaction is concluded correctly, it should be in place for a number of years, whereas other elements will fluctuate and require continuous effort.
Who to ask for help
Generally, it is worth paying for the advice of a consultant who is familiar with your industry and the Codes of Good Practice, and who will be able to evaluate your scorecard and highlight the areas of your business in which BBBEE can be most effectively implemented.
Companies such as banks, as well as many legal and auditing firms, have special divisions that offer BBBEE advice to their clients.
5 ways to move forward
Evaluate your BBBEE compliance in each area of the general and/or sector charter scorecard. (You will probably score higher on your sector scorecard, but do both to be sure.)
- Compare your scores with the targets. Calculate the percentage differences and highlight the negative ones.
- Identify what actions are required to reach each target (eg, employment equity of 70% might require hiring five new black employees). Start with the areas in which you can score additional points most easily, so as to achieve the highest possible score in the shortest time. Remember that monetary donations to various beneficiaries are a quick way of scoring enterprise development and socio-economic development points.
- Give each action a practical time frame. For example, if you have enough work to hire a new person every two months you could reach your goal in a year. Full compliance is a ten-year plan, but the sooner you reach your goals, the sooner your business will benefit.
- Map out a game plan for making these actions happen. Delegate tasks (such as interviewing candidates) to other members of your team and have regular meetings to monitor your progress.
What you should get from a rating agency
If you choose to use an agency to conduct your BBBEE rating, ensure you receive an official certificate that includes the following:
- The name and physical location of each site/office of your business.
- The date on which the rating was given and the period for which it is valid.
- The expiry date of the verification certificate.
- A unique identification number.
- Copies of the documents and details used to evaluate your business.
- The name and logo of the agency.
- The scorecard used to rate the business.
- The actual score.