Legislative changes have given businesses more space to grow before compliance becomes an issue.
Key changes to Broad-Based Black Economic Empowerment (BBBEE) legislation are making it easier for smaller enterprises to compete for business, without having to resort to using ‘frontmen’, or giving away shares in a business to win business, especially government tenders.
Instead, says Ravi Govender, head of small enterprises at Standard Bank, recent changes to BBBEE legislation have given way to a programme that can be of value to those who properly understand BBBEE and its implementation.
“The purpose of the legislation, however, is still to assist with fast-tracking previously disadvantaged people into the economy, so that they can contribute to national economic growth,” says Govender.
Practical advice online
Because of the importance of BBBEE and its potential to assist small business growth, the topic was selected as a subject for the series of BizVideos currently running on Standard Bank’s BizConnect website.
In the bank’s continued drive to provide solutions aimed at creating a sustainable SME sector, these have been designed to provide practical advice to small business owners on how to manage a business effectively. The videos can be accessed by logging on to www.standardbank.co.za/bizconnect from March to May 2014.
Significant threshold changes
“Small companies have now been given more opportunity to punch above their weight and compete on an equal footing with larger companies that may have more employees or resources,” adds Govender. “This is because of the threshold changes applied to small business and introduced through the new legislation.”
The changes are as follows:
- The annual financial turnover threshold for BBBEE compliance has been raised from R5 million to R10 million for small companies
- Proving that turnover is within these limits has been simplified
- Complying with BBBEE requirements now applies to companies that have a turnover of more than R10 million
- Those with turnovers between R10 million and R50 million have to comply with BBBEE, but the threshold of these requirements has been reduced.
Essentially, small businesses have been given an opportunity to grow their businesses significantly by automatically being granted certificates of compliance with BBBEE.
“If a business is now operating near the R5 million threshold, it can continue to do so knowing that BBBEE will only become a factor when the R10 million annual turnover mark is reached,” notes Govender.
“All that is needed when a BBBEE certificate is required, is that the annual turnover is certified by an accountant, or that a statement to this effect is made before a Commissioner of Oaths.
“It is unlikely that a business will grow from R5 million to R10 million in turnover within the short space of a year. This means that expanding small businesses will have two or three years in which to strategise and introduce a BBBEE compliance plan.
The introduction of a planned BBBEE initiative will ultimately enable the business to grow to the next level. Higher up the growth ladder the requirements have been simplified and eased, so the same will apply to these businesses.”
Addressing the five key operational areas
For companies exceeding the R10 million turnover threshold planning will have to be devoted to five key operational areas. These are:
- Ownership of the business
- Management control and employment equity
- Enterprise and supply development
- Socio-economic development
At first glance, these may seem onerous, but there are specialists who can advise on what is required and how changes can be introduced to the business.
“The emphasis should be on using the time allowed for growth and how this provides space to develop a BBBEE roadmap, so that any transition undertaken is beneficial for the growth of the company, Govender says. “
Planning for BBBEE should never be undervalued and should be seen as a tool that can increase employment opportunities and boost business growth.”