BEE codes do not speak enterprise development

The best way for an organisation to become involved in enterprise development is through its own supply chain, said Claudia Manning, MD of development consultancy ECIAfrica and a member of President Jacob Zuma’s BEE advisory council.

However, pushing this will take strategic effort from the top leadership of companies, said Manning: the highly concentrated structure of the economy means that big companies tend to rely on other big companies for supply – Procurement managers lower down the command chain are looking for the best deal and for efficiency.

Have the BEE codes helped?

The incentives in the codes have been of little help in encouraging procurement from black companies – an organisation can earn all its enterprise development points through early settlement of accounts, says Manning, and does not need to procure a cent from a black firm to be fully compliant.

Achieving good compliance levels without actually contributing to substantial BEE has been a typical outcome during the codes era, said Kio Advisory Services empowerment analyst Duma Gqubule, adding that compliance is too easy and organisations have played the system.

“There are companies that can achieve 75% compliance with the target without procuring a cent from a black empowered company. Enterprise development is a complete scam — the target is 3% of net profit. About 13 of the top 40 have achieved full compliance,” said Gqubule.

Trade and industry minister Rob Davies said that what has emerged is that organisations playing in the enterprise development space want to hand over a packet of money, rather than support an incubator. But what the economy really needs is active involvement of the private sector.

“In Asia small and big business have a symbiotic relationship,” said Davies. “Big business gets lot of input from small business, so they work with suppliers to make sure they are able to improve. What we want to say is, if you don’t do that, you can’t earn a higher BEE score,” said Davies.

The president’s BEE advisory council and the department of trade and industry, which is responsible for BEE policy, have begun some tentative work to redeem the BEE codes.

Claudia Manning, Duma Gqubule and Rob Davies comments were drawn from Carol Paton’s Financial Mail article Black Economic Empowerment (BEE) – Flimsy front of April 28, 2011.