For many South African companies, Broad-Based Economic Empowerment (B-BBEE) up until now may have been about tallying numbers on a scorecard to achieve compliance.
However this will no longer be enough, and amendments to the B-BBEE measurement codes published on 11 October 2013 by the Department of Trade and Industry and effective from 1 May 2015, should give pause for thought to South African businesses who will have to consider the imperative for enterprise and supplier development too.
There is a shift from enterprise development, where companies could just make a monetary contribution at arm’s length or settle supplier invoices early, to supplier development, where companies now have to have an active development relationship with the enterprises they support, says Nashika Singh, Supplier Development Manager for Shanduka Black Umbrellas (SBU).
“Over the years there have been a number of enterprise development programmes, and as a result we have a pool of businesses who are over-developed. Some businesses have been through four or five different enterprise development programmes, yet there is no access to procurement opportunities within the supply chains of the companies that have developed them” says Singh.
“If we want to create sustainable businesses, then we need to ensure that they are participating meaningfully in procurement opportunities.”
Furthermore, the imperative to reshape South Africa’s economic environment is at a critical stage, with unemployment rates increasing to 25.2% in the first quarter of 2014.
With one of the lowest levels of entrepreneurship in the world, contributing to 35% of GDP compared to 60% in countries like India and Brazil, the development of the country’s small, medium and micro businesses (SMMEs) is critically important.
Big and small businesses need to have a symbiotic relationship, where both can benefit equally from the transaction, rather than an underutilization of small businesses, noted Cyril Ramaphosa, Shanduka Foundation Chairperson, at a recent Shanduka Black Umbrellas National Enterprise Development Awards.
“We believe that we need to change that relationship, change that equation and get big businesses to begin to see the advantage of utilising emerging small and medium black enterprises,” says Ramaphosa.
Importantly, many companies are at risk of becoming non-compliant when evaluated against the amended codes, and particularly in respect of the sector-specific codes applicable to the following South African industries: IT and communications, agriculture, financial services, tourism and transport.
Whilst the DTI has committed to releasing the new codes before the end of the year, companies in this transitional period could elect compliance measured in terms of the new B-BBEE codes of good practice or the 2007 codes.
It will however be more difficult for enterprises to achieve and even retain their current B-BBEE contributor status ratings under the revised codes. However there are opportunities for companies to take proactive measures through platforms such as SBU.
Furthermore supply-chain ready businesses have the peace of mind that procurement opportunities are also cross-linked with continuous enterprise and supplier development, facilitated through the SBU business incubation programme.
“We also play a very active role in engaging with corporates in bringing qualifying businesses into their supply chains, and really understanding what the development needs are, what gaps exist, and how we address those as a development process over the procurement life cycle.”