The furor that currently surrounds the New Codes presents an opening to win business from competitors who are trying to find reasons to not comply. Implement the New Codes now to get a head start on your business rivals, says The Hope Factory business mentor Roche Mamabolo in this month’s SmartProcurement.
While some detractors maintain that the dti’s revised set of Codes contains many mistakes and aspects where interpretation is unclear or even outright wrong, the Codes are here to stay. [The transitional period for the New Codes has been extended by 6 months; they must be followed as from April next year- Ed]
However, the question we ask is what can a business do to earn points when using the New Codes? We can look at supplier and enterprise development.
Specifically, organisations must use black-owned suppliers to earn points. Nine points are available on procurement from 51%- (or more) black-owned businesses, with a target of 40% of total spend. Four points are available on procurement from 30%- (or more) black-female-owned business, with a target of 12% of total spend.
Procurement is also a priority element. Unless you achieve at least 10 points (40% of 25 points) you will drop a level. We already know it will be harder to earn points from suppliers based on their recognition level because it is now more difficult to achieve a higher level.
This leaves a major target area from which to earn points: the amended scorecard for procurement from black-owned suppliers. 40% of total procurement is a fair amount to spend on black-owned suppliers, especially if you previously had not bought much from black-owned businesses.
The first step is to identify your procurement score and calculate it correctly using the New Codes procurement scorecard. “Halve your total procurement spend from compliant suppliers to take into account a good estimate of the potential scorecards you will receive from those suppliers,” suggests Mamabolo.
Next, set a target – how much is 40% of your total procurement and what are you currently spending on black-owned suppliers?
Once you know how much you need to spend, start looking through your supplier list for suppliers that are hurting your BEE status. Common examples are suppliers who have achieved a bad level and those who do not have any black ownership.
List the different types of products/services from suppliers who are negatively affecting your BEE rating. From that list identify the types of products/services that you can purchase from alternative suppliers.
List all the suppliers who have black ownership. Speak with them to determine if they can supply you with some of the products/services you need. In that way you already have a trusted supplier who can supply to you.
The last step is to start looking for particular types of products that can be supplied by black-owned suppliers.
Furthermore, remember that black-owned suppliers are eligible for supplier development, which allows you to help them to supply exactly what you need. It is a win-win situation because you gain a supplier who is potentially loyal to you and at the same time you gain BEE points in a set of codes where earning points is much more difficult.
Most importantly, though, the supplier also becomes a sustainable business.
The Hope Factory welcomes this new legislation as it will help entrepreneurial businesses, for which access to markets is a key stumbling block, to get a foot in the door.
For more information on or assistance with navigating the Enterprise and Supplier Development pillar of the New Codes contact The Hope Factory, that can assist with supply chain analysis and achieving the best score and return on effort.
The Hope Factory works with businesses hands-on to help them to grow and develop. Their Johannesburg Enterprise and Supplier Development Programme involves more than 65 entrepreneurs (to grow to 100 by end 2014) who are being mentored in growing and developing themselves, and their businesses, into credible and reliable corporate suppliers. This is achieved (and measured) through a series of tailor-made business development interventions, culminating in our entrepreneurs being certified as supplier ready.