The DTI announced the new BEE codes in October last year which are due to come intoeffect in October 2014. Should businesses begin implementing these new codes now?
The amount of interest generated by the DTI with the Amended Codes of Good Practice has been staggering. As a simple comparison,when the DTI launched the first set of the Codes in 2007 there were only a few delegates at a small presentation with not much interest.
In October 2013 the entire Hall 5 at Gallagher Estate was booked for the presentation and most of Hall 4 was booked for the exhibition. All in all we estimate as many as 3 000 people attended. More importantly President Jacob Zuma and two other ministers were speakers.
B-BBEE has become very much entrenched in the way we do business in South Africa. We can complain that the Amended Codes have far too many mistakes and that there are aspects where interpretation is unclear or even outright wrong. We can continue applying B-BBEE as it was done based on the 2007 codes in the hope that the Amended Codes deadline of October 2014 will be delayed. We can even elect to not get a BEE scorecard in 2014. The reality is that BEE is an essential part of the way South African business operates.
It has now passed the point where we can debate whether the Amended Codes are good or not. The old codes had mistakes and interpretation issues and grammar and spelling mistakes and other issues.
The way we see it is that the Amended Codes need to be implemented now so that businesses can get a head start on their competitors. BEE has always been closely linked to the amount of business awarded to a company. The new codes now present an opportunity to win business from all those competitors who are still trying to find a reason not to comply.
The question we ask is what can a business do to earn points when using the Amended Codes? Let us look at Procurement (Supplier and Enterprise Development).
Using Black Owned Suppliers is one aspect that a company needs to implement to earn points.
Nine points are available on Procurement for 51% or more black-owned businesses with a target of 40% of total spend.
Four points are available on Procurement for 30% or more black-female-owned business with a target of 12% of total spend.
Procurement is also a priority element. Unless youachieve 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 to earn points on the Amended Scorecard for Procurement from black-owned suppliers. 40% is a fairamount of the total procurement 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 andcalculate it correctly using the Amended Codes procurement scorecard. We suggest that you 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.
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 then of course the suppliers who do not have any black-ownership.
List the different types of products/services fromsuppliers who are negatively affecting your BEE rating.
Through that list identify the types of products/services that you can purchase from alternative suppliers.
List all the suppliers who have black ownership. Speak to them to see if they can supply you with some of the products/services you need. In that way you already have a trusted supplier who can help supply you.
The last step is to start looking for particular types of products that can be supplied by black-owned suppliers.
Remember that a black-owned supplier can also be used 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. The supplier also becomes a sustainable business.