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While South Africa’s Broad Based Black Economic Empowerment (BBBEE) requirements are viewed by some as yet another impediment to conducting business as usual, others see them as an opportunity to make positive changes for themselves, their employees and the country.
South Africa needs to think differently about BBBEE and transformation.
Many organisations are disenchanted with consultants who propose questionable BBBEE schemes.
Their number one objective is to be profitable and they are tired of bleeding money into initiatives that are not sustainable or that they have no way of measuring.
This is particularly true when it comes to enterprise development and supplier development.
Depending on their turnover category, companies are obliged to contribute a percentage of their net profit after tax to organisations that are 51% (or more) black-owned small or medium micro-enterprises.
This contribution can be in the form of money, time, attendance or materials – or a combination of these.
Unscrupulous consultants will get their clients to hand over 1% of their net profit after tax to donate to a relevant small and medium-sized enterprise, with the promise that the it will deliver a service in return.
The service never materialises, but the BBBEE scorecard arrives in the mailbox – with the tacit understanding that no one is any the wiser and no questions are asked.
When Strata-G entered the market, the labour solutions company quickly became aware of how widespread BBBEE fronting was.
In one meeting after another with prospective clients, the response was invariably: “I’ve heard this all before. All you want is our money. We’ll never see what you do with it. We want to make a genuine, tangible contribution.”
Understanding that many organisations buy into the BBBEE ethos and want to be actively involved in the process, Strata-G develops relevant and sustainable strategies that are mutually beneficial to all parties involved.
By adopting this approach, we eliminate the distrust and resentment inherent in having to pay over a large sum of money without any feedback, significant change or improvement to the donor company.
Importantly, we encourage our clients to donate time, material, attendance or services rather than make monetary contributions.
This allows them to get more involved in the process and it becomes a mutually beneficial relationship.
For example, business furniture solutions company Cecil Nurse was required to spend 1% of net profit after tax on enterprise development and 2% on supplier development.
While an enterprise can be any black-owned micro-enterprise that the organisation has an interest in, a supplier must be a black-owned business that supplies services or products to the donor company.
Cecil Nurse enjoyed a prior relationship with a skills development body, Morentho Institute of South Africa (Morentho), which equips young people with upholstering and furniture manufacturing skills as well as the wherewithal to start their own businesses.
Cecil Nurse donated the spare materials from its own manufacturing processes/entities to Morentho for the upholstering of chairs and ottomans.
It then bought back the furniture made by Morentho to sell to the public.
Not only was Cecil Nurse giving Morentho the materials it needed to improve learner skills and create a sustainable business, it was supporting the business by buying the products it manufactures.
Since the project kicked off in July 2017, Cecil Nurse, which has obtained BEE level 2 certification, has sold about 200 units produced by Morentho.
In addition, the business furniture solutions company has addressed the issue of environmental waste and Morentho is enjoying the benefits of an additional income.
Its chief executive, Herbert Meyer, said: “Not only does this assist us in pursuing new business opportunities, but we feel confident that we are contributing to an initiative that can have a significant impact on the economy if everyone is committed to it.”
A local logistics branch of international company, IDL Fresh South Africa’s BBBEE strategy has seen it facilitate the transformation of an internal car wash operation and staff canteen into separate legal entities.
This has encouraged small and medium-sized enterprise growth. IDL Fresh South Africa has donated its space and doesn’t charge the businesses rent.
These enterprises are also suppliers. Instead of insourcing these functions and employing additional staff to manage them, IDL Fresh South Africa has boosted its BBBEE status by helping create sustainable businesses.
Cecil Nurse and IDL Fresh South Africa are just two examples of the many businesses that want to contribute to their communities but are not sure how to go about it.
Businesses in our beleaguered economy don’t have an endless supply of funds to support small and medium-sized enterprises. They need to be prudent and save for the difficult times.
If they work together with a reputable and specialist consultancy, they will be able to create mutually beneficial relationships that need not drain the bottom line.
• Roxanne da Mata Goncalves is director of Strata-G Labour Solutions, which assists companies in improving their BBBEE scorecards
