This is my latest article. It's free for circulation, distribution and syndication - all I want is my byline and contact details at the bottom. It has been published by the Skills Portal.
Managing BEE in an economic slowdown
Many economists argue that the world is not entering into a recession but with the US subprime crisis, rising food and fuel prices, power shortages and interest rate hikes there is little doubt that the South African economy is looking at a slowdown. In spite of this both public and private entities within South Africa will still be required to implement and measure their broad-based BEE progress. The question then is how do you go about managing the BEE process in an economic slump?
It was Robin Woolley who correctly identified that broad-based BEE is all about growth. The investment a company makes in its staff, suppliers and other causes should all work to empower black people and assist them on the path of sustainability. In this statement Woolley implied too that BEE is perhaps best suited for an economic boom. This makes perfect sense, in a boom economy companies will hire staff, invest in their training, support different types of suppliers and contribute to a variety of causes. All these programmes contribute positively to a company’s BEE scorecard. If these processes stop or get cut back then it follows that the BEE score will be affected proportionately. Or will it?
In times where budgets are cut, many companies start focusing inwardly looking for ways to maximise their current investments and staff. A BEE implementation should follow the same process. By concentrating on the core activities of the company and reducing unnecessary expenditure, an acceptable BEE score can still be retained. I have compiled a few ideas below.
Skills development
The B-BBEE codes of good practice have set a target of 3% of payroll to be used on the training of black people. This money should ideally be spent on accredited training but the codes do allow companies to recognise certain types of internal training to contribute to the scorecard. Although, on-the-job training is most certainly a critical part of any employee’s training, the codes will only allow this training to contribute to a maximum of 15% of the target (0.45% of payroll). However if this training is formalised by arranging formal sessions where staff receive some form of tuition or training the full value of this training is recognised. Costs that can contribute to this spend include the hourly value of the trainer, the cost of the training facility and any travel, accommodation and refreshments attached to this training. It might make sense to train certain key staff as trainers who train the balance of the workforce.
A further way to attract points is to enroll black staff on learnerships. This can generate up to 6 points on the scorecard and the costs associated with these learnerships are recognised as legitimate skills development costs.
Preferential procurement
The whole concept of preferential procurement has become a money-spinner for a variety of service providers. To cut back on these costs it is suggested that you focus on those suppliers that make up 60 – 80% of your spend. This is an application of the 80/20 rule where 80% of your purchases are spent on 20% of your suppliers. This should be a relatively small number of suppliers and can easily be handled internally. It is still a good idea to ask for either a BEE scorecard or a BEE score from the balance of your suppliers as and when you spend money with them.
Admittedly you are only likely to score 12 points out of the available 20 on the generic scorecard by only focusing on those suppliers but the cost is substantially reduced.
Enterprise development
I expect that we will see a reduction in enterprise development spend within the next 12 months. The target of 3% of net profit after tax might not make sound business sense. There are other ways of generating points without actually spending money. The Afrikaanse Taal en Kultuurvereniging (ATKV) is a section 21 company with a number of commercial entities that they use to generate income for their cultural activities; most notably LAPA Uitgewers and numerous holiday resorts. They have attracted the full number of enterprise development points by providing facilities for black craftspeople to sell their wares within the resorts. They also have subsidised a crèche for staff children that is now taking on other children from the local community. These are two ways that they have used their available facilities to benefit local entrepreneurs and communities without any additional investment.
Socio-economic development
In leaner times charities and causes become more dependent on donations and contributions. The qualifying small enterprise (QSE) scorecard provides 25 easy points to companies for contributing 1% of NPAT to SED beneficiaries. It would a disservice to those causes to stop making those contributions. But you might want to develop a stronger partnership with the beneficiaries to gain more mileage out of your contribution. This might be using the beneficiary as a marketing tool (as Outsurance has done with various staff projects) or a team building tool. There is a large financial institution in Sandton whose staff spend a weekend a year building and maintaining houses in poorer areas. This programme has proved to be a popular team building event – which is a by-product of the actual intention of the programme.
I have listed four of the elements that can have a positive effect on your BEE scorecard with little extra investment. These programmes can be initiated in a relatively short period of time and can start reaping rewards and BEE points within the next year.
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Paul Janisch is a director of Caird, a broad based BEE consultancy. He keeps a regular BEE blog at http://bbbee.typepad.com/paul_janisch/ . Janisch can be contacted by email or 083 227 1375 / (011) 666-0928.