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Why small businesses need BEE

Thu, 14 Jul 2011 14:14

Keith Levenstein

By Keith Levenstein

Many businessmen view BBBEE as an administrative annoyance. A more optimistic view of the BBBEE is an opportunity to grow your business and ultimately improve your bottom line. When all factors of your service / product are equal to that of your competitor, such as price, quality and reliability - your B-BBEE rating could be the major deciding factor in the deal.

The challenge for many business decision makers is that they do not fully understand the requirements of the BEE scorecard and as a result there are various misconceptions surrounding black economic empowerment. Commonly businesses feel that BEE is a burden that consumes many hours of admin. What most of these businesses don’t realise that the required admin task already exists; and that producing a BEE scorecard is often an easy task that genuinely results in sustainable growth.

For example, enterprise development encourages business to invest in black owned businesses. The eligible spend need not be a “cheque-writing exercise” but rather a low level business investment resulting in potential profits as a result of the small contribution. Common forms of investment can be found in discounts on existing products or even an exchange of services and infrastructure which result in a small share of the business.

The underlying business approach is not to give money away but rather to assist with business development and growth. Not only will your contributions assist a business grow but it will also create a sense of trust in your business because of your contributions for enterprise development. You will also be rewarded with points on your scorecard which further sweeten the deal as your customers will now be able to claim additional points on their scorecard which ultimately assists them earn more business.

Businesses are increasingly being asked for a BEE scorecard in terms of the preferential procurement element of the scorecard. Preferential procurement is the major mechanism used to encourage more businesses to comply with the broad based BEE legislation. With this in mind, the incentive to produce a scorecard is the need to compete and surpass competitors and not a government law which forces compliance. In this case, a better scorecard than a competitor can result in extra business.

Apart from skills development being a good way through which one can earn BEE points, it can have further positive consequences which make absolute business sense. Training is vitally important for businesses if one wants to keep clients satisfied.

As an example; a wholesaler selling technical products replies to a tender, providing their pricing and product details along with their BEE scorecard; which shows that they have spent the requisite amount on skills development. This implies that the company is actively training and improving the quality of their staff. Well trained staff have extremely positive, far-reaching, practical results.

Ensuring that you understand the composition of the broad-based BEE scorecard and the business impacts relating thereto will help you to make focussed decisions and take directed action to successfully build your scorecard. Forward thinking and recognising the opportunities that lie within each element will ensure that your company’s bottom line, even if only slowly at first, will begin to rise.

EconoBEE are currently running Prepare for Verification conferences; if you have missed the Durban event, there is still time to attend in Cape Town (21st July 2011 - Belmont Conference Centre) or Johannesburg (28th July 2011 - Emperors Palace). For more information about these conferences or their upcoming seminars visit EconoBEE or call them at 011 483 1190.