B-BBEE has the power to drive transformation, but only if businesses harness the benefits for themselves

Many companies are still finding it difficult to get a handle on what Broad-Based Black Economic Empowerment (B-BBEE) is meant to achieve. The complexities of the seven Codes and the variations in how points are scored within the different sectors can be baffling and may certainly require interpretation from accredited verification experts.

The point of B-BBEE is that it is not enough to just understand how much you should spend to gain a certain number of points and then simply spend the money. There are business benefits to be had that bring a much greater return on the investment than just scoring BEE points.

Deon Oberholzer, CEO of Veri-Com, says that companies need to be aware that the B-BBEE Codes have been specifically designed to enable businesses to invest in benefits for themselves while at the same time contributing to opening the economy to all. “Companies that are not taking advantage of the business opportunities provided by B-BBEE are missing out,” he says.

Just as important is that the transformation agenda of B-BBEE depends on how businesses apply the Codes. “It is pivotal that companies harness the strategic business benefits of the Codes to bring about the transformation that B-BBEE is designed for,” explains Oberholzer.

To illustrate, he gives this example: B Company and C Company both spend 1% of their nett profit after tax (NPAT) on supporting a centre (let’s call it House of Hope) for disabled children and young adults.

B Company donates the funds to the centre and gets the documents it needs for verification. The BEE score: 5 points for Socio Economic Development.

C Company directs the funds donated to pay for remedial training for the children and skills training for the older youths. Youths with appropriate ability are trained in workplace skills, and their training culminates in a period of internship with C Company. The interns are paid a small stipend, which C Company claims back under the provisions of the Skills Development Levy. At the end of the internship, C Company employs two of the youths and meets the requirements for employment of black people with a disability. The BEE score: 5 points for Socio Economic Development, an additional 3 points for Skills Development and 2 points for Employment Equity = 10 points. (The scoring can get complicated because it depends on targets reached, percentages of payroll, etc. but you get the idea.)

At the end of the day, B Company has gained no business benefit except for the BEE points. However, C Company has leveraged a business benefit in the form of a higher number of BEE points, a more equitable staff profile (which means more points down the line) and two employees who have been up-skilled to specifically meet the company’s requirements. At the same time it has equipped several other disabled persons with the skills they need to find jobs and enter the economy.

The story has another twist: C Company is so delighted with the results that next year it will be investing in an Enterprise Development project at House of Hope. It will assist the centre to turn its remedial and skills training capacity into a viable enterprise that can generate revenue for the centre. C Company will contribute 3% of its NPAT on this venture, 40% in equity and the balance as an interest free loan. For this, C Company will score 15 BEE points. House of Hope will also be taught to set up a recruitment agency for skilled disabled persons, which will provide another income stream for the centre and a decent return on investment for C Company.

Oberholzer’s example embodies both the spirit and the letter of B-BBEE. Its objective is for companies to get involved and develop projects that not only deliver community and economic benefits but also make a strategic contribution to their business growth. The cherry on the top, is that a significantly boosted BEE scorecard will provide companies with a competitive edge in terms of securing clients or contracts, meeting customer procurement requests, securing funding and even in marketing their businesses.

Oberholzer recommends that companies should get professional advice to maximise the benefits of their BEE spend. With the right B-BBEE strategies in place, the business sector has the power to make a phenomenal contribution to opening up the economy to a wider range of participation.