If your company has an annual turnover of more than R50-million, doing business in South Africa has become a whole lot more complex.
Instead of just worrying about increasing profits, maintaining market share and keeping your employees happy, as of 1 May last year you also need to worry about a whole new set of B-BBEE requirements.
Until recently, most companies took advantage of a grace period, allowing them to be measured on the old B-BBEE Codes of Good Practice. But that window period is essentially over, and the new B-BBEE Codes put an increased emphasis on Enterprise and Supplier Development (ESD).
In fact, this element accounts for almost 40% of the points in the new B-BBEE scorecard. In addition to this, there are punitive measures involved for not meeting the stipulated ESD targets. Even if your company has black ownership, black management and spends money on black skills development, if it doesn’t meet certain sub-minima for Enterprise and Supplier Development, it will automatically be downgraded by one level on the B-BBEE scorecard.
In an interview we held on 93.8 Mix FM’s ‘Watt’s Involved’, Stuart Townsend, a director of Enterprise and Supplier Development company Edge Growth, explained why this particular element of B-BBEE is receiving so much attention.
“Enterprise and Supplier Development is a mechanism that was brought in by the government to help provide access to support and finances to help develop companies that previously couldn’t access it,” said Townsend. “So basically it encourages companies to support initiatives that create jobs.”
A part-time financial director who understands B-BBEE can help your company master Enterprise and Supplier Development requirements in a way that will improve your B-BBEE score and provide sustainability to your company.
• Your part-time financial director can ease the B-BBEE audit process. “The measurement of B-BEEE is essentially financial,” said Seth Randall, MD of B-BBEE training company, Salient BEE. Every company is required to be “verified”, or audited for B-BBEE purposes. A part time financial director who understands the audit process can guide what needs to be measured in order to prove expenses at the time of verification.
“The more integrally your part time financial director is involved in B-BBEE, the more simple the process will be throughout the year,” said Randall.
• Your part-time financial director can ensure the strategic appointment of suppliers. If you’re looking to improve your company’s ESD score, it’s not as simple as appointing the suppliers with the highest BEE status. The Preferential Procurement aspect of the ESD scorecard involves separate points for B-BBEE status, black ownership, black female ownership, and so forth. A valuable part-time financial director will be familiar enough with your scorecard to know the nuances around what your company really needs to improve its score, rather than what it appears to need.
“Generally, a part-time financial director is involved in the approval of suppliers,” said Randall. “It’s crucial to understand how to appoint them based on the dynamic requirements of the Preferential Procurement scorecard, taking all of its complexities into account.”
• Your part-time financial director will ensure your “B-BBEE” money is spent in the most impactful way. Let’s say you need 20 points on the B-BBEE scorecard. Chances are, you could score those in one of several ways. But based on targets stipulated in the codes, some points are more “expensive” to get than others. A part-time financial director who is familiar with the codes understands the “cost per point” and will help your company devise a way to get the most possible increase in your B-BBEE score for every rand you spend.
Getting to grips with B-BBEE can be costly and sometimes overwhelming. Having the right part time financial director on your team can decrease the headache of the process, and increase the rewards. Contact The Finance Team for a free cost analysis.