Bringing soaring B‑BBEE compliance costs down to earth

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Bringing soaring B‑BBEE compliance costs down to earth

As B‑BBEE has become routinely and deeply entrenched in the South African business environment, many more companies are discovering a stark and inescapable reality: B‑BBEE compliance is expensive. Words like "stratospheric" are regularly bandied about. Unfortunately, for many businesses, the financial burden of B‑BBEE compliance can threaten their very survival.

There is a desperate need to reduce the total cost of B‑BBEE compliance, but ROI can be achieved through the correct management of the B‑BBEE compliance journey, using the right technology.

Thus, a two-pronged assault – cost reduction, plus increasing return on existing costs – can reap significant rewards if executed smartly, consistently and with agility. Ultimately the aim is to create a mutually-rewarding scenario where B‑BBEE expenditure is no longer classed as a cost, but as an investment yielding multiple rewards, financial among them.

B‑BBEE is becoming more expensive

It's in the area of skills development that companies are experiencing the most additional pain. While this is one of the most noble aspects of B‑BBEE legislation, doubling the payroll percentage requirement has certainly been felt.

Looking at the overall statistics, research from Grant Thornton's International Business Report for 2016 noted then already that the amended B‑BBEE codes have increased costs for two-thirds of South African businesses.

The lion's share of the increased costs has been consumed by companies using outside B‑BBEE consultants to fill operational gaps within their own organisations, when these consultants should rather be focusing on strategic areas of improvement. Many companies have yet to (or are unable to) develop their own in-house compliance management resources.

Verification costs have increased, as compliance requirements have become more complex. Verification agencies have also had to implement additional new procedures, with costs trickling down to businesses.

B‑BBEE compliance management:
Cost erosion from the inside

Significant additional costs ensue simply from B‑BBEE administration. These costs also include a lot more supplier procurement management than would otherwise be required. Naturally these will vary from company to company, but for a large corporate it can be present the proverbial elephant to digest. The tracking costs alone can amount to the stuff of actuarial nightmares. These can become so high that the expenditure situation starts resembling the Gauteng e-tolls administration model, which needs no further elaboration.

If these costs are not accurately revealed, fastidiously monitored and constantly optimised, they can well start to consume the business from the inside.

The knight in silicon armour

The financial aims of B‑BBEE compliance are simple: reduce costs and maximise ROI. This is hardly a new idea. Essentially it requires understanding where a business currently stands in regard to B‑BBEE compliance, including understanding the current expenditure in the various B‑BBEE areas to identify where the company already qualifies. Where targets are not met, gaps must be calculated, and corrective action implemented. This then all needs to be monitored, analysed and reported on.

The most effective way of doing this is to use an all-in-one B‑BBEE compliance management solution that will digitise and automate as many day-to-day functions as possible, especially those related to data and scorecard calculation.

The ultimate aim is to allow the compliance management solution to do all the heavy lifting, providing human resources with just the right information they need, and ensuring a seamless flow of data, information, evidence and scorecards all the way through the compliance process, up to verification.

As an example, a solution like Mpowered will comprise all the necessary tools to manage the financial aspects of B‑BBEE compliance, from interpretation of supplier information to putting the right numbers in the right place on the scorecards. Gap analysis and proactive scorecard tracking and prediction included. Verification management is handled, and there is the ability to produce realistic scenario and implementation planning.

Whatever the solution, it's unavoidably clear that B‑BBEE complexity has reached the point where the right software and systems can make the difference between shrewd investments in the company's financial future or being crippled by cost of compliance.

By Winston Nolan
B-BBEE Professional - Mpowered
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