How is B-BBEE still around?

South Africa is the only country where B-BBEE is legislated and while the legislation exists, there is no hard law forcing companies to comply with that very legislation. In the B-BBEE world we have The Department of trade and industry governing the B-BBEE Act and the application rules. The South African National Accreditation System (SANAS), who support the DTI, is the regulatory body that ensures that Verification Agencies that measure companies’ compliance, meet the standard accreditation level. We also have the B-BBEE commission who facilitate and accelerate adherence to the act, as well as an association of bodies to professionalise the industry which is ABP.

With all this governance and regulation around B-BBEE and the fact that we are close approaching the second decade that the B-BBEE legislation is around, it is surprising that there is no hard law enforcing that companies are required to obtain a valid B-BBEE certificate and comply with the act. Which begs the question, how is B-BBEE still around?

Yes, one could delve into the philosophical world of why as South African citizens, we have a responsibility to right the wrongs of the Apartheid past and allow for a broader participation by the previously disadvantaged. While this is a strong motivator, I believe that this is not the driving force behind compliance. Don’t get me wrong, the country has achieved by leaps and bounds with this motivation, but the hard truth is that a moral justification is not the reason that B-BBEE is still around.

I have been exposed to the industry long enough to have observed and use those observations to back my belief that transactions are the reason that the B-BBEE wheels keep turning.

By transactions, I am referring to trade. The simple buying and selling of goods and services. Being in the industry and posing the question to companies as to why they are getting B-BBEE certificates, the common response is: ‘Because the companies they trade with require it for their own compliance’. So, in order for any company to be a preferred supplier, they would need to do well in B-BBEE. There is an element in the codes called Preferential Procurement. It is a sub element of 1 of the 5 pillar elements and measures the extent to which companies buy from other companies with strong B-BBEE recognition percentages.

The world of B-BBEE is graded in levels, those levels are decided based on scoring bands and the band achieved is dependent on the scores achieved in each of the 5 elements. It ranges from Level 1 – Level 8 and each level has a procurement percentage attached to it. The higher you as a company score on your compliance, the higher the level band you achieve and therefore the higher the recognition percentage you will attract when trading. To add to this, B-BBEE is measured annually so you will constantly need to be reassessed to determine your level band achieved.

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In summary, companies will get a good Preferential Procurement score if they buy from other companies with good scores and so the chain reaction begins. Any company that operates in the South African economy would need to perform well on their B-BBEE compliance to continue to trade.

What a subtle, yet compelling thought that Preferential Procurement is a driving force in the B-BBEE arena. Whether you are competing in South Africa’s supply chain to thrive or simply survive, you need to check you B-BBEE boxes.

With a pool of consultants and advisory companies in the industry, it’s easy to get clued up on all matters B-BBEE but where companies face challenges is in figuring out how to overlap those compliance requirements with their business operations in a way that yields productivity and profit. There would be no point to tick the B-BBEE boxes, if your company would in no way benefit from it. It needs to make business sense.

To this extent, I think that The Department of Trade and Industry have done well in terms of releasing different applications of the B-BBEE codes specific to sector charters ensuring that companies play to their economic environments. This levels out the playing field and allows companies to focus on initiatives that do make business sense to their relevant sector charters.

As companies navigate the B-BBEE terrain, they need to find clever ways in which to optimize their scoring opportunities. B-BBEE compliance is fast becoming a key business objective and is used to differentiate in a strained market. As a result, efficiencies must be built into overall strategies to get ahead.

My move from the B-BBEE verification world into the B-BBEE software world has validated that the industry continues to evolve and adapt whilst integrating technology into its processes. Likewise, companies must revolutionize processes to keep B-BBEE compliance front of mind and to tick those boxes.

As companies constantly commit to improving their compliance levels, they put pressure on others to do the same, and those wheels keep turning. As better trade leads to each company performing better, the greater we perform as a South African economy. Of course, a beaming economy leads to further growth from resource rich local procurement to foreign investments.

Trade – a seemingly simple concept that makes the B-BBEE world go around and around. Even as the country walks towards uncertain times as Covid 19 has locked down our economic growth, companies are still committed to coming out on the other side stronger. Trade built the economy and trade will continue to rebuild the economy as South Africa looks to move out of our junk status downgrade.

So, we trade, and we procure, and we do so with B-BEE intertwined. We continue to involve participation from a broader more colorful South Africa and as each transaction occurs, we grow and embrace the legislation.

B-BBEE thrives not only because of idealism but also because of practicality and I think that’s a beautiful balance. Understanding that B-BBEE is indeed a powerful motivator to oil those wheels but also to understand that the underlying momentum of trade is what moves those wheels forward and will continue to move those wheels forward for the foreseeable future.

Author – Mitishka Ramdhani, 14 April 2020