A minefield of misinformation – Tackling the challenges of BEE perception
It’s been two years since the introduction of BBBEE (Broad Based Black Economic Empowerment) and yet there is still a critical need for information about this phenomenon. This lack of information perpetuates misconceptions around BEE – rather than empowering employers with the right framework for implementation, the limited knowledge available creates an emotional environment that is counter-productive to the precepts of BEE.
Primarily, access to this information needs to be made a priority. “A survey done by BeeReport found that the Internet is the first source of fact-finding, followed by relatives, friends and business relationships. In addition to access, there is a distinct need for information that is both concise and comprehensive. Based on a survey by KPMG, 80% of South African businesses have yet to become BEE compliant. Therefore, this suggests that 80% of South African businesses are in need of understanding how to become BEE compliant, as well as how to navigate the BEE process”, Alexander Soare, Managing Director of BEESA Boxsmart, told SmartProcurement.
BEE consultants are often confronted with situations where they have to overcome misunderstandings as a result of the wrong information gathered by clients about BEE. For example, most clients focus on the elements of Ownership and Management, which is understandable as narrow based BEE focused on these two elements. Unfortunately, this is also how BEE received its bad image and gave rise to the fear that transformation is all about giving away shares. This is not true. To date, only a few have benefitted from this narrow based BEE.
So how does broad based BEE differ?
“The original precept of BEE is to open the economic playing field to all of those previously unable to access and to participate in economic opportunities. Focusing on the elements of Ownership and Management alone are not going to create this access”, Soare explained.
The BBBEE scorecard makes provision for seven elements allowing businesses to develop a score which enables them to satisfy BEE needs. By aligning with elements such as Skills Development, Socio-Economic Development, Enterprise Development, Procurement and Employment Equity, the opportunities for economic access are greatly increased. Ultimately, these are also the elements that will make a difference to South Africa’s growing economy.
The biggest contributor to the South African economy is medium-sized businesses, which, in BEE terms, are classified as those businesses with an annual turnover of up to R35-million. With reference to the BEE scorecard, these medium-sized businesses can choose four of the seven elements. This enables businesses to score points on those elements which produce the best results, without completely restructuring the business.
Ironically, a large majority of businesses are already BEE compliant without their knowledge. Businesses employ South African Black, Coloured, Indian and Chinese people. Businesses invest money on staff training, whether on-the-job or through formal institutions. Businesses have some sort of Corporate Social Responsibility programmes that support communities, schools and/or individuals. These are all examples of BEE, and thus qualify for points. Yet, the prevalence of incorrect information communicated to businesses has resulted in a fear of BEE as a potential threat.
The reaction towards BEE tends to be an emotional one, and thus the motivation for this reaction can differ. Someone might feel discriminated against because as an educated black person, he/she does not need the support of a system to secure employment. Others talk about reversed racism, whilst others support the idea and the drive to grow South Africa’s economy.
Regardless of personal perception, business owners need to respond professionally, and spot the opportunity to use BEE as a business tool that leads to growth, thereby securing their position in the marketplace. Remaining emotionally frozen towards BEE can only result in a business strategy that runs contrary to government support. As stated in his 2009 Budget Speech, Finance Minister Trevor Manuel emphasised that “our response to the challenge before us builds on policies we have consistently pursued over the past decade and a half”. The message is clear – BEE policies will continue to remain enforced and enjoy government support in terms of financial and economic backing.
From a global perspective, financial systems are undergoing dramatic change. Recently President Kgalema Motlanthe summarised South Africa’s response to this potential financial crisis as follows: “We must investment in infrastructure, accelerated skills development, support the industrial and agricultural sectors, as well as increase social assistance programmes”. Yet it is the strength of our resolve to adapt and be flexible to change that will make the difference. As Motlanthe states, “it is not the numbers in the Budget that will measure the quality of our response to the present crisis, but the character of our resolve to work together, putting others before ourselves, confident in the choices we have made and committed to face our awkward and deepest truths”.
What is our ‘quality of response’ to the implementation of BEE? “Certainly there is a need to supply quality information that is concise. But perhaps more importantly, there is a need to overcome the emotional, knee-jerk reaction that BEE elicits in business owners who have been subjected to limited access to quality information. BEE policies have been formulated based on both good intention, and evolving practical implementation solutions. The reality is that BEE is neither going to disappear, nor is it going to be reduced to a series of rubber-stamping formalities. When applied correctly, BEE not only enhances businesses, but also business relationships”, Soare concluded.
Article submitted by Alexander Soare, Managing Director of BEESA Boxsmart.
Alexander Soare can be contacted at the details below:
Telephone: +27 11 726 3052
Cell: +27 82 441 1344