Most foreign-owned companies operating in South Africa are not going to sell shares locally and consequently have a lower B-BBEE scoring. Therefore, if they are your vendors then your Preferential Procurement scoring is negatively influenced. However, the Department of Trade and Industry’s (DTI’s) codes of good practice make provision for Equity Equivalents, Benni North of the BEESA Group, tells SmartProcurement.
“Code 100, Statement 103 of the DTI’s gazetted codes of good practice make provision for Equity Equivalents,” says North.
North led and implemented the first approved Equity Equivalent programme at Hewlett-Packard (HP) South Africa in 2007 as the responsible manager. He was also the programme driver behind HP achieving a Level 2 score in the first official year of B-BBEE – 2007. This allowed HP customers to score their procurement from HP at 125%.
“Equity Equivalents allow qualifying foreign owned multinationals to obtain 20 BEE points on the ownership scorecard without having to sell shares. This equates to a 2-level jump in their BEE scoring,” he explains.
This is typically achieved by contributing the equivalent of 25% of the value of the local operation to an enterprise development or socio-economic development type programme. Alternatively, 4% of turnover can be contributed over a 10-year period.
“These exciting programmes should be designed to provide a good return on investment to the multinational, while simultaneously accelerating broad-based transformation,” says North.
Equity Equivalents are poorly understood and North cautions that an organisation’s suppliers speak with the experts to inform decisions.
For further information on how Equity Equivalents can improve Preferential Procurement scoring, contact Benni North at email@example.com or on 011 726 3052.
Benni heads up the BEESA Group Equity Equivalent Practice, which offers specialised Equity Equivalent consulting to a number of significant Foreign Owned Multinational Companies.