Broad Based Black Economic Employment Act/BBBEE

PURPOSE

• Enables wealth to be spread more broadly across all population groups
• Outline areas that would give the government the platform for bringing equitable spread of wealth
• Allows for the development of codes of good practice
• It aims at targeting inequality in the south African economy

IMPACT OF THE BBBEE ON BUSINESSES – POSITIVES/ADVANTAGES

• Encourages businesses to address the demand for redress/equity directly
• Provides a variety of business codes to improve employment equity
• A good bee ratings improve the image of the business
• Promotes enterprise development, entrepreneurial skills previously disadvantaged individuals
• Businesses that comply with BBBEE regarding the pillars will be rated high on the bee scoreboard/ may get government tenders/may attract other BBBEE business partners or suppliers
• Encourages businesses to address the  demand of redress/equity directly
• Provides for human  resources development through training and development
• Promotes enterprise development, by developing entrepreneurial skills for designated people to start their own businesses
• Businesses will have a good overview on how its performing in comparison to other businesses in the rest of the country
• By focusing on BBBEE the business will show commitment towards the social/education/economic  development in the community/country
• Once rated the business will understand how to develop BBBEE strategies that will increase BBBEE ratings on an annual basis.
• Fronting is discouraged, as it may lead to the disqualification of a business,s entire scorecard/BBBEE status.
• Share prices BBBEE compliant business are likely to increase as they attract more businesses
• Businesses that support small micro, medium enterprises [SMMES] may increase their own BBBEE ratings
• Complying with BBBEE requirements give a businesses experience/exposure to be able to provide better employment opportunities/staff development

NEGATIVE/DISADVANTAGES

• Businesses that want to do businesses with the government must have their own BBBEE assessed annually.
• Processes may lead to corruption/nepotism if not monitored properly.
• Investment/ownership issues can cause unhappiness amongst existing shareholders/owners.
• Businesses have to go through the processes of having their own BBBEE compliance measured/verified by an independent BEE verification agency
• Provides for preferential procurement so certain businesses may be excluded from supplying goods/services.

DISCRIMINATORY ACTIONS ACCORDING TO BBBEE

• Failing to implement affirmative  action to meet BBBEE responsibilities
• Promoting unsuitable people into management position at the expense of qualified pdps
• Refusal to award tenders to black suppliers who are bee compliant

PENALTIES FOR NON COMPLIANCE WITH THE BBBEE

• Businesses may face imprisonment for non compliance and fronting practices
• The penalty could be a fine of up to 10% of the company annual turnover
• A business can be banned from participating in government contracts for a period of ten years
• Business  licence may not be renewed and authorisation may not be issued
• Government will cancel any contracts awarded that was based on false information  regarding BBBEE status
• Businesses that fail to achieve at least  a minimum 40% of compliance with ownership skills development and new enterprises and supplier development will automatically downgraded the by on e level

WAYS IN WHICH BUSINESSES CAN COMPLY WITH BBBEE

• Businesses must appoint black people in managerial positions
• Businesses must sell shares to black employees/people
• Send black people for black skill development  training
• Outsource their  services to BEE compliant suppliers
• Implement affirmative actions when making appointments
• Develop small business/ SMEs through enterprise development
• Improve the standard of living of the communities in which they operate

BBBEE COMPLIANCE

According to the Revised BBBEE pillars, five key areas of compliance are used to measure a businesses compliance to BBBEE. These are

Ownership: points are earned by selling shares to black people Management Control: points are earned by appointing black top managers and directors Skills Development: points are earned by training employees through on the job training or formal training Enterprise and Supplier Development: points are earned by assisting smaller black owned businesses to grow Socio economic Development: points are earned by supporting black social causes.

IMPLICATION OF BBBEE PILLARS ON BUSINESSES

MANAGEMENT CONTROL

• Appoint black people in senior executive positions/management
• Ensure  black female representation in management
• Implement transformation  at all levels of management
• Ensure that black people are involved in decision making process.
• Business must ensure that transformation is implemented at all
• levels.
• Businesses are directly penalised for not implementing this pillar.

SKILLS DEVELOPMENT

• Business must engage black employees in skills development initiatives
• Provide learnership and learning programmes to black people
• Business must contribute 1% of their payroll to fund the skills development programme
• Business benefits from the increased pool of skilled/trained workers
• Business must go extra mile to train staff where learnership are not offered
• Productivity is compromised as mentors/coaches have to find to participate in learnership/training

OWNERSHIP

• Business should include black people in shareholding/partnership/franchise
• Exempted micro enterprises (EMES) with an ownership of 50% or more of black people are promoted to level 3 of the be scorecard
• More opportunities are created for black people to become owners /entrepreneurs.
• Encourage small black investors to invest in big companies and share ownership.
• Large business should form joint ventures with small black owned businesses and share businesses risks
• Business sometimes find it difficult to locate suitable black business partners/shareholders
• Many black people cannot afford shares in companies/contributions to partnership

ENTERPRISE AND SUPPLIER DEVELOPMENT

• Business must create jobs as ESD promotes local manufacturing.
• Businesses are encouraged to invest/support black owned SMMEs.
• Contribution can be monetary, e.g. loans/investments/donations.
• Contribution can be non-monetary, e.g. consulting services/advice/entrepreneurial programmes, etc.
• Outsource services to suppliers that are BBBEE compliant.
• Identify black owned suppliers that are able to supply goods and services.
• Develop the business skills of small/black owned suppliers, e.g.sales techniques, legal advice, etc.
• Support the cash flow of small suppliers by offering them preferential terms of payment.
• Businesses should invest in/support black owned SMMEs.

SOCIAL RESPONSIBILITY/ SOCIO-ECONOMIC DEVELOPMENT

• Businesses should CSI focus on critical areas which can affect growth and development in the country e.g. environmental awareness/education/ housing, poverty/unemployment etc.
• They should distribute scarce CSI resources to selected beneficiaries in the community.