The Black Management Forum (BMF) has been pushing since last year for stiffer penalties of up to 10% of turnover for companies that do not comply with the requirements of Black Economic Empowerment (BEE). According to the BMF, existing fines are so small as to be ineffective and the proposed penalty would be a stronger deterrent.
However, according to Keith Levenstein, CEO of EconoBEE, a company that consults on broad-based black economic empowerment (BBBEE) issues, the likelihood of such a penalty coming into effect is zero.
“The BEE Act itself has no penalties. The type of punishment the BMF has called for would require the entire Act to be rewritten, while the whole approach to BEE has been to encourage compliance via procurement.”
Interestingly enough the BEE Act applies only to government and public entities. It applies to companies solely via the procurement element. “The only law that a company faces is the law of economics – if your customer wants your BEE scorecard, and you do not have one, then you stand the chance of losing their business,” says Levenstein.
He says the BBBEE Act and Codes of Good Practice have been well designed and written, and having a legal penalty would change the whole concept of BEE. “Again, it must be noted that the possibility of losing business due to a lack of a scorecard is more than sufficient motivation for a company,” he adds.
Levenstein makes the point that for companies, BEE is no more onerous than other regulations and red tape that affect businesses.
“As an act, it is actually one of the more “benign” ones. Doing VAT is a difficult job, and applying for a liquor licence is even harder. BEE is just a more emotional topic for many businesses.”
Practical Steps to BEE Compliance
Small-to-medium size businesses need to realise that becoming BEE complaint is no different from giving their customers good service. “If a customer wants delivery today, a good supplier will try to achieve exactly that,” Levenstein says. “If a customer wants an invoice or statement today, the good businesses do it. If a customer wants a BEE scorecard, the first-rate business will recognise this and supply it.”
BEE covers seven elements of a business, but an SME with a turnover of less than R35 million is able to choose four of the seven elements, making it easy to earn a good score.
10-Steps to Compliance
Levenstein recommends these steps to become compliant:
- Learn about BEE – get to understand what the codes say
- Look at where BEE is likely to affect you
- Look at the indicators to find ways of scoring points
- Collect documents around the indicators where points can be scored
- Do an initial calculation to find out how many points you have achieved
- Design your scorecard, profiles, policies and strategies around BEE and display your scorecard level
- Put effort into earning the points
- Do a final self-rating and sign it once you are completely satisfied
- Look for ways to find more points on the scorecard
- Get an independent organisation such as an auditor or rating agency to sign off your scorecard.