5 reasons why being black does not necessarily make you B-BBEE compliant!

There are black owned companies that are calling for the total scrapping of the constitutionally sound B-BBEE (Broad-Based Black Economic Empowerment) Act. These black owned businesses are usually the large so called “black industrialist” who have already been empowered through various DTIC’s (the Department of Trade Industry and Competition) incentives which they were given to purchase large factories that were previously white owned. When crunch time came, which required them to have a B-BBEE certificate, to their absolute shock, their companies were declared “B-BBEE non- compliant” or in some cases awarded level 8 certificate which is the lowest score!

This article will explain in simple “B-BBEE for Beginners” terms, why being black does not necessarily mean that your company will be B-BBEE compliant.

This article is in the context of a company with a turnover of more than R50 million per year.

  1. Being black  only counts for 25% of the B-BBEE scorecard

Once the turnover of a company reaches R50 million and above, the skin colour of the shareholders only counts for 25% on the B-BBEE scorecard. Now this is important considering that one needs to score at least 40 points out of 100 to get level 8. Therefore, scoring 25 out of 100 is considered a fail or in this instance: B-BBEE non- compliant!

A company with 25% +1 vote black shareholders will score roughly the same number of points as a company with 100% black shareholding (under the Generic Scorecard).

  • Failure to do business with other B-BBEE companies

Enterprise Supplier Development is an element on the B-BBEE scorecard which requires all businesses, irrespective of the skin colour of the shareholders, to do business with and buy from black owned businesses or with companies that have a decent B-BBEE level reflected on their affidavit or certificate (level 4, 3, 2, or 1).

Black owned companies, who do not buy from other companies with a B-BBEE certificate or affidavit, will mainly be B-BBEE non-compliant.

  • Failure to develop other small black owned businesses

Any large black owned business which has not identified small black owned businesses (51% black owned) and does not have a supplier development agreement in place with them, will  have a difficult time being B-BBEE compliant.

A signed supplier development agreement, which was preceded by a proper needs assessment of the small black owned company needs to be in place. The objective being to grow and develop the small black owned businesses. These can be in the form of giving them office space, paying for their training, mentoring, paying for their website,  grant funding  etc.

  • Failure to training black people

Black owned companies that don’t take the time to identify and develop black people and take them for training, internships and learnerships will not be B-BBEE compliant. Training black people but not submitting your training plan and report to SETA will also make you B-BBEE compliant even if the company is black owned.

  • Hiring only white managers

I have come across black owned companies whereby the whole staff complement was white. Except the lady making tea and the gardener. I am not sure whether the black shareholder felt a sense of security being surrounded by only white people.

Black owned companies without a significant level of black managers on their payroll will not be B-BBEE compliant.

Please note that it is a criminal offence to simply complete a B-BBEE affidavit if your turnover is more than R50 million even if you are a 100% black owned business.

Mapule Mahlulo is a B-BBEE advisor/consultant and is the author of B-BBEE for Beginners.

@govmapule

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