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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GTCOC Free Webinar on B-BBEE

The Golden Triangle of Chambers of Commerce has organised a webinar for its member and special guests on the implication of B-BBEE for covid relief funding that has been established by the Minister of Tourism, Mmamoloko Kubayi-Ngubani.

The webinar will be presented by Mapule Mahlulo, the author of “B-BBEE for Beginners”, who is a subject matter expert on Broad-Based Black Economic Empowerment.

The webinar will be held via Zoom online conferencing on 21 May 2020 at 10:00 am. Pre-registration is mandatory for all attendees.

Topics that will be covered include,

  • Understanding B-BBEE Levels
  • The different categories of B-BBEE (Exempted Micro Enterprise, Qualifying Small Enterprise and Large Companies)
  • The five elements of B-BBEE (Ownership, Management Control, Management Control, Enterprise Supplier Development and Socio-economic Development)

“This is a great opportunity for our members to be empowered with knowledge as B-BBEE is a sensitive topic in our country at the moment” said Klippies Kritzinger, the CEO of the Golden Chamber of Commerce in Vanderbijlpark.

Click here to REGISTER

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Most white South Africans are already B-BBEE (yet they are not aware!)

The recent announcement by the Minister of Tourism, Mmamoloko Kubayi-Ngubane that the R200 million covid relief funding will be based on B-BBEE, sent a wild tailspin on most white owned guest houses, lodges and establishments.

Solidarity and Afriforum  even took the Minister to Court and she rightly won the case which has since been referred to  the constitutional court. All of this is unnecessary because an overwhelming majority of these white owned companies are B-BBEE, but no one told them yet.

The court papers clearly showed that lawyers and even the Department of Tourism itself created a mole out of an anthill of what could have been explained in one easy simple sentence, which I will provide. But before I do that, did you notice that the large tourism establishment did not even utter a word and remained numb? Why is that? Well, all of them are already B-BBEE and they all have B-BBEE certificates.

Tsogo Sun is B-BBEE Level 1, the mother company and all her children    Black Rock Casino,  MonteCasino,  Sandton Sun, Suncoast Casino etc. There is one exception though, Emnotweni  Sun.It  is B-BBEE level 2. Although, it has the largest black female shareholding than its other siblings, it missed level 1 by a hair breadth through a silly miscalculations which could have been easily avoided. 

Who else? Emperor’s palace is B-BBEE level 2, though their certificate expired few days ago (11 April 2020), during the lockdown. But I am sure they will get another one soon or they already have it.  Sun City is also a  level 1.  Like I said, all the big tourism places already have a B-BBEE certificate.

This article is not about them though, but about the white owned businesses which  are also B-BBEE but they don’t know it yet.

So, what’s with the fuss and the court cases? It is created by  the white owned companies that are classified as exempted micro enterprises by the B-BBEE Act and not the larger businesses . But they are already B-BBEE and they don’t know it yet.

All companies in South Africa are B-BBEE if their turnover is less than R10 million a year. (In the Tourism sector the threshold is R5 million per annum).  That’s right, whether the owners, are pink, purple, green or orange, the company itself is B-BBEE. This is according to the B-BBEE Act. All that the owner needs to do, is complete a standard affidavit  declaring that their turnover is less than R10 million  have it commissioned and voila! they are now B-BBEE and can use that affidavit to apply for the covid relief fund of R500,000.

Now, I don’t know why the lawyers and the department did not file this detail in the court papers. I also don’t know why Afriforum does not know this fact. But all that should have been said was all white companies in South Africa are B-BBEE as long as their annual turnover is less than R10 million a month. They automatically qualify for a Level 4.