Companies looking to increase their profit margins in South Africa, even in the current economic climate, should be registering to the new BBBEE codes of good practice as they are a viable means for increasing business.
The Department of Trade and Industry (DTI) recently amended the BBBEE codes and they have caused some confusion as to how these new codes will affect small and medium enterprises (SMEs) as well as the qualifying small enterprises (QSEs).
According to Keith Levenstein, companies registered under the old BBBEE codes will drop four or five levels on the scorecard based on the scoring of the new codes and this implies that the policies which have been amended might have higher standards of compliance, they reap better rewards, although some business owners are not too happy with the new codes.
Levenstein explained that the reason for this is that the new codes seem a little more complicated and business owners find them a bit more difficult to integrate them into their practices.
He said that companies that were registered with the old codes in the period before 30 April 2015 were not required to re-register to the new codes.
However, he highlighted that there was a direct correlation between good BBBEE scores and being able to land business.
“The better the score the more likely you are to win business and the worse the score the more likely you are to lose business.”
It is therefore critical that small businesses, looking to expand, try to comply.
Raking in profits is not the only reason that companies should comply with the codes according to Levenstein.
“The majority of companies are still owned by white people, who still retain senior and executive positions and black people don’t have as much say in the economy as would be expected if we didn’t have the problems of the past.”
He also explained that while there were still some great inconsistencies in company ownership and leadership in the country, some strides had been made.
According to Levenstein, BBBEE has contributed significantly to the transformation that has happened in the last 20 years. It is one of thousands of policies to encourage transformation siting companies including MTN, Bidvest and South African Breweries as companies at the forefront of economic transformation.
Levenstein said the codes if implemented by companies, will foster proper transformation within the economic system. The biggest issue is still skills development, he said.
“If the companies implement the codes properly, there might be a lot of time and money spent on training but this will be an investment and not an added cost. It’s needed to avoid further economic and social issues.”
The National Union of Mineworkers (NUM) however, was not as accepting of the new codes calling them “regressive and backward”, in a statement released by the union. NUM sited inconstancies in the new points’ earning system as the reason for its skepticism.
Meanwhile some businesses are not entirely happy with the implementation siting that they are unclear.
In a statement released by Stephan van der Walt, managing director of Pallidus Capital, a niche, privately owned investment banking firm said, “I do not believe that the Notice validly amends the BEE Codes.”
According to Van der Walt there should have been a process of engagement between businesses and the department. “The Broad Based BEE Act requires that any amendments to the BBBEE Codes must first be published in draft form, and be open for public comment for 60 days.”
The DTI’s, BEE chief director Takalani Tambani said that after the draft of the new codes was released in October last year, the public and the business sector had eight months to engage on the codes before they were implemented on Workers Day this year.
Van der Walt highlighted that BBBEE was not the best way to create the necessary transformation in the country.
“Imagine the positive impact to South Africa if the 40 billion rand was spent on furthering the education of Black people through bursaries schemes? Holding a small number of shares does not even create a fraction of the upliftment and empowerment impact these schemes can achieve.”