Home Articles VIEWPOINT: SHOULD WE FEAR B-BBEE?

VIEWPOINT: SHOULD WE FEAR B-BBEE?

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The answer to this question is YES and NO, depending on our outlook. YES if we are looking for any kind of short-cut or loophole in attaining our B-BBEE credentials; NO if we are committed to following the rules and implementing initiatives that will meet the legislative objectives.

A negative approach to empowerment holds serious risks. If there is no commitment to really transforming the business, the company is likely to implement measures that will not meet the objectives of the legislation or even fall foul of it.

In reality, a company’s true intentions will over time become clear to all parties involved. A good question to ask is: ‘How will the initiative be perceived a year or two from now?’ The penalties for various forms of fronting practices are severe. B-BBEE is currently subject to intense scrutiny by government departments, state-owned entities, and the newly appointed B-BBEE Commissioner.

The opposite is also true. If there is a genuine willingness to share the company’s profits (in line with the company’s performance, of course) with those who were previously disadvantaged, it will be evident in the way the initiatives are structured and implemented. This will lower the risk posed by scrutiny.

I am convinced that good intent and transparency are two key ingredients in the sustainable empowerment of any business.

Then, why do many seem so fearful of B-BBEE that they are unable to move forward with their empowerment initiatives? Could it be that they are getting fear-inspiring messages in the media? Perhaps even companies that want to implement B-BBEE correctly are so scared of getting it wrong that doing nothing seems to be the safest course of action. I can’t help but think what such a situation will do to our economy.

I believe that there is nothing wrong with the legislation itself, which makes proper provision for various forms of empowerment, including black ownership. The codes are clear on what the rights of black beneficiaries should be. It also clearly indicates the criteria with which broad-based ownership schemes (most often hosted in trusts) have to comply in order to qualify as genuine black equity partners. The B-BBEE legislation is furthermore supported by seasoned principles in other legislation such as the Companies Act 71 of 2008, the Income Tax Act, and the Trust Property Control Act 57 of 1988.

So, do we really have to fear B-BBEE? It would be a sad day if we did.

THE YEAR 2017

You will probably be reading this article in February 2017, the last month of your financial year.

You may ask yourself: ‘What can I still do before the close of this financial year to optimise my B-BBEE status?’ It is important to note that all the scorecard elements dealing with monetary spending will look at funds that flowed into or from your business during your financial year. If you can make meaningful contributions by 28 February, consider doing so.

If the scorecard requirements will simply put too great a burden on your business and you want to implement 51% effective black ownership to qualify for automatic Level 2 status, you can do so in the new financial year since ownership is measured at the date of measurement.

Author: Anton de Wet CA(SA) is Managing Director of Net Value Holdings