Most companies will find that having no black ownership will mean not achieving a B-BBEE status level at all during their next verification. That could pose a huge business risk!
The remaining four scorecard elements are extremely onerous and very expensive to comply with. It is ironic then that even with black ownership a company could be rated as ‘non-compliant’ if it scores poorly on any of the other elements – especially the priority elements of skills development and supplier and enterprise development.
Black ownership must therefore not be treated in isolation but must form part of a holistic approach to the entire scorecard. What are some benefits of implementing black ownership sooner rather than later?
- The ownership element can be re-verified: Even if a company has already been through a recent verification, the ownership element can be re-verified after an ownership transaction has been implemented and the BEE certificate can be re-issued. The expiry date will stay the same but the ownership points should immediately enhance the overall status level.
- Take time to obtain proper advice: It takes time to decide on the best BEE partners, structure and potential tax implications of a specific transaction. Many are currently rushing into transactions without giving these and other important factors proper thought. For example, SARS views dividends paid to employees through a discretionary trust as remuneration for services rendered by such employees and require that such ‘dividends’ be subject to normal taxation in the hands of the employee. This poses a significant risk that the employer (or trust) may face an outstanding PAYE assessment from SARS!
- Gain a significant competitive advantage: In the current difficult economic landscape a good BEE status can be a huge competitive advantage. In a time when many are still struggling with making their BEE decisions, companies that are proactive in this regard will grow their market share at a much faster rate.
Qualify for current tenders and contracts: Large enterprises are compelled to spend significantly more with suppliers that are at least 51% black-owned or at least 30% black woman-owned. Starting and running a new business with an automatic Level 2 status is in my view the ultimate form of enterprise and supplier development and will reach the objectives of BEE in a much shorter time frame.
Leaving the implementation of black ownership to the point where a large tender or contract requires it will most likely lead to rushed decisions that will either not be financially sustainable or will not be within the spirit of BEE. Now is the time to act.
The technicalities and targets of the amended codes require a totally different outlook to BEE than in the past. The main change is that BEE is no longer a compliance only issue. It needs to become part of the way we do business in South Africa if it is going to work.
This means obtaining professional assistance in implementing a strategy as early in your financial year as possible to avoid hasty and costly decisions at the very end. BEE is not an impossible task, but it now does require some planning and thought.
Author: Anton de Wet CA(SA) is Managing Director of Net Value Hold