Changes to BEE laws on the cards

JOHANNESBURG – COMPANIES  that are not focused on refining their economic empowerment policies should be warned that changes to BEE codes could mean that their business could drop four levels on the BEE ladder, and thus cost them lucrative business opportunities, even though their black shareholders, black staff or black owned suppliers have not been reduced.

Diale Mokgojwa, senior manager for enterprise development at Standard Bank, told a media briefing on Tuesday that under the new measurement and interpretation of codes, companies should be investing more time and effort in developing empowered suppliers as enterprise and supplier development was now the single biggest component of the empowerment scorecard, which formed part of the codes that were promulgated in May this year.

Supplier and enterprise development accounted for 40 of the 100 points on the generic scorecard, the single biggest component. Ownership accounts for 25 points; skills development scored 20 points; while management and control scored 10 points. The balance of five points was made up of residual.

Mokgojwa said Standard Bank had developed a business tool which had, since August last year, helped facilitate R600 million worth of deals to help companies meet ownership as well as supplier and enterprise development requirements, which account for a combined 65 points.

A company needs a minimum of 80 points to meet minimum requirements, or level 4 BEE contribution.

Standard bank assisted companies with supplier development by offering funding to small suppliers on the basis of the cash flows from a contract issued by a large established company. The codes require that the contract must be for three years, and this provides certainty of supply.

The funding could include payment for what the codes recognised as an expert — a person whose expertise are critical to ensuring that a small supplier can deliver on their contract obligations. Companies are required to spend three percent of Net Profit After tax on enterprise development.

In a case where a reliable supplier existed but was not black, influenced through minimum 26 percent black ownership or empowered though 51 percent ownership, Standard Bank could assist the supplier to conclude its empowerment deal through management by buy out or bringing an external shareholder or help the supplier acquire another company. The company that was looking to procure goods from a small supplier could also offer guarantee or collateral for the loan that was used to fund the deal.

Mokgojwa said in under a year the facility had been in place they have concluded R 200 million worth of stand alone deals for small suppliers to become empowered and R 400 million worth of deals for large companies that enabled them develop empowered suppliers or help customers become empowered suppliers to other entities. – ANA