BEE RoI: Spending money for the sake of BEE points only?

Are you part of the “begrudging camp”, the laissez-fair group, or the “how much – give me my BEE points” brigade?

What is a BEE RoI?

Return on Investment (RoI) deals with the money you invest in a specific project, and the subsequent return you realize from that investment. In the case of BEE, most people will measure “BEE RoI” in the form of BEE points, and eventually a BEE Level. No. Your costs should be reflected in relation to your business gains. You should always strive to spend less and earn more. An effective RoI model should clearly measure costs, and be portrayed in relation to revenue generation, client retention, and overall organizational benefits.

Pivot back to basics: Unpacking the Underlying Principles of BEE

Writing a cheque to make the effort go away and delegate the entire BEE initiative to a third party is theoretically not a half-bad idea. However, the key to maximizing your BEE RoI is by taking control of it through, first of all, understanding the basic principles of the BEE Codes, secondly, understanding the cost of BEE projects leading to BEE points, thirdly through successful implementations, and lastly, followed by accurate RoI measurement.

The BEE Codes are based on five main principles;

  • a procurement incentive to businesses: a higher BEE level should lead to increased revenue
  • an equity drive: getting black people to earn shares
  • people development: skills development should feed employment equity with black talent
  • supply chain development: enterprise and supplier development funding should feed new black owned suppliers into your supply chain
  • and a strong community outreach principle.

These principles should cascade into the foundation of your BEE strategy. They are feeding channels to strengthen the main BEE elements, and eventually you earn BEE points without incurring direct BEE costs. This strategy will satiate scorecard compliance sustainably, increase economies of scale, and significantly improve RoI for the long haul.

Tipping the Scale

If you do it right, you can earn 71 BEE points (BEE Level 6) without spending money on BEE specific projects. And this is a fact.

Follow the nifty BEE Weighted Scale Model as developed by BEE Analyst.

In essence, you have Ordinary and Extraordinary Expenses (BEE) in the Weighted Scale RoI model. On the one side you “Earn BEE points without spending money”, as opposed to the other side; where you have direct BEE expenditure, year on year, to earn BEE points.

Conclusion:

BEE is here to stay, regardless of our economy being in ICU, in junk status or Covid-19. The South African economy must become more inclusive.

A mind-shift should occur from implementation focused (scorecard elements) to a strategically aligned (four pillar) approach. Equity transfer, people development, supply chain optimization and community outreach.

Simply follow the key principles to BEE success: Understand the basic principles of the BEE Codes, understand your costs, plan your investments, implement your projects, and measure your RoI.

Choose Smart, BEE Smart

BEE Analyst has a proven track record, and digital solution, to navigate the byzantine BEE legislative environment, achieve desired BEE levels, and reduce BEE costs.

Contact: gerhard@beeanalyst.co.za;

Commission releases annual report on B-BBEE trends

The Broad-Based Black Economic Empowerment (B-BBEE) Commission has released its annual report on the national status and trends on B-BBEE for the 2019 calendar year.

The Commission said that the report shows a 1% (43%: 2018 – 42%: 2019) decrease in the number of submitted compliance reports by JSE listed entities.

Click here to read more.

In the News: Employment Equity Amendment Bill to bring about real transformation

On Tuesday, 18 February 2020, Cabinet announced its approval of the Employment Equity Amendment Bill 2020, to be submitted to Parliament. As the Bill makes its way to Parliament for deliberation, the Department of Employment and Labour has set the ball in motion for the introduction of sector-specific Employment Equity numerical targets. Read the full article in SA News.

Click here for Government Gazette Notice. Download the Draft Public Procurement Bill here.

Financial Services Industry faces possible penalties

According to the B-BBEE Commission’s Zodwa Ntuli an analysis of compliance reports submitted by JSE-listed companies indicates that the financial sector is regressing in ownership and management control. These companies could face possible penalties for non-compliance.

Read more here.