• Date Posted: June 27, 2013
  • Author: Deon Oberholzer

Despite the heavy focus on Black Economic Empowerment (BEE) in the media and in corporate governance circles, there are still many misconceptions and uncertainties in the market.

The BEE implementation process can be beneficial and assist in company growth and compliance. Often it is a requirement to keep business flowing from corporate or government entities. When client requirements are extracted, BEE requirements form part of such requirements. BEE should be seen as a means of growing the economy and distributing wealth to the entire population.

When BEE is embarked upon, it is important for business owners to understand the codes correctly and to proactively try to get a good BEE scorecard. The consequences can be nothing but positive for the business. Incorrect perceptions, however are keeping business owners from wanting to comply with BEE codes.

Family businesses often resist BEE as the owners are wary of bringing in new partners, having started the business from nothing. The BEE code, however, does not enforce the giving away of shares. There are other ways of achieving good points on the BEE scorecards. When the annual turnover is less than R5 million, the company has emerging market enterprise (EME) status. However, a certificate is still needed to prove exemption status. With an annual turnover of between R5 million and R35 million, any four out of a possible seven codes can be chosen. Only when annual turnover revenue reaches R35 million or above is it necessary to comply with all seven codes. That is only applicable to 10% of the whole economy.

Compliance with the codes for the wrong reasons will also lead to unintended consequences. Window dressing in the BEE field is one pitfall which has harmed many entrepreneurs to date, resulting in CCMA cases and legal battles. When a driver is asked to act as a director of the company, exposure of such a scenario will lead to embarrassment and unnecessary cost to the company. Registering an unskilled person as a director will subject the employee to director’s risk without the tools to cope with the possible results of such risk. The correct alternative would be to appoint employees at the correct level according to their skills and abilities and then develop such employees to gradually move up in the company.

With the focus on BEE, the normal good human resource management practices should not be ignored. Recruitment and selection principles should be adhered to, job descriptions should be provided and performance management should be implemented across all employees. BEE should not take preference over choosing the right person for the position. The first priority in building a company remains the building of a cohesive team working towards a unified vision and goal. Applying all of the correct HR principles efficiently and fairly across the entire company will result in an effective yet diverse team.

BEE is here to stay and cannot be ignored. Even though there is no formal punishment for non-compliance, it could result in lost business. Bigger clients demand BEE certification in order to fulfil on their own procurement score on the BEE scorecard. It is necessary for business owners to accept the necessity of transformation. It is safer to embrace BEE and gain the benefits from certification. Transformation is one of the new natural laws of business and cannot be ignored.