BEE compliance vital for your business

MBOMBELA – Well-known businessman and BEE strategist, Mr Louis McLaren visited the Lowveld to shed light on the new BEE regulations at a seminar hosted by A2A Kopano and Stabilis’ conference centre on May 22.

McLaren is the current executive head of the B4 initiative and the founder of the Business for Empowerment Trust. He is also well-known for his columns in various publications and insights on broadcast media.

He focused on the challenges and opportunities that come with the new regulations for black economic empowerment during the seminar which was attended by businessmen and -women from various sectors.

“If you want a successful business with solid investment you have to incorporate BEE into your company. Follow the guidelines and seek the opportunities,” he said.

The major changes in the BEE system was that new turnover threshold are now in place ranging from R10 million for small enterprises and R50 million for large companies. There is also a restructured scorecard that businesses will have to

adhere to.

In general it will now be harder for businesses to gain a good BEE rating with increased targets on skills development and enterprise and supplier development. Furthermore, these elements combined with the ownership element have now been elevated to priority element status requiring any business with a turnover in excess of R10 million to comply with these elements or risk dropping a BEE status level. This has a big effect on family-owned businesses, especially in the agri sector where generations have been managing land under the family name.

“Businesses with more than 51 per cent black ownership have no obligation to comply with any other empowerment requirements as being black-owned is deemed as enough. This heightens the discussion regarding skills development,” said McLaren.

Not having an ownership deal almost certainly renders businesses non-compliant. Businesses that are verified after May 1 must adhere to the revised BEE codes in order to obtain a certificate.

“If BEE is executed incorrectly and misrepresented it will eventually kill your business. It cannot be ignored as businesses will be subjected to a whole host of elements,”

he explained.

Enterprise and supplier development now has a 40-point weighting while ownership is at 25 points out of a 100 on the BEE scorecard.

Another crucial aspect will be the new empowering supplier status which focuses on a number of business practices. It is crucial that this status is granted before certificates are obtained.

Interestingly, one of the greatest additions has been a zero-tolerance policy on fraudulent and misrepresented BEE practices with convictions ranging from a

10 per cent fine of turnover or a 10-year prison conviction. Enterprises may also not then contract any businesses or register tenders defaulters at the national treasury.

Some of these offences include:

• Misrepresentation or attempts at misrepresentation of a BEE enterprise

• False information presented to a B-BBEE verification professional

• False information to any organ of state or public entity

• Engaging in fronting practices.

Enterprises who are aware of competitors’ wrongdoing and who do not blow the whistle on these activities also face conviction according to McLaren.

Management control will also be an important aspect for enterprises to focus on with businesses needing to represent an average of 40 to 60 per cent black board and top management.

“Black needs to incorporate Africans, coloured and Indians. Demographically this can be a challenge and this needs to apply to the demographic that enterprises finds themselves in,” McLaren explained.

A positive aspect regarding the new regulations is skills development which includes the training of both employees of the enterprise and non-employees.

“The unemployed can now also be targeted to fill the skills development mandate as it does not have to be internal. Skills development will also increase costs and could affect profit margins while demographics will once again have to be considered,” he mentioned.