Vash Singh : BBBEE Case Study - From Level 8 To Level 1
2017-12-07
Vash Singh, Managing Director – Xcelerate Verification Agency (formerly Izikhulu BEE Ratings)
Since the new BBBEE codes have been used to assess companies on their scorecard, many are unfortunately finding themselves either non-compliant or at very low levels i.e. Level 7 or 8. This arises mainly due to limited pro-active addressing of the amended requirements within the company’s financial year, especially for the significant points (63% of scorecard points) in the last three elements, which must be executed in the financial year of assessment. For example, a verification at this stage will use a February 2017 financial period, hence the required skills development, preferential procurement, enterprise development, supplier development and socio-economic development should have been done from 01 March 2016 – 28 February 2017.
To demonstrate the power of this approach, I have included a case study of a client of ours who took the necessary steps and achieved a Level 1 on the Generic scorecard with just working effectively on two elements. If no action was taken, the client would have scored a Level 8!
To start, the table that follows, shows the results of the baseline assessment of this client. We inserted their 2016 Old Codes assessment results into the New Codes scorecard which demonstrated that, if the company did not do anything different, they would move from having a 2007 Codes certificate of Level 2 (85 – 100 points) to 2013 Codes certificate of a Level 8 in their next rating. The 2013 Codes have a new concept of Priority Elements — since 40% of the points were not obtained for two of the three Priority Elements (Skills Development and Enterprise & Supplier Development), the client drops from a Level 7 (55 – 70 points) to a Level 8.
There are numerous reasons for the drop, however the focus of this article is on how the client made
a concerted effort on the two Priority Elements, and the different outcome achieved. The key actions are listed below:
Skills Development
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Specialised service provider arranged for the targeted number of learnerships to score optimal points, viz:
o Off-site and on-site learnerships
o Disabled and able-bodied
o Mix of race and gender to meet demographics
o Mainly finance, business and administrative-related
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Disabled staff boosted Management Control by two points
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Will allow company to score some/all of five bonus points in the subsequent rating
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Specific training held for a group of unemployed students according to demographics, and declarations/IDs/training register maintained as records.
Enterprise & Supplier Development
o Specific drive to obtain as many valid BEE certificates as possible
o Where applicable, suppliers were sent affidavit formats to complete and submit
o Identification and actioning of supplier switching opportunities to address shortfall
o Signing of 3-year contracts with Black Owned Qualifying Small Enterprises (QSEs) and Exempted Micro Enterprises (EMEs) and use of first-time suppliers
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Training of procurement staff to implement BEE requirements throughout the year, identify valid vs invalid certificates and amend procurement process
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Supplier workshops and surveys held to inform of the new legislation and request 3-year scorecard /empowering supplier plans from key suppliers – these future proofs procurement scoring
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Identification of Enterprise Development (ED) beneficiary who would replace existing security company – skills development and direct costs were applied. The switching was done in September, hence converted to Socio-Economic Development (SD) beneficiary and three jobs created (two bonus points)
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Continued with early payment terms with historic suppliers, but implemented loans and skills development to meet targets
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ED/SD Agreements and BEE certificates completed upfront, and records maintained for initiatives.
The end result was a significant increase in points to a Level 1. This demonstrates the importance of understanding scorecard requirements and implementing when it counts. At this stage of the year, all companies with December 2017 and February 2018 financial year-ends should apply a similar approach to achieve better BEE levels in their next certification exercise. All those in the construction, transport, agriculture and financial services industries must take heed of these specific sector codes being finalised at any stage now, hence your next rating will most probably be done against the amended sector codes.
Xcelerate Verification Agency assists companies with understanding and tracking on the new BBBEE Codes.
T: 0861 505 555
info@xcelbee.co.za
www.xcelbee.co.za