By now most South African companies have either attended a seminar or heard of BEE in the media. But very few understand the concept, lest the practical implication thereof. 

So what is this BBBEE?

It is a system that strives to reverse race inequality in organisations. The purpose of BBBEE is to grade organisations according to their BBBEE compliance on a universal scale from Level 1 (135%) to Level 8 (35%).

The higher your percentage on the scorecard system the better your BBBEE rating and “chance” of successfully trading with other organisations.  Please note the word “chance”, BEE is under no circumstance a guarantee that you will get any contracts from anyone.

Who is required to do BBBEE?

By law only Government, Listed companies and other financial institutions MUST do BBBEE! No other organisations are forced to comply with BEE. 

So why do BBBEE.

If you want to deal with large organisations you will need to get a BBBEE rating. The rule of thumb is, if your most customers request your BBBEE score then you need to do it. Because your customers are dealing with a large organisation and their BBBEE rating depends on your BBBEE rating.

BBBEE is a pyramid scheme, let say you want to supply lollipops to Checkers then you will have to get a BBBEE rating but to get a rating you will need to get the BBBEE ratings from every one of your suppliers, their rating will determine your rating. 

But you don’t want to do BBBEE!!!

Many organisations in SA do not have to do BEE. 
If you only deal with private individuals, have a turnover of less than R5mil per year or you have NO BBBEE requests from your customers then you do not need to get a BBBEE rating!!

BBBEE Warning?

Once you start you can’t stop you have to do it every year, if you stop your customers and clients will blacklist you as non-compliant.

For a BBBEE rating, expect to pay the following: less than R5mil turnover = R750, R5mil to R35mil = R3000 to R9’000 and R35mil and more = R10’000+

However the biggest cost is not in the BBBEE rating itself. The cost lies in the things that you have to do to get the points; you will spend up to an additional 7% of your direct nett profit every year. Broken down as 3% on Skills Development, 1% on Donations, 3% on Enterprise development, plus an additional +/- 18% on salaries for “Equity Category Correction”.

Your customers and clients are requesting you’re BBBEE score!

Now that you know what the cost is, do the math. Does this customer warrant the expense and punishment? Does the profit that you generate from this customer warrant the BBBEE expenses? 

If the answer is yes then do it as quickly as possible. Don’t delay because his BBBEE rating depends on your rating. If no then be honest with him and tell them why you will not be able to give them a rating.

Must I get a “Black” (by definition) partner/investor?

NO, nowhere is it even remotely mentioned that an organisation must get a black partner/investor; there are many other ways of obtaining those elusive ownership points, without selling shares.