While South Africa’s Broad Based Black Economic Empowerment (BBBEE) requirements are viewed by some as yet another impediment to conducting business as usual, others see them as an opportunity to make positive changes for themselves, their employees and the country.
Roxanne Da Mata Goncalves, Director of Strata-G Labour Solutions, which assists companies in improving their BBBEE scorecards, says South Africa needs to think differently about BBBEE and transformation. “Many organisations are disenchanted with consultants who propose questionable BBBEE schemes. Their number one objective is to be profitable and they are tired of bleeding money into initiatives that are not sustainable or that they have no way of measuring.”
This is particularly true when it comes to enterprise development and supplier development. “Depending on their turnover category, companies are obliged to contribute a percentage of their net profit after tax (NPAT) to organisations that are 51% (or more) black-owned small or medium micro-enterprises. This contribution can be in the form of money, time, attendance or materials – or a combination of these.
“Unscrupulous consultants will get their clients to hand over 1% of their NPAT to donate to a relevant SME, with the promise that the SME will deliver a service in return. The service never materialises, but the BBBEE scorecard arrives in the mailbox – with the tacit understanding that no one is any the wiser and no questions are asked,” explains Da Mata Goncalves.
When Strata-G entered the market, the labour solutions company quickly became aware of how widespread BBBEE fronting was. “In one meeting after another with prospective clients, the response was invariably: “I’ve heard this all before. All you want is our money. We’ll never see what you do with it. We want to make a genuine, tangible contribution,” adds Da Mata Goncalves.
Understanding that many organisations buy into the BBBEE ethos and want to be actively involved in the process, Strata-G develops relevant and sustainable strategies that are mutually beneficial to all parties involved.
“By adopting this approach, we eliminate the distrust and resentment inherent in having to pay over a large sum of money without any feedback, significant change or improvement to the donor company,” says Da Mata Goncalves.
“Importantly, we encourage our clients to donate time, material, attendance or services rather than make monetary contributions. This allows them to get more involved in the process and it becomes a mutually beneficial relationship,” she adds.
She cites business furniture solutions company, Cecil Nurse, by way of example. “Cecil Nurse was required to spend 1% of NPAT on enterprise development and 2% on supplier development. While an enterprise can be any black-owned micro-enterprise that the organisation has an interest in, a supplier must be a black-owned business that supplies services or products to the donor company.”
Cecil Nurse enjoyed a prior relationship with a skills development body, Morentho Institute of South Africa (Morentho), which equips young people with upholstering and furniture manufacturing skills as well as the wherewithal to start their own businesses.
Da Mata Goncalves says Strata-G recommended that Cecil Nurse donate the spare materials from its own manufacturing processes/entities to Morentho for the upholstering of chairs and ottomans. “Cecil Nurse then buys back the furniture made by Morentho to sell to the public. Not only is Cecil Nurse giving Morentho the materials it needs to improve learner skills and create a sustainable business, it is supporting the business further by buying the products it manufactures.”
Since the project kicked off in July 2017, Cecil Nurse has sold about 200 units produced by Morentho. In addition, the business furniture solutions company has addressed the issue of environmental waste and Morentho is enjoying the benefits of an additional income.
Cecil Nurse CEO, Herbert Meyer, says with the help of Strata-G’s strategic input, Cecil Nurse has obtained BEE level 2 certification. “Not only does this assist us in pursuing new business opportunities, but we feel confident that we are contributing to an initiative that can have a significant impact on the economy if everyone is committed to it.”
Strata-G also assisted a local logistics branch of international company, IDL Fresh South Africa, with its BBBEE strategy, which has seen it facilitate the transformation of an internal car wash operation and staff canteen into separate legal entities.
“This has encouraged SME growth. IDL Fresh South Africa has donated its space and doesn’t charge the businesses rent. These enterprises are also suppliers. Instead of in-sourcing these functions and employing additional staff to manage them, IDL Fresh South Africa has boosted its BBBEE status by helping create sustainable businesses,” adds Da Mata Goncalves.
“We’re delighted with the solutions suggested by Strata-G. They make a lot of sense to the business. They allow us to focus on our core business while giving aspiring small businesses a leg-up. It’s a win-win situation and a great way to boost SME’s in South Africa,” says IDL Finance and Human Resource Executive, Yolandi Engelbrecht.
Cecil Nurse and IDL Fresh South Africa are just two examples of the many businesses that want to contribute to their communities but are not sure how to go about it. “Businesses in our beleaguered economy don’t have an endless supply of funds to support SMEs. They need to be prudent and save for the difficult times. If they work together with a reputable and specialist consultancy, they will be able to create mutually beneficial relationships that need not drain the bottom line,” concludes Da Mata Goncalves.