Revised B-BBBEE Codes Will Have a Far Reaching Impact on Suppler Procurement and Supporting Technology Backbone

MARCH 18, 2015

The revision of the Codes of Good Practice (RCoGP) which govern South Africa’s B-BBEE (Broad-Based Black Economic Empowerment) aims to foster an economy that becomes more inclusive, creates employment and drives good, sustainable transformation.  However, with these amended codes come a fundamental shift in companies’ procurement policies – qualifying suppliers enter a new paradigm from 1 May 2015.

In this light, Be One South Africa (B1SA), a supplier of bespoke B-BBEE technology and services, has announced the immediate alignment and readiness of its ICT offering, which includes its Opportunities Network (Network) and Supplier Relationship Management (SRM) solutions, to South African companies.

The Network and SRM solutions, among others, have been aligned to immediately enable companies to meet the new B-BBEE requirements for procurement and supplier compliance; one of the codes that has seen a noteworthy amendment.

“With the inception of the amended codes a few months away, it is imperative that organisations get their procurement and supplier compliance and policies on track. Under the old Codes, entities would chase supplier B-BBEE certificates at verification time. With the amended codes, entities will need to source compliant suppliers. A strategy of chasing compliance will just not work.

Therefore, if implemented correctly from the get-go, companies can transition and ensure that they meet these new requirements immediately benefiting their business while expanding and maturing their procurement policies that particularly impact smaller business development,” explains Brad Green, Executive Chairman of B1SA.

With the revised B-BBEE codes lies a significant challenge ahead to maintain certification levels.  For example, explains Green, with the new Enterprise and Supplier Development (ESD) priority element that essentially combines Preferential Procurement and Enterprise Development, companies must now achieve 44 points compared to the previous 35.

In terms of the procurement sub-element, on average (based on information collated from B-BBEE rated entities within the 130 000 entities on the B1SA Network) entities scored an average of 14.93 out of 20 on the old codes, indicating that most entities generally chased supplier B-BBEE compliance at verification time based on largest spend first.

Where entities chased compliance on all suppliers, as found by B1SA, the average score was improved to 19.56 out of 20 points on the old Codes. The shock is that when running scenarios on the amended codes, this latter higher average drops to 8.43 points out of 25, below the required 10 points to meet priority requirements.

Put in layman’s terms, companies must achieve compliance of at least 40% of the priority elements. Failure to achieve the 40% will result in the reduction of overall compliance by one level.

For the enterprise and supplier development sub-elements, in monetary terms, 2% of an organisation’s Net Profit after Tax should be spent on supplier development while 1% should be spent on enterprise development.  The minimum that should be reached is therefore 40% of each respectively.

Explains Green: “According to the amended codes, qualifying supplier development companies are Exempted Micro Enterprises (EMEs) and Qualifying Small Enterprises (QSEs) that are at least 51% black owned. A significant number of these EMEs and QSEs will need to be procured from for entities to meet the 40% of target spend on black owned suppliers, and the 15% target for EME spend.

From a technology perspective, a significant number of EMEs and QSEs’ information needs to be collated and updated to ensure they meet the necessary criteria that will in turn enable organisations to meet their (ESD) requirements.  This is undoubtedly a massive undertaking which means it makes sense to utilise a mature ICT offering that mitigates a lot of the guesswork associated with getting, among others, your supplier database up to speed,” he concludes.

B1SA’s Network provides companies with tools to assist B-BBEE information collation pertinent to all elements of the B-BBEE scorecard, as well as supply chain tools for the registering and sourcing of compliant suppliers.

The company’s SRM offering manages and monitors the B-BBEE status of all suppliers. It simplifies the preferential procurement management of current and future suppliers by utilising its extensive database of B-BBEE certificates.  Essentially, the SRM solution establishes a gateway for current and new suppliers to ensure companies stay on top of procurement targets while identifying businesses for both supplier and enterprise development.


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