One of the main reasons many smaller white-owned businesses haven’t embraced the concept of black economic empowerment (BEE) is the fear of having to give up a part of their businesses to a black partner. Yet, this is a misconception about BEE that is, unfortunately, quite widely held.
One of the panellists, William Janisch, a director of Empowerment Services, explained that BEE is actually Broad-Based BEE (BBBEE) – a programme that covers a range of elements relevant to running a business, only one of which is the ownership issue. He explained that there are seven elements to the BEE scorecard, of which ownership counts for only 20%.
Janisch advised business owners to familiarise themselves with the draft legislation due for Cabinet approval at the end of August 2006.
In-depth examination
“Analyse the scorecard in terms of its broad framework,” he said. “Through an in-depth examination of your business in relation to the categories in the scorecard, you may be able to identify something your business can easily begin with. Take, for instance, the procurement needs of your business – it may be easy for you to buy from another company and that could give you valuable points on the scorecard, even if the ownership of your business remains fully in white hands.”
Janisch warned that businesses should do only what makes the best business sense. Don’t change from a reliable supplier purely because you want to earn points on the procurement element of the BEE scorecard if doing so would create unnecessary costs.
Where a business is considering finding a black partner, it can be difficult to know where to source someone suitable. There is no demand on the white owner to give away a part of the business but, explains Janisch, you may have to sell a part of the business at a discount. This would occur if you’ve identified someone who can contribute to the business in the long term, but who doesn’t have access to all the funds needed.
Tumi Sengoara from CHAMSA (Chambers of Commerce and Industry South Africa), another Biznetwork panellist, endorsed this view. According to Sengoara, it’s important to analyse the competencies of a potential partner, rather than looking at the price you’re asking for the share of the business. The potential partner may offer significant profitability through access to other markets and fresh thinking, for instance, and so the sale price isn’t the core issue in choosing a suitable partner.
A further misconception about ownership exists among many black-owned businesses. They assume that they are fully compliant because the ownership leg is secure. They should, however, identify how they can meet the requirements of the other elements of the BEE scorecard, advises Victor Kgomoeswana, manager of BEE Consulting Services at Deloitte and Touche, the third panellist. He encouraged these businesses to get involved in skills development and in developing the communities in which they are located – and so improve their own BEE scorecards.
