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Act fast: Procurement is being affected by the proposed changes to the B-BBEE codes of good practice!

by , 06 March 2013
Many businesses struggle to raise and even keep their Broad Based Black Economic Empowerment or B-BBEE rating. It's not easy, especially as changes to the B-BBEE codes of good practice were proposed in October last year - and these are set to make it even more difficult to raise your company's B-BBEE rating. But there is an area of B-BBEE you can focus on to improve your B-BBEE rating...

Big changes are expected in the area of employment equity later this year.
 
And B-BBEE or Broad Based Black Economic Empowerment is fast becoming a business imperative, says EconoBEE, so the changes affect more businesses than ever before.
 
But the proposed changes to the B-BBEE codes of good practice have left the procurement fraternity 'hanging in the balance', says Seth Randall, Executive at Mpowered Business Solutions on Smart Procurement.
 
Randall says conservative estimates project that companies without black ownership will drop at least four status levels.
 
Luckily if your percentage of black shareholders is above 50%, you'll still automatically qualify for a Level 3 B-BBEE certificate, FSP Business explains.
 
But that's where the easy part ends.

Here's what you need to know about changes to the procurement aspect of B-BBEE
 
One of the more puzzling changes to the codes is the complete preclusion of non-value-adding suppliers from the Preferential Procurement calculation.
 
Value-adding status is determined by a calculation summing the Total Labour Cost of an enterprise with its Net Profit Before Tax. 
 
Randall says if the resultant figure is greater than a quarter of the enterprise's turnover, it is regarded as 'value-adding', and is classified as such on its verified B-BBEE certificate.
 
Now, such an organisation will be entirely excluded from the calculation, meaning that its clients would be unable to claim any spend on that supplier as part of their own 'BEE procurement.'
 
That's a big change.
 
And that's why you need to make sure you're completely up to scratch on all the DTI's changes to B-BBEE before the expected changes come into effect, says FSP Business.
 
Luckily, three priority elements are also being introduced to help with B-BBEE implementation. These are ownership, skills development and enterprise and supplier development.
 
Focus on two aspects of skills development to increase your B-BBEE rating!
 
'The Broad-Based Black Economic Empowerment codes have specified skills development as one of the elements of the pillar of human resource development,' explains the Practical Guide to Human Resources Management.
 
'Skills development contributes 20 points to the scorecard. These points are split between the level of investment in skills development as a percentage of payroll, as well as people employed through learnerships and internships,' says FSP Business.
 
So there you have it. Focus on these two aspects of skills development and you'll easily boost your business' B-BBEE rating.
 
It's the easiest way to boost your B-BBEE rating in the face of uncertainty!
 

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