Crimes of BBBEE capture!


Dr Ivor Blumenthal | CEO | ArkKonsult | mail me

Criticism of Broad Based, Black Economic Empowerment (BBBEE) abounds amongst employers. People who own their companies and are terrified that BBBEE means losing control of their most prized asset, the business built over decades through hard work and sacrifice.

These scared and witless business owners perpetuate the myth that BBBEE is bad. They spread it around so that they are able to share their misery with other unsuspecting ill-informed and dangerously wrong counterparts.

The problem is that consultants do nothing to discourage these myths. They want their clients to believe that unless they resist BBBEE and do everything they can do avoid implementing an acceptable and honorable BBBEE strategy in their workplace, they will lose this game. They create schemes designed to make them, the consultants wealthy but do nothing to stabilize the workplace because after all, it is not their business. They do not work in those workplaces and importantly every problem which results requires more and more of their intervention and consulting time.

Strategic corruption

BBBEE has been captured. It has become the victim of endless and meaningless schemes designed to defraud employee’s out of their entitlement, funded by the employers.

Take for example, the two procurement-related elements of New Enterprise Development and Supplier Development:

New Enterprise Development

The principle of including these two sub-targets, within the fourth BBBEE Element of procurement, is obvious. It is about the company investing 1% of net profit in encouraging previously dispossessed black people, to come into its value chain under the label of ‘New Enterprise Development’, into the supply chain of the business.

This is to encourage people who may not have any access to capital to build a business, but what they do possess is the insight, network and knowledge to add value by supplying necessary goods or services to the company. What New Enterprise Development does, is to place them in a position to be able to start operating, learn how to operate a business and to register that business in-readiness to supply the customer making the investment.

This sub-target pre-supposes that the company has identified the opportunity to diversify, who it is procuring from, and importantly to favor black suppliers, and particularly black female suppliers, in that supply chain. There is nothing written or implied that directs a company to ONLY buy from black suppliers, but to at least provide opportunities to previously excluded black entrants, to enter the supply chain and to be able to compete.

The current BBBEE generic scorecard requires that a company spends 22% of its procurement spend with black suppliers and of that only 12% are required to be black female owned suppliers. This in-order to maximise procurement spend points on your BBBEE scorecard. Surely that is not a ridiculous expectation given the demographics of our country?

What the innovators of BBBEE recognised was that even that 22% of black suppliers are just not there. They do not exist currently. That’s why spending Enterprise Development funding on creating those businesses so that the company is eventually able to meet its target, is a non-negotiable, sensible thing to do.

Where New Enterprise Development goes wrong is when a company elects that instead of investing that 1% of net profit into its own supply chain, it will instead DONATE that 1% to a New Enterprise Development incubator, far-far away from its own business. An incubator prepared to remove the problem away from the donating workplace, incubating internet café’s, vegetable retailers and even (I kid you not) ice cream vendors marching up and down a beach selling ice creams, and where the incubator charges the company R150,000 per beneficiary to do so, while maybe spending R30,000 on each of those beneficiaries, if they’re that lucky.

This is FRAUD. It is …

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Read this article by Dr Ivor Blumenthal, CEO, Arkkonsult, as well as a host of other topical management articles written by professionals, consultants and academics in the April/May 2019 edition of BusinessBrief.

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