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South African businesses will have to go the extra mile in the next few years to maintain their codes in relation to the Department of Trade Industry’s (DTI) Revised Black Economic Empowerment (BEE) plan. Though the business process might become more complex, there are existing tools that can help simplify the process.
The BEE plan seeks companies to adhere to certain standards that would see the economic development of those previously disadvantaged under the Apartheid government.
Saul Symanowitz, Divisional Manager at Sage Pastel BEE123, says that companies should rethink their approach to Preferential Procurement if they want to avoid dropping empowerment levels when next they go through BEE certification.
The revised BEE Codes will come into effect on 30 April 2015. The biggest change is that the Preferential Procurement and Enterprise Development will become one category known as Enterprise and Supplier Development.
Among other stipulations, this adjustment will mean the 25 points for Preferential Procurement can only be earned when procuring from Empowering Suppliers, irrespective of the BEE status level of the supplier in question.
On top of that, there are nine of the 25 points available for companies that spend 40% of their procurement with suppliers that are at least 51% black owned and a further four points for spending 12% of procurement with empowering suppliers that are at least 30% black women-owned.
“The challenge here is to identify stable and credible Black owned suppliers. How do companies transition to these new suppliers while ensuring they get the same level of quality and service?” asks Symanowitz.
DTI envisages that established businesses will invest 2% of their net profit after tax into nurturing their qualifying black-owned suppliers, says Symanowitz. “DTI is looking for companies to create big brother type relationships with emerging black-owned businesses” he says.
“The Codes reward them for supplier development efforts that help emerging enterprises to become self-sufficient, sustainable businesses in their own right. This makes sense, as through their supplier development investments, companies will ultimately receive better quality service from the emerging suppliers they have supported”.
Symanowitz says the new Preferential Procurement and Enterprise and Supplier Development scoring system demands complex calculations from companies who want to keep their BEE levels constant. She says that “Automated tools can take much of the pain out of the process, especially the Preferential Procurement element, which can otherwise be exceptionally laborious and administratively intensive.”
Check out the Sage BEE123 website for tools and more information on how changes could potentially impact your BEE rating.
Image by Sebastiaan ter Burg via Flickr