“Where do I start when it comes to B-BBEE?”
This is a question we often encounter when we meet with entrepreneurs who have started a small, but growing business and they are faced with pressure to deliver a B-BBEE scorecard for the first time.
Businesses under the R10m annual turnover threshold are classified as an Exempted Micro Enterprise (EME) and this means that they can submit an affidavit affirming their B-BBEE status.
As businesses move through above the R10m threshold – but less than R50m – they are classified as Qualifying Small Enterprises (QSEs). Unless the business has at least a 51% black ownership, the QSE will need to go through a formal B-BBEE verification.
Consultant or Verification Agent?
“Do I need to appoint a B-BBEE consultant or a Verification Agent / Agency?”
The short answer is that you will need to appoint both – but they fulfil materially different roles.
The B-BBEE consultant is the person you need to appoint to help you build a tangible B-BBEE strategy to meet a targeted B-BBEE outcome or rating on the scorecard. This consultant will take on a consultative / advisory role, but they do not measure the outcome.
The Verification on the other hand is the equivalent of a financial auditor. They are responsible for assessing the various elements of the scorecard and providing a scorecard which will define your rating for the next 12 months.
B-BBEE will be part of your Access to Market strategy
Ownership structures are challenging – particularly for QSEs – as they often need to grapple with issues including funding and pricing of debt / equity. This is particularly relevant in asset light businesses where cashflows and profit are not yet established.
As a QSE, you are no longer able to simply rely on an Affidavit (Assuming that you do not have 51% ownership) and this means that you will need to give consideration to your scorecard if you want to do more material business with blue-chip clients.
Why your B-BBEE consultant will be key
As your business matures and you start to do work with bigger and more established businesses, they are going to scrutinise your scorecard more closely as they have their own targets to achieve.
The switch to a QSE will materially change the way your business operates as you will now need to give consideration to elements including Ownership, Management Control, Skills Development, Enterprise and Supplier Development.
Unless you are a specialist on your B-BBEE scorecard, you will need to bring in some expert planning to develop a plan that will help you achieve your desired rating.
Summary
As an entrepreneur, your primary focus has to be on running your business and executing on your strategy. Access to Market will be a key part of your growth trajectory and your B-BBEE rating will be a deciding factor for winning new clients.
The field of B-BBEE is constantly evolving with new sector-specific considerations and bringing in expert advice will free you up to run your business.
If your business strategy sees you exceeding R10m in the coming financial year, you should seriously consider bringing in a professional B-BBEE consultant to help you develop a roadmap.