South Africa

Details

  • Service: Advisory, Transactions & Restructuring
  • Type: Business and industry issue
  • Date: 2012/02/07

Organisations that are unprepared for B-BBEE scorecard changes are likely to be caught on the back foot 

The results of the sixth annual KPMG Black Economic Empowerment (BEE) Survey have highlighted a positive trend regarding Broad-Based Black Economic Empowerment (B-BBEE) compliance since the Survey began in 2006.

On average, Exempted Micro Enterprises (EMEs), Qualifying Small Enterprises (QSEs), unlisted, listed and multinational companies surveyed across the years have increased their B-BBEE Contributor Status from Level Eight to Level Four.

 

Scores achieved for all survey participants 

 

No.

Element

Target

2011

2010

2009

2008

2007

2006

1

Ownership

20

13.43

11.29

13.86

8.46

10.82

8.00

2

Preferential Procurement

20

15.99

12.36

10.24

8.69

10.80

6.00

3

Employment Equity

15

7.09

7.02

7.41

5.11

5.42

5.00

4

Skills Development

15

7.92

6.00

10.00

5.72

6.06

7.00

5

Enterprise Development

15

12.41

10.46

7.24

7.94

7.82

3.00

6

Management Control

10

5.57

4.16

5.51

6.15

7.71

4.00

7

Socio-Economic Development

5

4.51

3.74

5.00

4.04

3.20

4.00

Total

100

66.92

55.03

59.26

46.11

51.83

37.00

 

This increasing investment in B-BBEE compliance is encouraging, particularly given the tough economic climate in South Africa.

 

The current focus remains on improving traditionally lower scoring people elements, Employment Equity and Skills Development. In this year’s Survey, Management Control was also cited as a priority element.

 

On average, respondents have increased their efforts geared towards supporting small black-owned entities as evidenced by the significant increase in the Enterprise Development scores from 2006 (three points) to 2011 (12.41 points). Average Enterprise Development scores are now 80 percent of the stipulated target.

 

Ownership and Socio-Economic Development, indicated as previous focus areas in surveys, are now less of a priority among respondents as the scores for these elements are within acceptable ranges. Notwithstanding, as public and private enterprises adopt the above broad-based measurements as opposed to only the narrow-based (Ownership and Management Control) evaluation criteria, poorer scoring elements have become prioritised as these will have a combined impact on organisations’ overall B-BBEE Contributor Level Status.

 

43 percent of respondents in 2011 as opposed to 27 percent in 2010 indicated that they have set minimum Preferential Procurement target levels for their suppliers. Unsurprisingly, 69 percent of respondents indicated that B-BBEE Level Four Contributor Status is the most preferred target level set by respondent organisations as procuring entities are able to recognise 100 percent of their procurement spend from B-BBEE Level Four suppliers. Most respondents also indicated that suppliers’ non-compliance with B-BBEE will be addressed by putting these suppliers on notice to improve their

B-BBEE Contributor Level Status.

 

The challenge remains for organisations to keep abreast of B-BBEE Scorecard measurement and target changes. Four out of the seven elements’ measurement criteria are changing and are likely to have a negative impact on subsequent scorecard ratings. This year’s Survey revealed that while 75 percent of respondents are aware of the pending Employment Equity changes, 48 percent are certain that their

B-BBEE Scorecard will be negatively impacted and 30 percent are unsure of the impact.

 

Surveyed organisations have undergone significant transformation in the past six years. Organisations ill prepared for B-BBEE Scorecard element measurement and target changes are likely to suffer the consequences in poorer B-BBEE Scorecard ratings.

 

The time for leaders to navigate organisations to transformation has never been so critical, especially given the current difficult economic climate.