The High Price of Misguided B-BBEE Initiatives

By Deidre Mitchell, Managing Director at Honeycomb BEE Ratings

I have witnessed the positive impact that well-implemented Broad-Based Black Economic Empowerment (B-BBEE) initiatives can have. A carefully planned strategy can lead to the growth of a skilled workforce, enhancing employability, productivity, and a company's overall competitiveness.

Unfortunately, when a company's sole focus is on finding an 'easy way to score points,' it can result in severe financial consequences for both the company and the country.

It is understandable that companies may seek shortcuts, as the alternative can be daunting. These days, many corporations rely on BEE consultants to efficiently and costeffectively help them achieve their desired level of B-BBEE compliance.

Act With Caution

The alarming reality is that the market has become inundated with unscrupulous consultants and skills academies who target unprepared companies operating within the B-BBEE framework, particularly in the realm of Skills Development.

Moreover, these entities lack oversight from a regulatory body and are not held accountable for their questionable practices. This places substantial pressure on reputable agencies to maintain industry integrity and the verification process's credibility. As a result, we are often tasked with explaining that substantial expenditures on certain initiatives, while well-intentioned, do not necessarily align with the legal requirements of the BEE Act.

The Cost of Mismanagement

Skills development necessitates a 6% allocation of a company's annual salaries and wages to training. While this may appear substantial, when managed effectively, 3.5% of the expenditure can be recovered through the relevant Sector Education and Training Authority (SETA) via Skills Development Levies (SDL) and certain tax incentives. In these instances, the actual expense to the company is almost non-existent. However, in reality, companies often rush to spend substantial sums on colleges and skills development academies without authentic alignment with the mandates of the Broad-Based Black Economic Empowerment (BEE) Act.

Some of the most common mistakes we are seeing in this regard are companies investing in generic training programmes, neglecting accreditation requirements and misalignment with industry needs. In one case, a company spent over R13.6 million on courses that did not qualify for full points. As a result, we were compelled to restrict their claim to 15%, in accordance with the B-BBEE Codes which translated to a net loss of R11,560,000.00 for the company involved. This is just one of many examples we have encountered in recent months.

Be Prepared

Skills development demands meticulous planning and the long-term implementation of initiatives that align with B-BBEE requirements. This approach ensures efficient resource utilisation and the realisation of potential benefits. The main emphasis should be on successfully implementing best practices, which will naturally result in achieving these points.

When executed correctly, this will result in a nation of skilled labour, contributing to the growth of our economy. Instead of having incubators that merely claim to support new enterprises, we shall witness the emergence of young, thriving companies, fostering bottom-up growth in our country.

About Honeycomb BEE Ratings:

Honeycomb BEE Ratings is an independent, nationally based SANAS-accredited verification agency that conducts fast, professional, and impartial B-BBEE verifications of enterprises, across all sectors, countrywide.

Get a Quote:

0118801630

info@honeycomb-bee.co.za

For more information visit www.honeycomb-bee.co.za