B-BBEE Basics: 10 Transformation Tips to improve your planning and performance
Let’s start by putting it out there: you’d be hard-pressed to find a responsible South African business that doesn’t believe in the critical need for representative transformation and inequality reduction in South Africa, yet the intricacies of B-BBEE are confusing at best and can be incredibly expensive and stressful at worst. And the pressure from clients to be Level 2 or higher, and preferably black-owned, has never been greater.
Navigating the B-BBEE landscape and ensuring your business plans properly and invests in the right areas is even more difficult in a recession, when it’s hard enough just keeping your business above water.
Does any of this sound familiar?
If your organisation is still majority white-owned (i.e. more than 50%) and does work with Government, SOEs or listed companies – or businesses that sit within their supply chains – then I’m guessing it probably does.
The bottom line is that South African companies need to transform if they have any hope of succeeding and flourishing in future. This is not a political or legal threat, but simple business logic. This is especially pertinent in the Marketing, Advertising and Communications (MAC) Sector: brands and their agencies need to build strong and meaningful relationships with an overwhelmingly black domestic audience, and those that truly understand and represent this audience will win. The transformed will beat the untransformed in the marketplace.
I know I need to transform, but where do I start?
I’ve dissected the B-BBEE Codes of Good Practice – or the MAC Sector Charter for those who are subject to it – in articles before (read here) and am not going to attempt it again here. Rather, I’m going to go right back to basics and focus on 10 practical tips to help those charged with managing B-BBEE in businesses.
- Get Board and CEO buy-in and lead from here. If your senior-most decision makers aren’t on board with transformation, and aren’t prepared to give it the strategic and operational focus and support it deserves, B-BBEE and the next 9 tips below are going to be hard for you. The journey has to start here.
- Get a B-BBEE consultant. A lot of companies try to go it alone and flounder along. Unless they are very lucky, this will inevitably lead to B-BBEE plans that don’t align with organisational strategy, wasted expenditure, and sub-optimal scores. There are a number of good consultants out there who can help get you started, and grow with you as you go. Your time is better spent on running your business, and not on re-inventing the basics of SME B-BBEE planning.
- Become a black-owned company. This might seem radical, but there are tremendous advantages for SMEs (under R50m in annual turnover) in securing 51% black shareholding. The immediate benefit is that you will immediately and automatically qualify as Level 2 (minimum) and your black-ownership status is far more attractive to many clients than your recognition level. Following recent amendments to the Generic Codes (carried forward into the MAC Charter), black-ownership status is more lucrative in terms of points than recognition level. In other words, all other things being equal in a pitch, an agency that is Level 2 and black-owned will win over an agency that is Level 2, but not black-owned. Another big advantage of black-ownership for SMEs is that they don’t need to comply with any other elements on the scorecard (they will be at least Level 2 regardless). As responsible South African businesses, they should arguably continue to contribute to transformation at an industry level nevertheless. This option may not be for everyone, but a lot of companies are doing it.
- Get some books on B-BBEE for your business, read up on it, go to seminars and workshops. There is plenty of this stuff around. A lot of it is free or very inexpensive, and B-BBEE seminars and workshops happen weekly across the country. Sign up to some mailing lists, buy a few books on the subject for your company, read articles online. Just be curious. It’s alarming how poor companies seem to be at this, and how easy helpful information is to find.
- Run basic internal B-BBEE training. Once you’ve established a high-level understanding of how the Codes work, spend some time with your Exco and Managers unpacking the various elements, how they piece together and the impact that they have on your business. You need buy-in across the business, and helping your colleagues understand why they need to prioritise black hires, and invest in training and mentorship, and support black-owned suppliers and businesses makes this task a lot easier. If you can get a consultant or specialist to come in and do this for you, even better.
- Get intimately acquainted with the Learning Programme Matrix. The matrix, which serves as an annexe to the Codes, breaks down all of the various forms of training in which a company can invest into 7 categories. Each of the categories carries different B-BBEE advantages (or disadvantages) which are stipulated in the Codes themselves (primarily under Skills Development). Some are tremendous (such as the ability to recognise salary costs for employees engaged in learnerships, apprenticeships and internships). Seta funding and tax deductions are also available for some categories of training. If you’re going to be investing up to 6% of your payroll in Skills Development, it’s probably a good idea to invest a bit of time and effort into understanding how you plan on doing this.
- Support small, black-owned businesses. Enterprise and Supplier Development points are available for companies that contribute towards small, black-owned suppliers (companies within their value chain) and enterprises (companies outside their value chain). The contribution can be in cash, but also in any number of non-cash means provided there is a “fair market” means of valuing the contribution. Examples could include providing office space and facilities, back-office support, training, mentorship or free or discounted products or services. This can often be done at relatively low marginal cost to the business itself.
- Build a relationship with your Seta. A large number of companies don’t take full advantage – or any advantage – of training grants available from Setas (Sectoral Education and Training Authorities). Although navigating their bureaucracy and inconsistencies can be highly frustrating at times, when they do come to the party, the grants they award can help drastically reduce the net cost of training. If you don’t know which Seta you belong with, check your Income Tax or PAYE registration certificate, or chat with your accountant. All companies in South Africa are registered with a Seta, and the SDL that you pay monthly gets allocated to them. Find out where there closest office is, and make an appointment to go and introduce yourself to them. Time and time again, we find that the companies that nurture their relationships with Setas have the best experience with them.
- Plan. Once you have an understanding of how the B-BBEE elements work, do some basic modelling. I’m not talking about a massive spreadsheet exercise here (although that would be brilliant); just some basic 3- to 5-year forecasting, with rough estimate numbers that shouldn’t be hard to extrapolate into the years ahead, will make a huge difference. High-level projections on revenue, profit and payroll (for agencies, probably somewhere between 50% and 70% of revenue) a few years into the future will allow you to calculate targets across the Scorecard elements and give you a framework to build and test scenarios. Do it. It really helps.
- Embrace Transformation Through Training. B-BBEE aside, the companies that will win time and time again are those that view money spent on training as a critical investment in their most valuable resource, and not merely a necessary cost of doing business. At Red & Yellow, we have developed the TTT (Transformation Through Training) Pyramid, which represents a medium-to-long term (3-to-5 years) training and development philosophy that delivers against short-term development and transformation (B-BBEE and diversity) goal, whilst simultaneously building the foundations for management- and succession planning at an organisation level, and focused, targeted career-path planning at an individual level.
How it works
This hierarchical view of the organisation draws on the full range of available accredited and unaccredited learning programmes, each with its own specific educational, B-BBEE, tax and Seta-funding benefits. It allows HR, Learning & Development (L&D) and management to transpose and link individual career path planning with the company’s strategy and goals.
Implementation will naturally involve some upfront thought and work, but the benefits of even a rough-and-ready 5-year plan are tremendous:
- Businesses can start developing now for skills, roles and diversity that it knows it will need in the years ahead. Technical skills may change over time, but every single company in existence will need strong managers – at every level – in the future.
- Using even basic, conservative financial forecasts, training budgets and B-BBEE Skills Development targets can be extrapolated 5 years into the future. Even “back of the matchbox” budgets for training in Years 3 to 5 are incredibly helpful in empowering HR or L&D Managers to build training programmes now that will mature and deliver critical skills when they are needed.
- A hierarchical view of training, starting with bursary student and learners before they join your company, all the way through to your Executive team, enables businesses to develop a multi-year “Academy” view of their training plans and structures.
- Starting in Year 1 with a rough outline of what the company’s Academy could look like, a series of foundational learning programmes can be developed at each level of the hierarchy. These programmes can be improved and repeated annually, but will not necessarily need to be re-invented each year. This simple proactive step will allow HR and L&D Managers to be far more proactive in Years 2 and onwards when it comes to planning and notifying employees well in advance before each programme starts. No more reactive, 11th month of the year scrambling to spend unused budget!
- Career planning, promotions, salary increases and incentives, and employee retention can all be far more closely coupled to training. For instance, a middle-manager may need to complete the organisation’s structured annual Management Development programme before she is eligible for promotion to senior-management and commensurate salary increase, and her retention can be secured with a commitment to refund the cost of the training should she leave within a certain period of time after completing it. If she and her peers know that the programme runs periodically, and that there is competition for seats (and promotion), the programme becomes a highly motivational benefit in itself and incentives and rewards high performance.