BBBEE Fronting Definition.....

The President signed the B-BBEE Amendment Act (the Act) 46 of 2013 into law on the 27 January 2014. The Proclamation Notice was signed on the 2nd October 2014 and it was gazetted and came into effect on Friday 24 October 2014.
 
The target date for setting up the new BEE Commission and B-BBEE Verification Regulator is 31 March 2015.

The Trumping Clause (Section 3) has been deferred for 12 months, and will come into force in October 2015.

The B-BBEE Amendment Act is now real and in force. I have started consulting and training companies on the increased risks that its provisions introduce with regards to Fronting.

FRONTING

Fronting is defined as a transaction, arrangement or other act or conduct that directly or indirectly undermines or frustrates the achievement of the objectives of this Act or the implementation of any of the provisions of this Act.

A person commits an offence if they knowingly:

i. Misrepresent or attempt to misrepresent the B-BBEE status of an enterprise.

ii. Provides false information or misrepresents information:-
·    To a B-BBEE Verification Professional to secure a BEE status or any benefit from compliance with the Act.
·    To a public entity or organ of state regarding a B-BBEE status.
iii. Engages in a fronting practice.

Penalties associated with Fronting are heavy:-

·         A person:  A fine &/or imprisonment of up to 10 years.
·         Legal Entity: A fine of up to 10% of annual turnover.
·         Directors and Shareholders may be imprisoned or fined

Government agencies may cancel contracts awarded on false B-BBEE information and offenders will be unable to do business with the Government for 10 years.

For Expert advice on the outgoing and incoming B-BBEE codes and Act, contact Nelson Sebati.

The Legend Of The “One Man Army” Entrepreneur.

 

Entrepreneurship is not an exact science. It probably is the furthest thing from it. However most people mistake Entrepreneurship with the famed legend of the “One Man Army”, but in life as in the picture above if you tilt your head or your screen a tab bit you will see the supporting troops in the background.

Though fabled and celebrated the “One Man Army” approach is completely wide off the mark. According to this approach the Entrepreneur controls everything and gives limited responsibility to others. I think if Entrepreneurs are to run successful businesses then they must learn to trust others and share responsibility with them. Team effort plays a major role in the development and growth of a business. So by delegating out tasks to others Entrepreneurs not only reduce their workload, but also give opportunities to others to show their talents.

By encouraging teamwork and cooperation the Entrepreneur transforms from a “One Man Army" to a "5-Star-General" and this is usually accompanied by better service delivery, increased customer satisfaction and higher staff morale. Most importantly it allows the Entrepreneur to do his/her job of creating much better.

At Murason Business Services we employ a rich balance of young talent and seasoned professionals that align for the company’s collective objective of excellently serving our clients. Our personnel consists of highly qualified, knowledgeable and enthusiastic expert teams devoted to the provision of service excellence i.e.:

• Executive Team  – Providing strategic oversight for the company’s activities;
• Management Team  – Managing the execution of the company’s operational mandate;
• Staffing Practitioners  – Certified consultants providing a comprehensive range of integrated recruitment services;
• Public Sector Professionals – Highly skilled specialists dedicated to serving government and public sector organizations and institutions;
• Support Team – Experts in back office systems, administration and quality reporting;
• Legal Team – Providing internal legal expertise.

We are dedicated to employing, empowering and developing people with the competencies required to enhance their careers. We constantly seek employees who wish to become instrumental participants in sustaining the company’s competitive advantage.

We value and reward the efforts of our staff because coming together is a Beginning, keeping together is Progress, working together is Success and staying together is significance.

We are a young company with many adventures and victories ahead of us. For the latest news on our journey follow us on Twitter, connect with us on LinkedIn and like our page on Facebook.

BBBEE Enterprise Supplier Development (ESD) Challenges.....

Enterprise Supplier Development’s foremost goal is to build sustainable business enterprises that achieve growth in order to create jobs and to grow the economy, the two VERY essential conditions for political stability and low crime rate. But intents alone are not enough to ensure success of Enterprise Supplier Development (ESD). The most prevalent problem is the lack of knowledge and expertise and these have led to the sluggish progress in implementing Enterprise Development projects. The problem is exacerbated by the following issues:

o Lack of time and resources to identify sustainable Beneficiaries;
o Lack of a business model to maximize recognition of contribution;
o Lack of a process to monitor progress on projects and to introduce corrective measures, where necessary;
o Delaying implementation until the right partner comes along; 
o And reservation of spending lump sum due to fear that money will be wasted or misused. 

I can help your organisations successfully overcome all the above stated challenges through a sustainable Enterprise Supplier Development (ESD) Strategy.


Contact me, Nelson Sebati today for EXPERT help.

BBBEE Enterprise Supplier Development (ESD) Mistakes......

In order to save my clients time and money I ensure that their Enterprise Supplier Development (ESD) interpretation is in line with the letter and spirit of the BBBEE Codes, Act and Sector codes. Here is a list of the most common mistakes that businesses make when interpreting the Enterprise Development element on the BBBEE scorecard:

The targets for Enterprise Development spend are 3% of Net Profit After Tax (NPAT) for Generic companies and 2% of Net Profit After Tax (NPAT) for Qualifying Small Enterprises (QSE). On occasion companies misconstrue the targets as a percentage of annual turnover. VERY expensive blunder.

Enterprise Development beneficiaries are categorized by the BBBEE codes of good practice into two categories – “Category A” for Exempt Micro Enterprises (EME) and “Category B” for Qualifying Small Enterprises (QSE). Spend incurred with “Category A” beneficiaries is multiplied by a benefit factor of 1.25, while spend with “Category B” beneficiaries is recognized at 1 for 1. A common error is that companies overlook to multiply the “Category A” spend by the benefit factor for enhanced recognition or multiply spend incurred with “Category B” beneficiaries by the benefit factor (Category B spend doesn’t qualify for enhanced recognition). Avoid confusing the 2 as this has significant impact on your ED score.

In claiming early payments as Enterprise Development spend, companies must only consider amounts paid for invoices within 10 days and going forward this recognition will be capped at a maximum of 15% of the invoice amount and available points.


In recognizing shorter payment periods as Enterprise Development spend, companies should consider amounts paid for invoices within 10 days. The amount recognized under shorter payment periods is a percentage of the invoice based on the number of days taken to pay. The actual formula used is (15 minus number of days from date of invoice) divided by 15.


For example if payment was received on the same day as invoice, i.e. zero days after invoice received, then the calculation would be (15-0)/15 = 100%. If payment was received one day later, the formula would be (15-1)/15 = 14/15 = 93.3% and so on.


Supporting Invoices and Proof of payments with dates will be required to validate any claims for shorter payment periods.


Some companies “mistakenly” qualify 30 days invoice payments or the full invoice amount paid within 15 days as Enterprise Development spend. This is bad business and you will be painfully penalized at verification.

Currently Enterprise Development means helping small black businesses that are have a 50% or more black-owned or any other enterprises with more than 25% and a BBBEE status of between Level 1 and 6 (This has been removed in the new codes and will no longer apply after After 01 May 2015). Another common mistake here is considering Exempt Micro Enterprises (EMEs) or Qualifying Small Enterprises (QSEs) with no black ownership as Enterprise Development beneficiaries.

It is clear from the above mentioned that it is easy to make these misinterpretations on Enterprise Supplier Development (ESD)  and that is why I recommend that you speak to an EXPERT to ensure that your Enterprise Supplier Development (ESD)  spend achieves the desired results.

Contact me, Nelson Sebati for dependable help and valuable advice on Enterprise Supplier Development (ESD).
 

Meet The BBBEE Enterprise Supplier Development (ESD) GURU.

My name is Nelson Sebati and I am a BBBEE Enterprise Supplier Development (ESD) GURU. I work for a market leading provider of BBBEE/ESD solutions across South Africa. Our company offers a seamless solution to Enterprise Development (ED) and Supplier Development (SD) that will not only feed into our clients’ business strategy and provide the requisite BBBEE points, but will meaningfully contribute towards sustainable and impactful socio-economic change in the communities and the country at large. By partnering with us your company will achieve the following ROE (Return On Empowerment): 
1. Receive the requisite BBBEE points for ESD (Guaranteed); 
2. Contribute towards strategically growing its Supplier base, Customer base and Potential skills base through targeted ED sponsorships in the relevant sectors or locations; 
3. Confirm its position as a socially-economically responsible corporate citizen thus improving employee loyalty and customer goodwill; 
4. Save money and time by maintaining focus on its core areas of business; 
5. Identify and develop companies for future M & A activity or Investment opportunities; 
6. Receive branding and marketing opportunities in the form of media exposure via our media partners ; signage at our premises; advertising on our website, at our sponsored or hosted events, our Social Media platforms and advertising on the beneficiaries’ websites and social media platforms; 
7. Assist South African SMMEs in becoming sustainable; I define Sustainable as a business employing at least 4 people on a full time basis, generating sufficient cash to pay the business owners and employees a reasonable salary, generating sufficient turnover and revenue to cover the market related expenses incurred in operating the business and generating an annual profit equal to the owner's salary, showing net positive growth in sales over the last year and having a positive net asset value. 
8. Additionally, by partnering with us, you create a buffer that mitigates the risks of straight line ED contracts as we assume responsibilities for beneficiary expectations and performance. 

I have assisted many companies in varying sectors to implement sustainable BBBEE/ESD programs that and we can help you too. Contact me, Nelson Sebati today.

What Is Enterprise Supplier Development (ESD)..

Enterprise Supplier Development (ESD) is a combination of Preferential Procurement, Supplier Diversity, Supplier Development and Enterprise Development programs to service business needs. It is part of the Broad-Based Black Economic Empowerment (BBBEE) policy to advance economic transformation in South Africa. The aforesaid can be defined as follows:

1.    Preferential Procurement is a national policy that encourages government departments and agencies to buy goods and services from previously disadvantaged individuals or businesses.

2.    Supplier Diversity is the proactive business process of sourcing products and services from previously under-used suppliers. This process helps to sustain and progressively transform a company’s supply chain thus quantitatively reflecting the demographics of the community in which it operates by recording transactions with diverse suppliers.

3.    Supplier Development is the process of working with certain suppliers on a one-to-one basis to improve their performance for the benefit of the buying organisation, leading to improvements in the total added value from the supplier in question in terms of B-BBEE rating, product or service offering, business processes and performance, improvements in lead times and delivery.

4.    Enterprise Development is a strategy for promoting economic growth and reducing poverty by building SMMEs, membership organisations to represent them and competitive markets that are stronger and more inclusive. It consists of monetary and non-monetary, recoverable and non-recoverable contributions actually initiated in favour of a beneficiary entity by a measured entity with the specific objective of assisting or accelerating the development, sustainability and ultimate financial independence of the beneficiary.

The broad practice statements which underpin ESD are;

1.    There is no single approach to ESD. Companies must select the most appropriate approach to suit their needs and their relationship with the beneficiaries that they select for development;

2.    Before any decision is made to implement ESD the organisation’s needs and objectives must be established;

3.    ESD is a two-way activity that should be thought of as a joint-venture;

4.    Whatever approach to ESD employed, companies should ensure quantifiable and measurable results that lead to business benefits;

5.    ESD projects should be capable of being assessed, monitored and evaluated in terms of quantifiable operational and financial impact;

6.    A Project plan must be developed and implemented to ensure that supporting evidence needed to guarantee that ESD projects will benefit under the B-BBEE codes is collected;

7.    It is not necessarily only the best suppliers which should be eligible for ESD programmes – each supplier should be assessed on the basis of individual merit and potential;

8.    ESD professionals should possess relevant expertise; in particular they need to have the necessary interpersonal and communication skills to be able to persuade stakeholders and beneficiaries who may otherwise be reluctant to embark on a development programme;

Companies must identify sound reasons for embarking on ESD such as:

1.    Improving B-BBEE rating;

2.    Improving beneficiary performance;

3.    Reducing costs;

4.    Resolving serious quality issues;

5.    Developing new routes to supply;

6.    Improving business alignment between the beneficiary and the sponsoring organisation;

7.    Developing a product or service not currently available in the marketplace;

8.    Generating competition for a high price product or service dominating the marketplace.

Contact me, Nelson Sebati, for expert assistance with your BBBEE and Enterprise Supplier Development requirements.  

3 Ways To Improve Your BBBEE Enterprise Supplier Development (ESD) Initiatives...

It is not a secret that most South African companies are not only dedicated to doing business with black-owned suppliers, but are also committed to the sustained success of these suppliers. In light of the new BBBEE codes most of these companies are putting in place Enterprise Supplier Development (ESD) programs to help achieve and show this commitment. However, despite their well intentions I have found that the majority of internal ESD programs are missing some vital components.

 In my opinion, there are two main causes for most internal Enterprise Supplier Development (ESD) programs not being as effective or successful as they can be:

1.    companies leave the programs entirely in the hands of their internal staff without providing any training to upskill or reskill them;

2.    program components are not focused on the critical aspects of business development support that benefit the suppliers.

 
While these companies are dedicated to the development of their black-owned suppliers, supplier relationship management or supplier diversity management is not in their wheelhouse. In other words, Enterprise Supplier Development (ESD) is not their core business, nor should it be.

 Procurement and Transformation departments typically have a small staff count that is tasked with a huge amount of responsibility that leaves them with little time, resources or enthusiasm to dedicate to developing black-owned suppliers. Additionally, most professionals in these departments have not owned businesses themselves and are not skilled at training and developing business owners.

As a result many internal Enterprise Supplier Development (ESD) programs focus most of their attention only on operations management issues like process, quality and delivery improvement. Quite frankly, most small business owners are great at delivering a stellar product or service, but most are not great Innovators. If this critical business development support component is left untouched, operations management can become a moot point. So these imperative elements of business development that will make them more successful must be included in all Enterprise Supplier Development (ESD) programs.

Another way that internal Enterprise Supplier Development (ESD) programs fall short is that they develop all suppliers in the same fashion. Companies must have integrated programs that are specifically designed to engage with black-owned suppliers depending on the size of the supplier, how much business the company does with the supplier, how the supplier has performed in the past and many other criteria. This approach creates a community effect within the company leading to an environment that assists black-owned suppliers to become major strategic partners.

In my view there three key ways that internal Enterprise Supplier Development (ESD) programs can be improved significantly that will lead to increased BBBEE points, innovation, collaboration, profits, and draw maximum value from black-owned suppliers:

1.    Leave Supplier Development To The Pros. Entrepreneurial and small business support is a skilled profession and therefore Enterprise Supplier Development (ESD) programs should be developed and/or ran by qualified, experienced and competent persons that are employed for this purpose or outsourced to a reputable 3^rd party. This avoids adding “one more thing” to the plates of the procurement or transformation professionals that likely do not have the skill-set to empower black business owners to do something they themselves have never done (and no, assigning another supplier to be their mentor does not solve this and will not qualify for BBBEE points). This move will also put ESD programs in the hands of a qualified, experienced and competent expert that understands BBBEE, the needs of growing businesses and has the skills and knowledge to provide the adequate tools and resources that creates a sustainable and well-run enterprise.

2.    Have One Solid ESD Program For All Chosen Suppliers. It is far more effective to approach Enterprise Supplier Development (ESD) in a way that allows all suppliers to grow in relation to their capacity. The program must extend to potential suppliers (Enterprise Development) as well. This is the best path to a robust and diverse supply chain across the board.

3.    Focus On Critical Elements Of Business Development Support. The most frequently stated challenge that procurement and transformation professionals report in doing business with small black-owned business is that they do things that create more work for them or just flat out drives them crazy. These challenges include not approaching the decision-makers properly and not following up adequately, wasting their time on the phone or in emails, not having the proper systems in place in their business to execute the contract smoothly and the list continues for days….

 

Most small business owners do not realize that the magic happens around the edges—outside of smooth delivery and great quality of product or service. Enterprise Supplier Development programs should include components that empower black business owners to be stronger innovators, sellers and negotiators. For example, things like:

1.    How to align what they offer with what larger companies really need and want;

2.    How to add value so they can compete beyond BBBEE, product or price and are also viewed as strategic partners to larger companies;

3.    How they can create scalability and capacity beyond the typical strategy of tendering for large government business;

4.    How they can ensure their business is set up to thrive so they execute well once a large contract is awarded;

5.    How they can put a solid growth strategy in place so they can grow with larger companies and compete globally.

 An effective Enterprise Supplier Development (ESD) program is one that provides companies with strong, reliable black-owned suppliers and access to a pipeline of partners to meet business goals and objectives.

As a Professional Empowerment Advisor (Pr EAd), experienced and competent Entrepreneur I can help your suppliers help your company achieve success in Enterprise Supplier Development by focusing on the matters that really count.

Contact me today.