Have would-be BBBEE Consultants been taking unsuspecting employees to the CLEANERS since the inception of BBBEE- The crime of BBBEE-Capture in the South African workplace by the BBBEE Consultant.

By: Dr. Ivor Blumenthal

A Climate of Negativity consciously promoted.

Criticism of Broad-Based, Black Economic Empowerment abounds amongst Employers. People who own their companies and are terrified that BBBEE means losing control of their most prized asset. The business built over decades through hard work and sacrifice. These scared and witless business owners perpetuate the myth that BBBEE is bad. They spread it around so that they are able to share their misery with other unsuspecting ill-informed and dangerously wrong counterparts.

The problem is that Consultants do nothing to discourage these myths. They want their clients to believe that unless they resist BBBEE and do everything they can do avoid implementing an acceptable and honorable BBBEE strategy in their workplace, they will lose this game. They create schemes designed to make them, the Consultants wealthy but do nothing to stabilize the workplace because after all, it is not their business. They do not work in those workplaces and importantly every problem which results requires more and more of their intervention and consulting time.

Strategic Corruption

BBBEE has been captured. It has become the victim of endless and meaningless schemes designed to defraud employee’s out of their entitlement, funded by the employers.

Take for example, the two Procurement-related elements of New Enterprise Development and Supplier Development.

New Enterprise Development

The principle of including these two sub-targets, within the fourth BBBEE Element of Procurement is obvious. It is about the company investing 1% of Net Profit in encouraging previously dispossessed Black people, to come into its Value Chain under the label of “New Enterprise Development”. Into the Supply Chain of the business making the 1% investment.

To encourage people who may not have any access to capital to build a business, but what they do possess is the insight, network and knowledge to add value by supplying necessary goods or services to the company. What New Enterprise Investment does is place them in a position to be able to start operating. To learn how to operate a business and to register that business in-readiness to supply the customer making the investment.

This sub-target pre-supposes that the company has identified the opportunity to diversify, who it is procuring from, and importantly to favor Black suppliers and particularly Black Female Suppliers in that Supply Chain. Not exclusively, but at least partially. There is nothing written or implied that directs a company to ONLY buy from Black Suppliers. But at least to provide opportunities to previously excluded Black entrants, to enter the supply chain and to be able to compete.

The current BBBEE Generic Scorecard requires that a company spends 22% of its procurement spend with Black Suppliers and of that only 12% are required to be Black Female Owned Suppliers. This in-order to maximise Procurement-spend points on your BBBEE Scorecard. Surely that is not a ridiculous expectation given the demographics of our country?

What the innovators of BBBEE recognized was that even that 22% of Black Suppliers just are not there. They do not exist currently. That’s why spending Enterprise Development funding on creating those businesses so that the company is eventually able to meet its target, is a non-negotiable, sensible thing to do.

Where New Enterprise Development goes wrong is when a company elects that instead of investing that 1% of Net Profit into its own Supply Chain, it will instead DONATE that 1% to a New Enterprise Development Incubator, far-far away from its own business. An incubator prepared to remove the problem away from the donating workplace, incubating Internet Café’s, Vegetable Retailers and even (I kid you not) Ice Cream Sales People marching up and down a beach selling Ice Creams, and where the Incubator charges the company R150 000 per beneficiary to do so, while maybe spending R30 000 on each of those beneficiaries, if they’re that lucky.

This is FRAUD. It is depriving Employee’s and ex-Employees and a company’s naturally potential extended network, of the opportunity to do something other than work in a menial job for the rest of their lives or worst wallow in unemployment and unemployability.

That is what gives BBBEE a bad name. That is where the money is wasted and where Employers rightly have a right to complain that BBBEE has become about the money without any positive consequence. This is the work of savvy Consultants, ring-fencing funds which were never intended to be used with a tick box mentality.

Worse, it is Trade Unions who get co-opted and end-up colluding with these Consultants to defraud their own Trade Union Members of that which is rightfully theirs, for their personal enrichment. These Trade Unionists should hang their heads in shame for having let their own members down.

Supplier Development

Supplier Development is even worse. This is where a company is required to invest a minimum of 2% of Net Profit After Tax in facilitating essentially New Enterprises which have emerged, and ideally which have been created with the company’s assistance, to morph into fully-fledged Suppliers within the supply-chain of the business itself. Again, here the targets are not onerous, namely 15% of all businesses procured from having to be Black Owned businesses making a turnover of less than R10 million a year and another 15% of those doing a turnover under R50 million a year. Come on South Africa, expecting companies to stretch to do 30% of its procurement business with Black Businesses is intelligent strategy, not a massive burden which it is being made out to be?

The fact that Business Owners are most probably correct in asserting that they cannot find worthy Black Suppliers of the magnitude required, is precisely why the BBBEE Scorecard prescribes these targets and directs that 2% of NPAT be used to fund the development of these beneficiary New Black Companies.

Again, the problem is that instead of facilitating the implementation of this positive strategy, Consultants are so busy developing schemes for companies to be checking this off their to-do-list while not doing so at all, is a massive embarrassment to the corporate sector and to our country as a whole.

Avoidance of NPAT Declaration

The favorite mechanism facilitated by Consultants, Accountants, Bookkeepers and Auditors colluding together for fee’s, is to ensure that companies never realise NPAT, despite doing turnovers way-in-excess of R50 million. Who do these companies believe they are fooling? Do they not realise that the CIPC has begun issuing penalty notices for such fraud? What do they think the most recent CIPC Written Notice to the PIC to recoup the R4 billion paid to Ayo was? A mistake? More importantly while the average Consultant professing to be a BBBEE Expert may not have to belong to a Professional Body (yet) and therefore be accountable for their services and professionalism, those Accountants, Bookkeepers and Auditors colluding in this fashion are directly accountable to Professional Bodies. The jury is however out on the professionalism and political will of those Professional Bodies to do their jobs and initiate investigations into such illicit collusion and impose the required penalties?

General Misuse and Crime in BBBEE

There is misuse and abuse in every one of the 5 Elements in the Generic Scorecard and in additional Elements which constitute part of Sectoral Scorecards such as that of “Responsible Marketing” under the MAC Charter. I will endeavor to examine this litany of crime in a follow-up article.

Employee’s on whose behalf BBBEE has partially been created, are rightfully entitled to their indignation in this regard. Indeed, there seems to be a muted resignation amongst the majority of workers that if they resist too loudly they stand to lose their jobs and in such a precarious economic market that is extremely likely. It doesn’t make the misuse of BBBEE any more palatable though. If anything, it reeks of abuse. A country is judged by how it treats its most vulnerable and there can be no argument that when it comes to the stratehic intent of implementing BBBEE, our country has failed the very market it has targeted to benefit from the proper and effective implementation of BBBEE.

Quo Vadis – Where to from here?

Save-to-say however that it’s not good enough to criminalise and ostracise such corrupt practitioners in our world of BBBEE, or the other Professionals who collude with them, or even the Employers who pay for and commission such criminality. We have to collectively regulate by tightening-up on BBBEE regulations and practices and directing that if a company wants the benefit of BBBEE Verification and thereby SANAS’s protection to be allowed to continue to operate and do business, that company must be willfully and mindfully compliant and show growth year on year which is more than the BBBEE Scorecard, checkbox mentality currently being experienced in the corporate and industrial sectors which constitute our economic framework in South Africa.