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Preferential Procurement is Set to Reinforce BBBEE Codes

New legislation effective 7 December will change the BBEEE landscape.

Deon Oberholzer

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Legislation is like a rowboat. The boat is provided for you to get to the other side, but you have to row it in the right direction in order to get there. This is the thinking behind the new regulations on Preferential Procurement that come into effect on 7 December 2011. For the supplier, the rowboat is the means to securing a contract; for government the rowboat will facilitate the equitable spread of economic empowerment.

The loopholes that have allowed the prevalence of fronting and the enrichment of individuals at the expense of wider capacity building and skills transfer have been a worrying factor for the architects of Black Economic Empowerment (BEE). Many are asking the question: after 17 years of BEE, where are the black industrialists?

President Zuma asked this question at the Black Business Summit in September 2011. “The economy must produce authentic black entrepreneurs, who own factories and manufacture textiles, furniture, metal products or whatever the market requires,” he said.

The answer to this concern may well be provided by the new Preferential Procurement regulations which aim at closing the door to fronting and black intermediaries that act as order mail boxes. The intention is to encourage black suppliers to develop their own capacity to deliver while recognising companies that engage in real transformation. Both the weighting of procurement points and the new restraints on outsourcing should result in a more equitable outcome.

Evaluation of points

Come December, tenders must first be evaluated on functionality, with scores allocated for each candidate’s capacity to meet the terms of reference. These may include criteria stipulated by National Treasury or the relevant government body to meet certain transformational objectives.

Applicants who meet the minimum criteria for functionality must then be evaluated on price and Broad-Based Black Economic Empowerment (BBBEE) status, according to an 80/20 or 90/10 formula. So the message is; your tender application must first meet all the technical criteria, second it must be competitively priced and third, you should have a high BBBEE rating.

For contract values under R1 million, the 80/20 weighting applies. This means that 80 points are allocated for the price and the balance of twenty points are allocated for BBBEE rating, with L1 scoring the full 20 points and lower ratings scoring a sliding scale of lower points – 18, 16, 12 and 8 points scored for L2, L3, L4, L5 respectively, and so on.  This weighting gives proportionately greater favour to the BBBEE status of the applicants, making it a little easier for small black suppliers to compete.

The balance shifts to 90/10 for contract values above R1 million, which places greater pressure on applications for multi-million rand contracts to be competitively priced. 90 points are allocated to price, while a maximum of 10 points count towards BBBEE status, with L1 scoring the full 10 points, followed by 9, 8, 5 and 4 points for L2, L3, L4 and L5 respectively down to non-compliant bids that get zero.

In both cases, the contract must be awarded to the tenderer who scores the highest number of points out of 100. If this does not happen, the other candidates may challenge the procurement decision.

A high BBBEE rating could be a tangible benefit for companies that want to charge a bit more for a project. In other words, a L1 or L2 candidate may still win on points even if his price is higher than that of his competitors. This is certainly an incentive for companies to clear the Level 3 barrier and get into the top end of the tender evaluation.

Conditions of outsourcing

One significant condition is that contracts can no longer be awarded to black intermediaries who then simply pass on the actual work to a non-compliant company. If the tenderer intends sub-contracting more than 25% of the value of the contract to any other enterprise, that sub-contractor must have a BBBEE status equal to or greater than that of the tenderer, or the work must go to an exempt micro enterprise (EME); otherwise the BBBEE points of the tenderer will not be counted in the total score. This should also put a lid on corrupt tendering practices and encourage the development of capacity within black-owned companies.

A second significant condition is the Local Content Clause: the contractor may not renege on contract terms that stipulate a minimum threshold of local production and local content. This means, for example, that you cannot, after being awarded a contract, decide to source cheaper materials from the east rather than use local materials; you are obliged to meet the contract requirements for local manufacture and services. Government has already started to identify designated sectors, such as the automotive industry, where local content rules will be applied diligently.

If you are found to be in breach of these conditions, the penalties may be disqualification, having to pay for costs and damages incurred, cancellation of the contract, being barred from doing business with government (any organ of state) for ten years, or criminal prosecution.

When the Preferential Procurement regulations come into force the result will be a more level playing field for tender applications and an emphasis on using compliant suppliers who can do the work themselves. Regulations are always onerous, but these are designed to drive transformation more effectively, opening the way for real participation of black and BEE compliant suppliers in the economy.

Deon Oberholzer is the co-founder and CEO of Veri-Com, a SANAS Accredited BEE Verification Agency. He has been involved with Black Economic Empowerment at various levels since 2004.

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LaunchLab Fellows – Great Opportunities For Aspirational Young African Students

The Stellenbosch University LaunchLab officially kicked off their Fellowship Programme on Monday, 5 February.

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The Stellenbosch University LaunchLab officially kicked off their Fellowship Programme on Monday, 5 February with 12 students filled with aspirations of elevating their own lives through gaining valuable connections with LaunchLab start-ups.

Through this platform the LaunchLab hopes to inspire, guide and unleash the critical mass of problem solvers, at Stellenbosch University, guiding them along the path to discover their purpose in entrepreneurship and make an impact.

Related: 10 Young Entrepreneurs Under 30 Share Their Start-Up Secrets

The core focus of this programme:

The core focus of this fellowship programme is to invest more in building a tribe that feels included in what we do. The key tag line within this initiative is ecosystem development, focusing on the following aspects:

To Foster Collaboration

Young people need support networks that can help them communicate, draw inspiration and gather resources to take action. These networks include not just their peers who share the same interest, but mentors and others who support their cause. To facilitate the emergence of a global community and network of young people that are committed to changing the world.

Knowledge Generation and Sharing

As young people gain experience and move on to other things in life they often take their valuable experience with them, leaving others to relearn the lessons of the past. To ensure continuity of learning, it is important to have mechanisms for capturing the lessons from the past as knowledged resources as well as to share that knowledge as widely as possible. With the help of our willing residents we can use the fellowship programme as a vehicle for knowledge sharing and importation within the ecosystem. The fellowship programme can act as a knowledge sharing pipeline.

Feeder for Incubation

If this programme is fully endorsed and supported we would have finally answered the questions around having a feeder program for our incubation program. The fellowship programme would be structured to function as a feeder program for our mainstream incubation program. The aim would be to Identify talents that can participate in our ideas programme and make their way up within our incubation programme. 

Opportunities identified for LaunchLab Fellows

The following key activities will be covered in the fellowship program.

  • Product development/makerspace activities
  • Monthly meetups and breakthrough innovation impact stories
  • Assist at LaunchLab events
  • Participation in global startup events and challenges
  • Work with LaunchLab startups
  • Become contenders for our Corporate Innovation Challenges
  • Free training and skills acquisition programmes.

Related: 9 Top Tips For Young Entrepreneurs

What will LaunchLab Fellows have access to?

  • Commercialisation of product or technology
  • Interaction with SU technologies
  • Work in teams with the aim of commercialising world class technology and driving it to become a successful business
  • Introduce innovative flagship products that are relevant to the need of existing or new corporate clients
  • Access to LaunchLab development partners on products on which they are currently working
  • Develop your own new and interesting solutions, and showcase them to relevant members of our community
  • Participation in LaunchLab programmes
  • Participation in LaunchLab talks
  • Assist at LaunchLab events
  • Provide adhoc support as interns or volunteers for startups, thereby gaining valuable experience.

Who are the LaunchLab Fellows?

The LaunchLab Fellowship Programme is open to the following category of people:

  • Stellenbosch University students
  • Problem solvers
  • Researchers and engineering students
  • Students from other universities where we are networked who are able to be in Stellenbosch
  • International students from global knowledge regions.

Visit our website for www.launchlab.co.za or email Pius@launchlab.co.za directly to find out more about this programme. Please note that all entries for 2018 have closed.

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Bitcoin Family Of Coins – Who Will Win?

Off the back of 6 sold out live events, and after successfully hosting the biggest #Cryptocurrency event ever held in South Africa, the Matt Brown Show is holding a one-time exclusive learning and networking event in Johannesburg on Wednesday, 7 March (6pm – 8pm) we’ll be launching a deep dive series into alternative cryptocurrencies.

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The interest around cryptocurrencies, with Bitcoin being the most famous, has continued to capture headlines worldwide whilst regulators around the world are still struggling to formulate a plan to deal with it.

The Matt Brown Show #cryptokungfu is kicking off its first edition of a deep dive series will be looking at the bitcoin family of coins, what makes the coins different, their utility and the opportunities for traders and investors.

The Matt Brown Show has built a listenership and captive audience in over 100 countries around the world. #CryptoJHB was the first podcast event to trend in the #1 hashtag position on Twitter in the history of South African media.

Related: 11 Things You Need To Know About Bitcoin

The Matt Brown Show Johannesburg event taking place on Wednesday, 7 March 2018 from 18:00pm to 20:00pm, now being hosted at the Mesh Club in Rosebank will tap into THREE of the world’s leading experts for this first edition of a deep dive series focused masterclass.

The Masterclass will feature Tone Vays (via video conference) and Adam Meister from the United States, both regarded as world’s leading Bitcoin experts. Lorien Gamaroff, founder/CEO of Bankymoon, blockchain and cryptocurrency consultant will provide the local market perspective as a South African.

The masterclass has been engineered to provide a more focussed and intimate discussion on the landscape, which is one of the reasons the event was moved to the mesh club. To provide a more exclusive and engaging atmosphere for the attendees.

Matt Brown says, “these 3 experts have the uncanny ability to read the cryptocurrency market and are considered part of the top 100 most influential people in blockchain/cryptocurrency space in the world”.

“So we need to look beyond the recent surge in bitcoin investors across Africa, businesses have also started to embrace the cryptocurrency. It no longer a fad but a reality of the world we live in today” says Brown.

South Africa continues to lead the way, with businesses now starting to accept bitcoin payments.

Gamaroff says, “The global financial system is crumbling. People are seeking alternatives to fiat money. Cryptocurrencies will be their hedges against the cataclysm that is coming.”

Related: Embracing Technology For Business

“The reality is that Bitcoin is here to stay and, with many seeing a good return on their investment in cryptocurrencies, they now want to use this digital cash to invest in their future” says Brown

“Today, South Africans are using the ease of online trading to make money that they can then reinvest in a future beyond the world of forex. Which is why we continue to see the demand for events like this, being attended by a mixture of cryptocurrency enthusiasts and/or people simply interested in learning more about this space.” Concludes Brown.

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The Workspace And MiWay Announce Entrepreneur Competition

To celebrate their collaboration at Village Road, The Workspace and MiWay are launching a competition for South Africa’s entrepreneurs that will see the winner/s given a major advantage to further grow their business.

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Space solutions and coworking specialist, The Workspace, and insurance company, MiWay, recently joined forces at The Workspace’s premises in Village Road, Selby where they have launched an entrepreneurial hub and business development programme in the Johannesburg CBD.

The competition is open to entrepreneurs based in South Africa who have valid identification documents, who run a business with four or less employees and are making an impact in their industry.

“We have always believed in assisting entrepreneurs and small business owners who are members of The Workspace community in whatever way we can. This entrepreneur competition takes it to the next level, giving a voice to our belief in entrepreneurship and its ability to create jobs,” says Mari Schourie, CEO of The Workspace.

Related: 6 Resources For Start-ups Looking For Funding

Morné Stoltz, head of Business Insurance at MiWay, says both companies are committed to upliftment initiatives and economic development. “The entrepreneur competition is a call to action to those vibrant entrepreneurs out there. Start-ups always need a bit of a hand-up and the winner of this one will have a serious advantage once the competition has gone through its paces,” he said.

Schourie and Stoltz agree they’re looking for an entrepreneur who has reinvented the way business is done in his/her industry. “Someone who has been innovative in the product or service being offered to the market,” says Schourie.

“We are looking for an entrepreneur who has or is busy creating a special environment where employees can flourish, and in the process, potentially creating more jobs,” Stoltz adds. “An entrepreneur who makes an impression on the judges due to aspects such as the business’ social impact, attitude, positive entrepreneurial outlook and a good business mind”.

Related: 4 Tips To Secure Funding For Your Start-up

The prize on offer – worth over R230 000 – will help set-up the winning entrepreneur for a period of 12 months, giving them a boost to help build their business.

All information on the Entrepreneur Competition is available on The Workspace website, including criteria, terms and conditions, and of course, the prizes.

For queries, please email events@theworkspace.co.za

Download the competition criteria here.

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