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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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Business Linkages And Investment Readiness

The Africa Women Innovation & Entrepreneurship Forum (AWIEF) is hosting its flagship Growth Accelerator Programme for 2018, sponsored by Nedbank.

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The Africa Women Innovation & Entrepreneurship Forum (AWIEF) is hosting its flagship Growth Accelerator Programme for 2018, sponsored by Nedbank. AWIEF is seeking 25 ambitious, innovative and committed early-growth-stage South African women entrepreneurs, from a variety of sectors, looking for support to scale their businesses.

Access to finance is the most cited challenge to the growth of women-owned businesses in Africa. Bankability and investment readiness are major impediments to attracting business finance.

This is an intensive six-week programme designed to support participants with the business modelling and growth strategy required to scale their enterprises, become investment ready and develop entrepreneurial leadership. The programme will cover:

  • purpose and values
  • target market, competitive landscape and value proposition
  • delivery model
  • financial modelling
  • conduct a creative force
  • growth strategy
  • financing for scale
  • pitch training.

Related: Watch List: 50 Black African Women Entrepreneurs To Watch

Nirmala Reddy, Senior Manager of Nedbank Enterprise Development, says: ‘We support initiatives such as this in line with our pledge to help clients see money differently, which is aimed at making a difference in South Africa, not just for women and children and business, but also for communities throughout the country. The bank strongly focuses on the development of female employees and black-women-owned suppliers, and this can be seen through our development and training programmes. We are also proud that women make up 62% of the workforce at Nedbank.’

The 2018 AWIEF Growth Accelerator, with its first 25 participants, is implemented as a build-up programme that will culminate at the 2018 AWIEF Conference, Exhibition and Awards event taking place on 8 and 9 November at the Cape Town International Convention Centre, where participating entrepreneurs will pitch their business to an audience of investors, business leaders and corporate decision-makers.

The three best ventures stand to win monetary prizes from AWIEF and financial management advice from Nedbank.

The programme details are as follows:

  • Dates: Starts on 17 September and culminates on 8 and 9 November 2018
  • Location: Cape Town and Johannesburg
  • Participation fee: Free 

Eligibility

Businesses must be:

  • in a post-revenue phase;
  • scalable and innovative ventures;
  • in operation for not less than two years (ideally three to five years);
  • owned or led by ambitious and committed women entrepreneurs; and
  • seeking investment or funding to grow.

If you are interested in participating, click here to apply. Applications close on 31 August 2018.

The event is hosted by AWIEF and sponsored by Nedbank.

Read next: Kid Entrepreneurs Who Have Already Built Successful Businesses (And How You Can Too)

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Investing In Women Key To SA Socio-Economic Development

Investment in women’s empowerment delivers long-term socio-economic returns, says Novartis. Women’s networks and mentorship engagements can help unlock personal and career success.

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Empowering women has long-term positive socio-economic impacts, making women’s empowerment, career development and mentorship programmes a compelling narrative for companies.

This is according to Sibonile Dube, Head of Communications & Public Affairs at Novartis South Africa and a mentor at Phakama Women’s Academy. Marking the start of national Women’s Month, Dube cites Bain & Company research into how and why the career paths of South African women and men differ, which found that in 2017, 31% of South African companies had no female representation in senior leadership roles. The research noted that the Businesswomen’s Association of South Africa (BWASA) census on women in leadership indicated that 22% of board directors were women, but only 7% were executive directors. Only 10% of South African CEOs and only 2.2% of JSE-listed company CEOs were women.

“Considering that recent research by MCSI concluded gender diversity on the board has significant benefits for both productivity and profits, South African enterprises need to become more proactive about supporting women’s empowerment in the workplace,” says Dube. But Dube adds that while formalised empowerment and mentorship programmes are important, South African women hold some of the keys to helping both themselves and other women unlock success.

She outlines three key factors that hold women back from corporate and entrepreneurial success, and how these challenges can be overcome:

Lack of confidence

A key factor holding women back from achieving their true potential in the workplace – and as entrepreneurs – is fear and a lack of confidence, says Dube. “As women, we often undersell ourselves – we underestimate our potential, our power and the amount of influence that we have. In contrast, men are typically quite confident in themselves and their capabilities,” says Dube.

The Bain & Company survey of over 1000 women found an apparent loss of confidence amongst women in junior- and middle-management positions that they could rise to the top. At this level, some respondents noted political imbalances that were difficult to navigate; while their male colleagues had access to a sponsor or mentor (normally of the same sex and colour) to help navigate these issues.

Dube believes women need to become more proactive about empowering themselves, equipping themselves with a broad range of skills, and actively working on building their self-awareness and self- esteem. “Building skills goes beyond developing academic or technical expertise – we need to work on our relationship skills and communication skills, because human relations are crucial for success in a setting where you are looking for influence and significance.”

“Dealing with fear and lack of confidence is important, because this enables us to have relevance and contribute more meaningfully to in the workplace and in business,” says Dube.

Related: 13 Female Entrepreneurs Rising To The Top In SA

Lack of support networks

More than women, men generally back one another be it in corporate or in business deals and this has supported their career success a lot, says Dube. “Having a network is important – it is through these networks that opportunities are shared and support is gained. Having a strong network of people that back your career becomes an effective reference point especially in times of challenges. And through these networks, people are also able to find mentors.”

Dube believes mentorship is a crucial component of career success, offering both mentor and mentee opportunities to learn and grow. “We need more mentorship. With mentorship, training and coaching, women can actually pull out some of the strengths they possess which they may not be aware of. One is challenged and pushed to aim higher,” says Dube.

Bain & Company research found that sponsorship of individuals, especially at the mid-management level, ensures that contributions and performance are recognised and attributable to the individual. Often women, particularly in middle management, feel marginalised, ignored or simply worn down by trying to get their efforts recognised.

Dube, who mentors a number of women, says mentorship can be formalised through a corporate career development programme, but can also extend to informal and virtual mentor-mentee relationships. “You can be guided by simply reading the books, reading articles and watching videos and talks of inspirational leaders anywhere in the world on social media,” says Dube. Dube points out that good mentorship can be a mutually beneficial in the exchange of ideas and meeting of minds. “In an effective mentor-mentee relationship, reverse mentorship takes place. In an era where we now have four generations in the workplace, the digital and tech savvy younger generation have a lot to offer to the rest,” says Dube.

Poor Health and Wellbeing

In order to cope and remain competitive in the workplace, women have to ensure they take care of their health and maintain some resilience especially when pressure mounts. Recently, there have been a lot of conversations about mental health in South Africa. According to the World Health Organization (WHO), gender is a critical determinant of mental health and mental illness. Gender determines the difference in power and control that men and women have over the socioeconomic factors of their mental health and their exposure to specific mental health risks.

“Women are under immense pressure to perform in various spheres of their lives. Juggling a career, motherhood and marriage or a relationship can be emotionally and physically taxing to the extent of affecting one’s health, especially mental health. It is therefore imperative that women take good care of their health and wellbeing amid the demands of a competitive and fast paced lifestyle presented by the demands of modern society,” says Dube.

Depression is not only the most prevalent women’s mental health problem but may be more persistent in women than it is in men. There is more research needed to determine the reasons for this and what can be done to address it.

Related: 30 Top Influential SA Business Leaders

Unlocking empowerment

This Women’s Month, Dube says women should feel encouraged to be proactive about their own career development, and about helping other women to grow – both personally and professionally.

“As women we should be firm believers in one another. We hold the keys to opening doors for other women. By creating a support structure for one another, we can create phenomenal opportunities to make a difference for fellow women, with the aim of creating leaders and catalysing empowerment that has a ripple effect, benefiting all of society and the economy as a whole. Studies have revealed that women reinvest up to 90% of their income into their families compared to men who reinvest 30-40%. This has far reaching socio-economic gains for any society,” concludes Dube.

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Leaderex Drives Digital Transformation Agenda For 2018 Summit

Leaderex, Africa’s largest gathering of business leaders, professionals and entrepreneurs, returns to Johannesburg on 4 September 2018.

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Building on a successful debut in 2015, the organisers, Leader.co.za, in association with the JSE and leading think tanks, will host 250 masterclasses on key priority areas to drive digital transformation, including agile leadership, innovation, fintech and blockchain, AI, IoT, ecommerce and the future of work.

“Our programme has been designed around peer-based learning, allowing participants to gain practical knowledge from the trenches, engage with the best in the business, and thrive in a disrupted world,” says Leader.co.za.

Over five hundred CEOs and industry leaders will share actionable insights and advice on the day, representing one of the largest collaborations of its kind in the country.

Delegates will have the opportunity to connect with incubators, accelerators and start-up platforms, explore MBA programmes and business schools, and participate in one-on-one sessions with respected coaches and consultants.

South Africa’s lack of a savings culture will be another talking point, and investment vehicles, from tax-free savings to ETFs, will be thoroughly unpacked.

“We are pleased to be working with Leaderex again this year because we have seen the impact that the event has had since inception,” adds Mpho Ledwaba, Head of Marketing at the Johannesburg Stock Exchange (JSE).

For executives and entrepreneurs looking to unlock value through new technologies and ways of thinking, Leaderex 2018 represents a highlight on the business calendar.

Tickets can be purchased online at www.leaderex.com.

Read next: 22 Qualities That Make A Great Leader

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