Since its establishment in 2020, the Spaza-shop Support Programme has funded more than 6 000 small businesses around the country but many shop owners have bemoaned the poor communication around the scheme. Photo: Supplied
South African society has little faith in broad-based black economic empowerment (B-BBEE). Many think it’s just there to benefit a politically connected elite or that white-owned companies must give away 51% of their businesses.
Both perceptions are understandable. But neither are accurate. In fact, South African businesses need to start believing in B-BBEE again if they’re going to make the most of their investments and have the biggest effect possible on the country’s economy.
That’s going to demand a sharp turnaround from the current trajectory, which is decidedly jaded. The B-BBEE Commission’s 2020 Annual Report showed a 1% decrease in the number of submitted compliance reports by JSE listed entities, with most measured entities still failing to comply.
For most businesses, B-BBEE has become about saving as much money as possible while getting the maximum points. That’s not entirely surprising, because enterprise and supplier development can cost as much as 5% of a company’s net profit after tax.
This isn’t an easy concept to explain to shareholders, especially in a multinational organisation. Corporates want to know that their investments will produce a direct and positive effect on their businesses and the broader ecosystem.
The problem is that in the rush to get their points and be compliant, companies are missing opportunities to be both cost-effective and to have a broader effect. Part of the reason for this is that there’s a desperate need for education about the opportunities that B-BBEE offers South African businesses, and how they can access them.
Companies can get up to 40 points on their B-BBEE scorecards for enterprise and supplier development, 20 points for skills development and five points for socioeconomic development. All three get a business to level-four compliance. They can also use B-BBEE initiatives to boost their corporate social investment credentials.
But many smaller companies, and even divisions of bigger corporates, simply don’t know what to do with their B-BBEE funds. They don’t have the time or the skills to fully understand the return on investment of B-BBEE expenditure, or that there are various ways they can spend the funds. So, they end up missing opportunities.
That’s a shame. Because implemented correctly, B-BBEE could shift the economy into a positive direction in as little as three to five years. But its potential is lost in implementation because companies see it as a compliance exercise.
The real opportunity is to create an approach to enterprise development, supplier development and preferential procurement that will benefit corporates and small businesses. For example, businesses should be looking to directly co-invest in small black-owned companies specifically selected to best complement the value and supply chain gaps of the corporate. This would solve the issue of access to markets and funding.
By identifying and investing in sound and innovative start-ups — which can then scale up and grow aggressively to be sustainable — we would be starting to create more permanent and valuable jobs. This addresses the problem of local economic development and growth.
And finally, we have the opportunity to create a platform for all South Africans to participate in the investment and growth of start-ups, and ultimately benefit from the wealth created in the process without the barriers and limitations of traditional stock investment options. This is true broad-based shared value.
In this way, we’re not only helping corporate South Africa be better at B-BBEE, but we’re also incubating local start-ups to become scalable, sustainable businesses — and giving the public the chance to share in the value.
That’s living the spirit and the letter of the B-BBEE codes and taking a huge step towards a future we all want to be part of.
Mitchan Adams is chief executive and founder of venture builder and business incubator Aions Creative Technology.
The views expressed are those of the author and do not necessarily reflect the official policy or position of the Mail & Guardian.