Stuart Parkin: Business Development Manager at Siyaya Skills Institute

The goal of preferential procurement (PP) is to encourage companies to support and engage with suppliers that are B-BBEE compliant, which in turn helps promote economic transformation and empowerment. When done properly improving ones PP element would also help businesses to achieve their Earnings before Interest, Depreciation and Amortisation (EBIDA) goals.

However, businesses do not usually fully embrace this aspect of B-BBEE, despite its potential for point accumulation and cost savings. There could be several reasons for this:

  1. Lack of Awareness: Businesses might not fully understand the importance of B-BBEE compliance and the potential benefits it can bring to their overall business strategies.
  2. Complexity: The B-BBEE codes can be complex and challenging to navigate, especially for smaller businesses that might not have dedicated resources to manage compliance effectively.
  3. Short-Term Focus: Businesses might prioritise short-term gains over long-term benefits. For instance, they might focus on cost reduction rather than considering the broader economic and social impact of their procurement decisions.
  4. Resistance to Change: Implementing preferential procurement policies might require changes to established procurement processes, which could be met with resistance from within the organisation.
  5. Lack of Commitment from Leadership: Without strong support and commitment from top-level management, it can be difficult to drive meaningful changes in procurement practices.
  6. Perceived Complexity: Businesses might view B-BBEE compliance as complex and burdensome, leading them to neglect certain elements like preferential procurement.

With 29 points available, Preferential Procurement is the single greatest contributor to the Amended Codes of Good Practices Scorecard.

The reality is that PP needs to be a long-term project that a business improves on gradually each year. By following the process below, most businesses can improve their PP.

  1. Gather Data: Collect data on your current procurement practices, including supplier demographics, spend patterns, and B-BBEE compliance status.
  2. Assess B-BBEE Compliance: Evaluate your current B-BBEE scorecard and identify areas where you can improve, especially in the preferential procurement element.
  1. Define Objectives: Establish specific objectives for your procurement improvement plan. This might include increasing spending with Exempted Micro Enterprise (EMEs), Qualifying Small Enterprises (QSEs), and Exempted Micro Enterprise (EMEs), Qualifying Small Enterprises (QSEs), black-owned businesses (businesses that are 51% or more black owned).
  2. Set Measurable Goals: Define measurable goals for spend targets with these businesses. For instance, aim to allocate a certain percentage of your procurement budget to B-BBEE compliant suppliers.
  1. Policy Development: Create clear and comprehensive procurement policies that emphasize support for Exempted Micro Enterprise (EMEs), Qualifying Small Enterprises (QSEs), and black-owned businesses.
  2. Supplier Criteria: Define criteria for suppliers to be considered EMEs, QSEs, or black-owned. This will guide your selection process.
  3. Supplier Evaluation: Develop a process to assess and evaluate potential suppliers based on their B-BBEE compliance, quality, capacity, and competitive pricing.
  1. Supplier Outreach: Actively seek out and identify EMEs, QSEs, and black-owned businesses in your industry through networking events, trade associations, and government databases.
  2. Capacity Building: Offer training and support to help these businesses improve their capacity, quality, and compliance to become stronger suppliers. This should also form a part of a business’s Supplier and Enterprise development strategy.
  3. Long-Term Partnerships: Foster strong relationships with these businesses by engaging in regular communication, providing feedback, and offering growth opportunities.
  1. Regular Audits: Implement regular audits to ensure your selected suppliers maintain their B-BBEE compliance and meets the established criteria.
  2. Reporting: Develop a system for tracking and reporting your procurement spend with EMEs, QSEs, and black-owned businesses. This will help you monitor your progress toward your goals.
  1. Employee Training: Educate your procurement and relevant staff about the importance of B-BBEE compliance, the benefits of supporting EMEs, QSEs, and black-owned businesses, and how it aligns with your business goals.
  2. Leadership Support: Gain the support of top-level management and involve them in the decision-making process. Their commitment will provide the necessary resources and authority to implement the plan effectively.
  1. Feedback Loop: Establish a feedback loop with your suppliers. Regularly discuss challenges, opportunities, and areas for improvement to strengthen your relationships.
  2. Adaptation: Continuously assess your plan’s effectiveness and adapt it based on changing circumstances, regulatory updates, and lessons learned.

Remember that this plan requires a long-term commitment, effort, and collaboration with various stakeholders.

By embracing this approach, your business can improve its B-BBEE compliance and contribute to economic transformation and empowerment within your industry and community. A business should not fixate on only the B-BBEE level of their suppliers since even if all your suppliers are at level 1 you could still only score 5 points. It is important to target a good mix of suppliers to improve your rating, but this should be done strategically to reduce risk of supply shortages.

Stuart Parkin ~© SiyayaSkills