SUPPORTING B-BBEE COMPLIANT SUPPLIERS
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:
- 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.
- 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.
- 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.
- Resistance to Change: Implementing preferential procurement policies might require changes to established procurement processes, which could be met with resistance from within the organisation.
- 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.
- 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.
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