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Risk Management: The importance of continuing to plan for BEE compliance despite COVID-19

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Risk Management: The importance of continuing to plan for BEE compliance despite COVID-19
15 May 2020
In the eye of the storm – using disaster management tools to shield against the rage of the coming waves and surviving the aftermath.

The COVID-19 pandemic, national lockdown and continuing uncertainty has left many businesses in dire financial straits with their prospects all but wiped out. BEE consultants have however continued to advise businesses to renew their BEE certificates, which has left business owners wondering whether it’s really worth doing so in this time.

If one for the moment ignores the social responsibility of businesses to transform and be BEE compliant and purely look at the economic factors related to BEE compliance, it still remains a big “Yes” that businesses should comply and ensure that they have a good BEE certificate, despite the economic pressures all South African businesses are under due to pandemic.

Important to note is that the South African National Accreditation System (“SANAS”) remains operational during the COVID-19 lockdown and its accredited verification agents are conducting verifications as well as issuing BEE certificates. SANAS has implemented special COVID-19 measures and BEE certificates can be issued without a physical onsite verification. Documents can be provided electronically and interviews are conducted remotely.
But to the point on why businesses should continue their BEE planning and renewal of BEE certificates, a few aspects can be considered:

Any business that lets its BEE certificate lapse during this period may be in breach of contract if it was agreed with a client or it was stated as a condition of tender that such business will have and maintain a BEE certificate or maintain a specified BEE level, as a condition for such business providing goods or services.

Not having a BEE certificate may disincentivise clients, now or once the lockdown lifts, from procuring goods or services from you and rather focus on using alternative suppliers. BEE legislation has not been paused by the lockdown and procurement compliance will remain vital to clients.

Many businesses may not elect to renew their BEE Certificates and even stop all BEE planning for the moment. The moment things get going again, these companies may be at a substantial disadvantage in relation to other competitors that have continued with their BEE compliance and end up losing market share to such competitors. Remember, preparing and obtaining a BEE certificate takes time and there is no quick fix for getting a BEE certificate.

Without a BEE certificate your business will not be able to apply for and secure state tenders. With many businesses and industries reliant on state tenders for work, this could mean a death knell for your business if it does not have a BEE certificate. 

Timeous BEE planning generally helps your business be more effective in its BEE expenditure. Last minute BEE solutions can be more expensive and less efficient than more timeously planned options. With work pressures lower during the lockdown, it may provide the necessary time to pay more (and not less) attention to your BEE planning to ensure you identify and plan for initiatives which will save you money in the long run and help obtain a good BEE certificate. 

A good example could be to register some of your employees on learnerships. Many employees are at home and have time during this period to make good progress with learnerships, particularly with some service providers providing effective online learnership options such as www.trainingportal.co.za. Also take into account the fact that the salary component of your employees on a learnership could count to towards your skills development target, which may help substantially to achieve the skills development targets for your company.

Another useful consideration in this time is to revisit your current suppliers and their respective BEE statuses. Procurement is a difficult element for many companies to achieve compliance with, and you may want to get ahead of the curve and revisit your suppliers and even start looking for new suppliers that have better BEE levels. This in turn supports the point above, namely that if you do not have a BEE certificate, you may find yourself losing out to a competitor that does.

As bad as the COVID-19 situation is, there are also advantages. Remember that many of your targets for BEE compliance may be lower because of the lockdown and resultant economic impact. BEE compliance targets are generally based on elements such as turnover, net profit after tax, employee costs and number of employees. This may mean that many of your targets could be lower and you may be able to renew your BEE certificate working with lower costs to achieve your targets. You may even find that your company’s turnover has reduced and that you may now report under, for example, the QSE scorecard instead of the Generic scorecard, just because your turnover is now less than R50 million. Such a change could also make compliance easier and at a reduced cost.

Every cloud has a silver lining, and COVID-19 may also have that for companies that remain positive about the future and plan timeously and strategically around BEE. Once the running starts, companies with a strong BEE certificate may just have enough of an advantage to edge out ahead of their competitors.

For the moment and at the date of publication, this is the information we have obtained. We will keep you updated should any further relevant information come to our attention.

Although we have used our best efforts to ensure that all information contained in this communication is accurate as at the date hereof, we cannot guarantee the accuracy thereof and recommend verification thereof before use.
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