The evolution of black economic empowerment from being largely equity- and ownership-related in the late 1990s to today`s definition involving a complex set of much broader-based empowerment principles, is opening up opportunities for local business software development houses.
“Initially, BEE ownership was the criterion most often equated with empowerment. Now the move to broad-based empowerment is creating a whole new ball game that will require businesses to maintain criteria databases that will track and update the many variable components of the scorecard,” says Errol Wills, managing director of Lorge, a supplier and implementer of mid-market business and technology solutions.
The key transformation dimensions now being applied in BBBEE (broad-based black economic empowerment) are: direct empowerment, relating to ownership and management; human resource development, relating to employment equity and skills development; indirect empowerment, relating to preferential procurement and enterprise development; and finally residual empowerment relating to corporate social investment.
“Ownership and management is likely to vary only occasionally through acquisitions, sales or mergers as will corporate social investment. However, skills development and particularly preferential procurement have variables that will need to be closely monitored. It is here that businesses will be looking to local software developers to come to the party.”
Wills adds that human resource development and indirect empowerment between them account for 60% of the BEE scorecard. Direct empowerment counts for 30% and corporate social investments for the remaining 10%.
“What is really important is that just two of these focal points, namely skills development expenditure as a proportion of total payroll and procurement from black-owned and empowered enterprises as a proportion of total procurement, amount to 40% of the scorecard.”
The ICT industry BBBEE charter looks to signatories to undertake to procure 80% of their eligible procurement from BEE contributors whose empowerment rating is “excellent, good or satisfactory”. They are also required to publish and implement favourable payment terms to SMMEs equal to 15 days or less and to implement “robust independent verification and reporting mechanisms” to avoid “fronting”.
Wills feels the complexities within the scorecard system, the calculations required to determine the actual contribution to a company`s total scorecard from each particular BEE dimension, the tracking of procurement history (what was bought from whom and when), the selection process that involves assessing the BEE compliance of suppliers and weighting each supplier`s BEE scorecard into the company`s scorecard, adds up to a situation that is ripe for an effective software.
“There are opportunities in this space for business software developers to come up with third-party programs that will cater for the requirements of BBBEE and integrate seamlessly into the proprietary accounting and payroll software systems used by medium and large-sized companies.
“The BBBEE element tracking, the calculations and the presentation of accurate data for tenders and for customers is already complex and, if the development history of BEE is anything to go by, this arena is likely to become even more complicated in future. Companies are going to need software solutions to cope efficiently with the ongoing requirements.”
Issued by: CopyWise
Lorge is the preferred supplier and implementer of mid-market business and technology solutions. A deep pool of experience and skills accumulated over 19 years ideally places Lorge to provide independent and consistent expertise in the implementation, development, support and maintenance of business and accounting software systems. Innovative solutions that provide businesses with strategic and competitive advantage are designed and implemented throughout southern Africa.
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