“Chinese rail consortium treated its BEE partners with utter disrespect”. That’s a recent, rather dramatic, headline to a story in a popular local newspaper. The story raises two important considerations when communicating with overseas companies about the obligations and functions of B-BBEE:
- What are B-BBEE Codes and regulations relevant to the company’s industry?
- And how can B-BBEE pose opportunities for overseas companies?
These may seem like quite different levels on which to engage a partner. On the one hand, there’s the basic duty to simply outline the legislation and practicalities of compliance. On the other hand, we’re dealing with more intangible questions of long term planning and strategy. However, these considerations are actually connected in an interesting way. To see why, let’s unpack these issues in turn.
Creative local answers for complex global questions
First, when partnering with foreign companies, it’s good practice to explain all the relevant B-BBEE codes and regulations up front, clearly laying out what compliance entails. Not just for the obvious reasons that any foreign entity needs to know the relevant laws in order to operate successfully in the country. And not just because your foreign partners should understand the logic of your internal B-BBEE policies.
But it’s important to also bear in mind that international firms are often constrained by global governance rules, some of which could potentially clash with the requirements of B-BBEE.
Successfully navigating the local B-BBEE codes with your foreign partners is therefore not simply a matter of listing all the applicable rules. At best, you should be looking to devise creative solutions that effectively meet your B-BBEE goals while also respecting broader corporate governance mandates.
A question of perspective
Secondly, as the article reports about the Chinese consortium makes all too clear, foreign investors often see B-BBEE as nothing more than a layer of bureaucracy that needs to be overcome. That is, they see B-BBEE in purely negative terms; a problem to be mitigated rather than an opportunity to make sustainable investments in the South African economy.
The challenge for South African firms is to show their foreign partners how B-BBEE isn’t merely a set of corporate laws to check off the list. What you need to do is align your partners with your strategic visions, and demonstrate how B-BBEE could potentially help realise that vision.
Two sides of the same coin?
These issues – on the one hand, finding B-BBEE creative solutions that meet the unique needs of foreign firms; and aligning your overseas partners with your own strategic visions – may seem like quite different, even opposing, issues. In fact, they are closely interconnected.
Make better choices with fewer options
Let’s suppose you partner with a major multinational firm. They want to enter the South African market and have joined forces with your business. B-BBEE compliance will be (or certainly should be!) one of the major strategic talking points.
But there are clearly-defined obstacles. The firm’s global governance rules strictly limit how much ownership can be transferred to a local entity. Which, of course, will affect the Ownership element of the B-BBEE scorecard. However, that clear limit also helps you define a path forward.
So the Ownership element is strictly curtailed, but what about opportunities for upskilling the firm’s own local employees? Or helping the local business’s suppliers deliver better service, thereby enhancing the firm’s local supply chain?
In some cases, limits are just opportunities that need to be creatively unlocked.
An inclusive economy is a resilient economy
What should be clear by now is that working creatively within the limits of a multinational firm’s internal regulations doesn’t just allow you to meet minimal B-BBEE compliance demands. You will often have leeway to help produce a more resilient local business, that can more ably meet global HQ’s business goals.
And that takes us to our second point. The B-BBEE compliance – at least when enacted intelligently – isn’t just a box-ticking exercise. And in the case of foreign businesses, it’s an opportunity to invest locally in a more sustainable way. Which ultimately makes business sense.
After all, foreign investment is a sign of confidence in an economy. So it’s up to local partners to leverage that confidence and address the complex but urgent question of investing in a way that drives long term results.
Making compliance simple
Of course, while these high-level business questions are critical, there’s another, more practical, element that will reassure any foreign partner. That is, how you can meet B-BBEE requirements as efficiently and cost-effectively as possible. After all, saving money makes sense in any language.
And that where advanced locally-designed software, especially created to optimise local business objectives, is so important.
It’s for precisely that reason that BEE123 designed powerful B-BBEE Management Software that automates compliance processes, while ensuring you are able to efficiently meet your high-level business goals.