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When B-BBEE compliance goes wrong: Is compliance a cost or an opportunity?

All things being equal, the better a company’s BBBEE status level, the better we would expect that company to perform, right? After all, a better score enables you to take advantage of more opportunities. And yet the empirical evidence is ambiguous. Some data clearly demonstrates that a better BBBEE status level correlates with improved business performance, as one might expect. However, other studies show little benefit, or even negative benefit. The most alarmingly counterintuitive study found that firms with better BBBEE scores actually demonstrated lower long term performance.

How could this be? As the author concludes, the high cost of compliance ultimately harms performance. In other words, it may well be true that, all things being equal, a better BBBEE score is good for business. But things aren’t always so equal. For many businesses, the cost of compliance is simply too high, which is often detrimental to their business potential. 

Ultimately, achieving a good BBBEE score can be a powerful element of your overall business strategy if the cost of compliance does not exceed the benefit

However, achieving sustainable success is a little more subtle than that. Obviously, you want to lower the cost of achieving the benefit. But at the same time, what if you could enhance the benefits? That is, what if there were better ways to leverage the opportunities BBBEE affords? 

First step: Reduce the cost of compliance

Let’s start with the obvious problem. Compliance is complex. And that complexity means time and resources. Optimising a company’s BEE scorecard involves a multitude of variables, each of which can be affected by changes to the other.  

For many firms, BBBEE compliance is enormously expensive because they have outdated systems, rely on manual processes and lack effective specialist advice.

So here’s the good news. With the right technology, you can make that complexity relatively simple to manage. You can slash the amount of time staff need to process manual tasks, you can make faster, data-driven informed decisions and you can collect, process and prepare all the documentation you need in a fraction of the time. 

And those are just the direct cost savings. At the same time, all the admin time that was spent on compliance can be redirected to other productive tasks. It’s not just the expense of manually dealing with BEE codes, you also eliminate the opportunity cost of having your HR and finance departments bogged down in time-consuming paperwork and spreadsheets. 

Second step: Think outside the compliance box

Let’s go a step further. Now that you have the tools to make compliance more efficient, what’s the best way to pursue your BBBEE goals? First, of course, you need clarity on what those goals are. 

After all, the BBBEE scorecard is multifaceted, consisting of five elements, each relating to quite different areas of compliance.  For example, a company may have focused on the Ownership element because it was, given the nature of its operations and structure, relatively simple to comply with. But what about Skills Development? Enhancing the skills of internal staff may, in some cases, be more costly in the short term, but produce sustainable improvements to business operations. 

Getting real value out of the compliance process is as much an art as a science. An experienced partner who can explain the costs and benefits of each element, and assess your company’s specific goals, is therefore indispensable.

Or consider the Youth Employment Service (YES) programme, which enables your business to gain up to two levels on your BBBEE scorecard. In the right circumstances, an initiative like YES is a highly efficient way to achieve your BBBEE goals. More effective than devoting all your resources to the minutiae of optimising their scorecard to appreciate the bigger picture. 

But how do you know what the right circumstances are? The first step is to get a right partner; someone with a deep understanding of the BBBEE codes and who will take the time to understand your business. 

Crucially, though, we can also take the guesswork out of scenario planning. With intelligent technology, like BEE123’s Scenario Planning Tool, companies can run scenarios and precisely work out the benefits of each approach. The upshot: a fully optimised BBBEE strategy which is more efficient and cost-effective and which produces more impact in the real world. 

Reducing the cost of compliance is therefore about more than simply doing what you already do, more affordably. With the right strategic guidance, optimising compliance, in many cases, means thinking outside the box. 

Final step: Don’t just focus on the tactics, develop a BBBEE strategy 

Finally, let’s take one further step back and look at the big picture. Yes, there are more or less efficient ways to meet the compliance demands of BBBEE. But that’s not the fundamental issue. Ultimately, managers should ask whether they are harnessing BBBEE for long-term success or if they’re just going through the motions.

For example, consider the strategic benefits, for a particular business, of harnessing BBBEE initiatives to upskill your staff or to provide resources and support to small businesses in your supply chain.

In other words, strategic BBBEE optimisation is not simply about meeting compliance goals for their own sake, but about upgrading a firm’s internal capacities and creating a richer business environment.

Of course, your strategy is more likely to succeed with the right tactics (including more efficient and cost-effective compliance processes). At the same time, optimising your tactics only takes you so far without a strategy. 

That’s why BEE123 is so focused on integrated approaches to BBBEE compliance. We can help you design an effective BBBEE strategy, and provide the tools, insight and support you need to realise that strategy. 

BBBEE the right way

BBBEE compliance isn’t straightforward. In fact, approaching BBBEE the wrong way can be more of a compliance burden than a growth opportunity. That’s why BEE123 is focused on working with our clients, as partners, to drive long-term growth and make real change to South Africa’s social and business landscape. 

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