During the (SA)UEO SME panel discussion, Dawie Brink, a B-BBEE consultant at Cores, shared valuable insights into the complexities of the B-BBEE legislation and its impact on SMEs in South Africa. As an experienced consultant in the B-BBEE space, Dawie offered a practical and critical perspective on how businesses can navigate this often-burdensome system, while still striving for success.
1. B-BBEE as an Additional Tax Burden.
Dawie emphasised that, for many businesses, B-BBEE functions as an additional tax. SMEs are already heavily burdened by taxes like VAT and corporate tax, and B-BBEE compliance adds another layer of financial and administrative pressure. The complexity of the legislation forces businesses to hire costly consultants to ensure they meet the requirements, making it a significant economic burden.
Conclusion: SMEs must approach B-BBEE compliance strategically, using cost-effective and legal methods to reduce the financial strain. Avoiding unnecessary expenses and seeking out government incentives can help alleviate the added pressure.
2. Psychological and Morale Impact on Business Owners.
One of the key challenges highlighted by Dawie is the demoralising effect B-BBEE compliance has on business owners, regardless of race. Whether black or white, the threshold for compliance is a psychological barrier for many entrepreneurs. The complex regulations can discourage business growth and make it harder for SMEs to focus on their core operations.
Conclusion: Business owners should focus on building resilience and adaptability. By cultivating a mindset of innovation and strategic planning, they can mitigate the psychological strain that B-BBEE compliance creates.
3. The High Cost of Compliance.
The financial burden of B-BBEE compliance is particularly heavy for SMEs. Small businesses with turnovers just over the R10 million threshold can face compliance costs ranging from R100,000 to R500,000 annually. This can take a serious toll on smaller companies that are already operating on tight margins.
Conclusion: SMEs should explore legal ways to stay below compliance thresholds, where possible, and seek advice on reducing compliance costs. Partnering with skilled consultants and exploring win-win strategies can help businesses meet requirements without sacrificing too much.
4. B-BBEE as a Barrier to Foreign Investment.
Dawie also pointed out that B-BBEE poses a significant barrier to foreign investment. Many international businesses are discouraged from entering the South African market due to the complexity and cost of compliance. This restricts the growth opportunities for local SMEs looking to partner with foreign entities.
Conclusion: South African businesses seeking foreign partnerships need to be aware of the challenges B-BBEE poses. SMEs should advocate for reforms that encourage foreign investment while still supporting local empowerment initiatives.
5. B-BBEE and Ownership Challenges in Family Businesses.
For family-owned businesses, particularly those in their third or fourth generation, B-BBEE presents difficult decisions regarding ownership. The legislation often pushes businesses into uncomfortable positions, requiring them to bring in new shareholders to maintain compliance. This can be especially challenging in businesses with deep family roots.
Conclusion: Family businesses should seek out creative solutions to maintain control while achieving compliance. Exploring strategic partnerships, mentorship programmes, and other avenues of empowerment can provide a way forward without compromising the integrity of the family business.
6. The Trojan Horse Principle: Turning Compliance into Opportunity.
Dawie introduced the idea of the “Trojan Horse Principle,” suggesting that businesses should use B-BBEE compliance as an opportunity to create real value. Instead of treating compliance as a box-ticking exercise, companies can engage with communities and foster genuine socio-economic development that benefits both the business and the wider society.
Conclusion: SMEs should take a proactive approach to B-BBEE by aligning their compliance efforts with broader business goals. By building partnerships and focusing on long-term community investment, businesses can turn compliance into a strategic advantage.
7. Marketing the Value of B-BBEE Compliance.
Many businesses focus solely on obtaining their B-BBEE certificates, without understanding how to leverage them effectively. Dawie emphasised that having a good B-BBEE rating should be integrated into a company’s broader marketing strategy to enhance its competitive edge.
Conclusion: SMEs should ensure that their B-BBEE compliance contributes to their overall brand value. By promoting their compliance as part of a larger value proposition, businesses can enhance their reputation and attract more opportunities.
Navigating B-BBEE with Strategy and Resilience.
B-BBEE compliance can be a heavy burden for SMEs, but with the right mindset and strategic approach, businesses can navigate this landscape effectively. Dawie Brink’s insights highlight the importance of understanding the legislation, seeking cost-effective solutions, and turning compliance into an opportunity for real socio-economic impact. By approaching B-BBEE compliance with resilience and innovation, SMEs can continue to grow and succeed in South Africa’s challenging business environment.