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Is it Worth Spending to Improve your BEE Level?

Spending on training can greatly benefit your BEE scorecard, however, it is sometimes unclear what the value is of any spend directly aimed at improving your B-BBEE level. Let’s investigate this value.

From the above table it is clear that on public tenders alone, for company B, level 8 would be worth R 1.87 M and level 1 worth R 18.75 M. Note that we haven’t even mentioned the value of BEE levels in bids to the private sector and it is surely there.

What is the Benefit of 1 BEE Level?

With many state tenders the scoring method is 80:20, meaning 80 points for price and 20 points for BEE.

Let’s now say 2 companies were to compete for the same tender, company A is non-compliant and company B has a level 1.

If company A submits a tender for R 10 Million then company B would still win the tender even if the price is higher than R 10 Million, in fact they will win with any tender price below R 12.5 Million. This means those 20 points are worth R 2.5 Million in this single tender, alternatively we can say each point is worth R 125 k on this single tender. If the tender followed a 90:10 model a single point would still be worth R 125 k.

Let us further assume company B submits 10 bids per year with an average value of R 10 Million. If we stick to R 125 k value per point per tender, meaning the value per point over the year on public tenders alone, is R 1.25 Million and 10 points are worth R 12.5 Million.

We now know what a point is worth to company B.

Let us now determine what different BEE levels are worth.

We’ll use what we know about company B, however, adjust its BEE level to determine the value per level over one annum. We can further assume 50% of tenders follow a 80:20 model and 50% follow a 90:10 model.

 

The question remains – should I spend on training?

How much you need to spend depends on the size of your company, revenue, profits and salary bill. The level you are currently and the amount of scorecard points required varies greatly, therefore we would recommend contacting a BEE consultant to assist with a detailed budget and strategy. If you contact us we would gladly put you in touch with consultants specialising in improving score cards at the lowest possible cost. In short training can benefit your BEE scorecard in three main categories namely Skills Development, Enterprise & Supplier Development and the Yes Programme.

Training spend further allows you to improve your scorecard without having to make structural changes or at least limiting the requirement of structural changes in your business, as such changes may in some cases lead to alienation or loss in equity.

About

Resolution Circle is a technical training provider with a wide range of programmes designed to address the skills required in the rapidly evolving technical work environment. We are committed to ensuring our trainees and corporate clients are equipped with a keen mindset, skillset and knowledge to harness all the opportunities emerging from the fourth industrial revolution. Resolution Circle is a subsidiary of the University of Johannesburg.

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