South African firms put less emphasis on black empowerment

29 October 2010
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Supply warning for southern African firms

31 October 2010 | Lindsay Clark

Research from business consultancy KPMG found the number of businesses in South Africa demanding standards of black economic empowerment from their suppliers has fallen over the past year.

Overall, only 27 per cent of firms had set a minimum broad-based black economic empowerment (BBBEE) status for their suppliers, according to a survey of more than 2,000 businesses, the KPMG report said.

Compared with last year’s survey results, this marks a dramatic decrease from 46 per cent of respondents who indicated they had set a minimum BBBEE status for their suppliers.

The report puts the drop down to a significant reduction in interest in BBBEE in the construction sector. In 2009, 25 per cent of respondents in the sector said that they had not set a minimum contribution level for their suppliers, while in the current year’s results, 100 per cent of the respondents said they not set minimum standards for suppliers.

Of the firms that did set minimum standards for BBBEE for suppliers, the majority of respondents (54 per cent) indicated they would put suppliers on notice to achieve the “stipulated procurement recognition level” within an agreed period if they did not meet those standards. A further 23 per cent will put suppliers on notice to improve to the next level within 12 months. At the extreme, 8 per cent of respondents indicated that they changed suppliers if they did not meet the set minimum BBBEE contribution level, while 15 per cent did not take any action against these suppliers.

The survey could cause concern in South Africa’s mining sector. In September, the government said the by 2014, mining firms must purchase 40 per cent of their goods from organisations that meet BBBEE standards.

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