I would like to briefly address a couple of matters in this post:
- Ownership and Fronting
- Successes of the YES programme
Ownership and Fronting
Black ownership in companies remains an area of concern for the dti. This is evidenced by the headlines in the Business Report in February “Sharp decline in black ownership rankles the dti”.
In a report dated 14 March 2019 entitled “Economic transformation still hampered by B-BBEE fronting: Davies” IOL quotes the Minister as saying “In South Africa, too much [black] ownership is not real economic ownership; too often it is only legal ownership,” said Davies.” Minister Davies is also reported as saying “More economic transformation would take place in South Africa when more black people were able to exercise true business ownership powers” and “Black people only experienced real ownership of a business entity when they were involved in major decision-making and day-to-day operations, added Davies.”
Companies are under increasing pressure from Government and from customers who are requiring certain levels of Black Ownership before they will grant concessions, sell franchises, or do business with that company.
This is complicated by several issues which include:
- Ownership is a highly emotive issue. People have spent a lot of time, money and effort building up their businesses and now feel that they are being forced to give away ownership.
- Funding for ownership transactions is limited. There are a limited number of people who can fund their own transactions and they can cherry pick the best investments and demand discounts. The vendor financed funding model is fraught with difficulties in today’s weak economy as it is largely reliant on dividends being paid to service debt.
- Not everyone wants to be the owner of their own business. It carries a level of risk that is not attractive to some people. The security of a salary at month end is attractive.
Concerns about Black Ownership of companies can lead to questions fronting. The Government seems to believe that such practices are widespread. Our experience with larger business is that they are concerned about the reputational risk linked with such practices and try to avoid them. Fronting is likely to impact smaller business, where the loss of a contract or tender may have going concern issues. We must apply some healthy scepticism and avoid Ownership solutions which seem too good to be true as they normally are. To use an Americanism “if it looks like a duck, walks like a duck, sounds like a duck, it’s a duck”.
There are a number of Ownership options we can advise on, so please contact me if you are interested.
Successes of the YES programme
The Youth Employment Service Initiative or YES is an initiative by Government to promote experiential training for unemployed black youth. The belief is that a year’s quality work experience and a verifiable reference will assist in gaining permanent employment on completion of the programme.
A review of their website shows that:
- Yes4Youth, the governing agency, has been operating for 18 weeks with no government funding.
- Funding has come through the registration fees paid by the 450 companies who have registered to date, and
- Other funding has come from fees paid on registering the 15,715 youth placed, or which have been committed to be placed by corporates.
A number of our clients have taken on YES candidates and most are impressed with the experience and the youth that they have employed in terms of this scheme.
In addition, YES has granted a dispensation in the first year of YES whereby companies that took on YES candidates before their financial year end and meet all requirements, other than the absorption requirement, can recognise the B-BBEE benefit of increased levels in year 1. In a webinar hosted by Yes4Youth, they stated that 6 companies have already increased their B-BBEE levels through YES, and 1 GBS client has increased their B-BBEE level by 2 levels because of YES.
At GBS, we have developed a YES management system. We will project manage the entire YES year for clients. Services include registration with YES, sourcing staff, placing them at companies (if our client does not want to host), offering payroll and other HR services, providing training and then assisting with placing the youth on completion of the process.
To find out more, click here for the brochure or contact us.
If you have any questions regarding this post or would like to inquire about our B-BBEE services, please do not hesitate to contact me on 083 440 2130 or at [email protected].