BankerSA, Edition 15
Positive takes for small businesses from the Revised Codes of Good Practice.
By Lindsay Grubb
The Revised Codes of Good Practice (RCoGP) have set off alarm bells for many SMEs which are concerned about the impact that these codes will have on their businesses, most notably the controversial compulsory minimum ownership score. In terms of ratings, the Exempt Micro Enterprise (EME) will receive an instant Level 1 status for 100% black ownership, Level 2 for 51% and Level 4 for all others. The Qualifying Small Enterprise (QSE) requires significantly more changes, as ownership is just one element out of five against which they are judged.
Deciding whether to look at potential partnerships, and giving up a percentage of their company could be daunting for SMEs and QSEs, but there are many enterprises who have successfully transitioned.
A successful partnership
In 2014, Johannesburg Stock Exchange (JSE) listed company, Adapt IT, acquired a 49% stake of Uyandiswa Project Management Services, a 100% black woman-owned, project-management consultancy founded by CEO Amanda Dambuza. Dambuza says her company shares similar values to those of Adapt IT. Prior to the 49% acquisition by Adapt IT, she says she had made a personal choice to partner with an entity. “I believed there was strength in having a more established partner,” she says. “Majority ownership was, of course, very important for me in order to still retain elements of independence and credentials as a black women-owned enterprise.”
The acquisition formed part of Adapt IT’s commitment to enterprise development. CEO Sbu Shabalala said at the time that there were excellent synergies between the two businesses, both of which were firmly established and committed to being leading Broad-Based Black Economic Empowerment (B-BBEE) companies. Adapt IT retained its Level 3 B-BBEE status and is ranked as the 28th most empowered company on the JSE, and ranked sixth within the Information and Communications Technology (ICT) sector.
Uyandiswa is a Level 1 black woman-owned company, which favourably influences its customers’ B-BBEE scorecards. Dambuza says there has been a big shift in the way Uyandiswa operates today, compared to before the acquisition. “We are operationally more structured and more astute,” she says. “We have a competent team of shared-services people who take the load o the executives of the company. They help us with proper governance and adherence to the Companies Act. We can therefore focus on building a commercially viable and sustainable business. We have been afforded the opportunity to focus on attracting the right talent and giving them exciting employment opportunities.”
She says the real value realised thus far is the level of governance that Adapt IT brings to Uyandiswa. “As an experienced business, they lead the way for us and we are learning through this,” she says. “Furthermore, the association with an established JSE-listed company affords Uyandiswa the opportunity to be seen as a
stable entity, albeit a fairly new one.” Dambuza says Adapt IT benefits from doing business with highly networked professionals who come from established corporates, adding to the strategic thinking and operational efficiencies. Adapt IT has also been able to positively influence its B-BBEE scorecard through this partnership with a majority black women-owned entity.
Her advice for SMEs who are looking into potential BEE partners in order to become compliant with the new codes comes from personal learning. “It is very important to understand you will struggle to be successful on your own, regardless of your B-BBEE status,” she warns. “there are so many operational and governance matters that need to be taken care of that you only learn on the job. Also, you need to have access to investment funding and working capital for growth if you are to achieve anything worthwhile. When you have made the decision to partner, choose your partners very carefully. Make sure you share similar values and that there are real synergies between your companies or complementary service offerings.”