South Africa’s transformation and empowerment codes are increasing costs for the bulk of businesses; however, companies are taking compliance seriously, new research by Grant Thornton has found.

The second-quarter International Business Report for 2016 shows that two-thirds of businesses surveyed reported rising costs as a direct result of the Broad-Based Black Economic Empowerment (BBBEE) Amended Codes of Good Practice.

“Our survey shows that many companies are now turning to specialist consultants to reach compliance, while a number have actually gone as far as to appoint internal specialists and transformation managers to monitor, target and track compliance internally,” explained Grant Thornton Johannesburg verification services MD Jenni Lawrence.

Around 76% of the businesses employed outside consultants, 44% appointed an in-house BBBEE team and 41% enlisted specialist service providers to assist, as “proper planning” is required to avoid the cost of noncompliance and “maximise the return on every cent spent on BEE”.

“The cost of noncompliance should not be underestimated, particularly for companies relying on BEE scorecards to tender or apply for Department of Trade and Industry grants,” said Lawrence.

Enterprise and supplier development contributions – in the form of grants, loans, discounts or time – accounted for 15 of the 109 points on the new scorecard, which seems to have catalysed 61% of the companies to work with new, additional or alternative small and medium-sized enterprises to improve their ratings.

The BBBEE amendments had led 55% of respondents to make a shift in suppliers to improve scores, while 55% of the respondents were impacted in their approach to tendering or proposals. Thirty-nine per cent and 38% respectively said there was no change.

BEE spend is measured out of 25 points, with nine being allocated towards companies that are at least 51% black-owned and four points for suppliers with at least 30% black women ownership.

“It has become crucial for businesses to get this right, particularly as procurement is now a newly-designated priority element, which requires a 40% subminimum achievement to avoid a level drop,” she pointed out.