The 15th BRICS Summit, hosted in Johannesburg, has come and gone, and left some extraordinary opportunities for business in its wake. According to President Cyril Ramaphosa, “through stronger relations with other countries, manifested through investment and trade relations, we can grow our economy, create more opportunities for new businesses and create jobs.” By opening up the South African economy to foreign direct investment, we stand to take an even firmer stance on the global stage.
“That said, doing business in South Africa as an international company comes with its own set of challenges,” says Angie Lanham-Love, CEO of Lanham-Love Consulting. “While policies such as affirmative action have been implemented in other countries, Broad-Based Black Economic Empowerment is a very different beast indeed, and can be tricky to wrap one’s head around.”
“However, wrapping one’s head around it is a must if your multinational wishes to succeed in the South African context,” says Lanham-Love. “A higher level B-BBEE score is necessary if your company intends to do business with the South African government, and you may even find it difficult to do business with private business without a higher level of B-BBEE compliance. This is because your B-BBEE scorecard is also affected by the companies with which you do business, so private South African companies will prefer to partner with businesses that have a great compliance score.”
In addition, international or multinational companies may have policies which limit the sale of equity. “Since Ownership is a priority element of the B-BBEE Scorecard, this can be detrimental to your potential B-BBEE score,” says Lanham-Love. “However, the South African government does allow for multinationals to exchange ownership with the Equity Equivalent Investment Programme. This is a programme that promotes Critical and Core Skills, Enterprise and Supplier Development, and Research and Development within the South African economy. It is worth noting that programmes such as these do carry sizeable financial implications, and there are far less expensive options when it comes to ownership recognition.”
Nevertheless, B-BBEE also carries with it considerable opportunity for reward. “Myself and my colleagues at Lanham-Love Consulting believe that B-BBEE should not be viewed as a ‘grudge purchase’, but rather as an opportunity for investment,” says Lanham-Love. “When implemented correctly, B-BBEE can help to engender a more equitable, sustainable business environment. This in turn benefits companies, employees, and communities, who will continue to work together to create a flourishing economy that has real longevity.”
“South Africa is currently ripe for foreign investment,” says Lanham-Love. “Not only can we serve as a gateway into the rest of Africa, our position as a member of BRICS means that we are part of a group that makes up one quarter of the global economy, is home to over 40 percent of the world’s population, and accounts for a fifth of global trade. If you are eager to bring your company to our shores, it is worthwhile to speak to a B-BBEE expert should you wish to explore how best to do business in South Africa,” says Lanham-Love.
Let Lanham-Love Consulting help you on your South African business journey – we are perfectly positioned to ensure comprehensive B-BBEE compliance. Speak to one of our consultants today!