New BEE codes have saved us
This family-owned business is looking to the future with confidence, thanks to broad-based black empowerment
George and Sonya Didloff met at teachers’ training college. They’re married and are both 39 except that he’s all of one day older than her. They work together at home as parents, and during the day they run the Witbank-based transport business that George’s father and grandfather founded. George runs the workshop and Sonya the administration. As George jokes, Sonya could be ripping the business off blind and he wouldn’t be any the wiser. Interviewing the couple in Sonya’s administration office in the Mpumalanga highveld town there is a lot of laughing. The Didloffs apparently love their business, each other and their buses .
Proud of their business
George is proud of the fact that their business, Pal & Sons, has the biggest Volkswagen bus fleet in the country – 40. He’s proud of its family ownership and he intends to keep it that way, hopefully one day passing the business on to one or both of their sons, now aged 11 and 13. (In case you’re wondering, the “Pal” comes from the initials of George’s grandfather, Petrus Albertus Loggerenberg. A few years ago George’s brother tired of the transport game and opened up a couple of sports bars in Witbank.)
Threatened
Recently, however, the business was threatened by the fact – not that it’s a family-owned affair – but that it is a white family-owned business. Pal & Sons’ bread and butter is transporting mine and power station workers as well as scholars. (On weekends their buses are often chartered for school trips or for weddings and funerals, but the business is overwhelmingly dependent on big government and corporate contracts.)
Recently BEE started becoming a major concern of the bus company’s clients and the Didloffs were aware that they had to do something; they decided to have their broad-based black economic empowerment credentials certified. “Broad-based has completely changed the landscape for us,” says Sonya. “We’re now really looking to the future with confidence.”
George adds that a business based on contracts is never secure. Standing still, he says, is never an option; you have to keep driving the business forward. “When we (George and his brother) bought out my father in 2000 we were very exposed because we relied a great deal on just one contract, which had only a year to go. “You’ve got to anticipate the doors that are closed or closing, and find new doors to open.” Determined to keep their business doors open – and the jobs of their 60 staff – Pal & Sons hired Nelspruit-based Labour Aid to rate them.
An exempt enterprise
With a turnover of under R5-million, Pal & Sons is what is known as an exempt micro enterprise. This means in effect that they are exempt from the broad-based black economic empowerment certification process and automatically qualify as a level 4 compliant business. The Didloffs, however, took the view that it would be good for business to be able to show how Pal & Sons had been transformed.
They now have a certificate issued by Labour Aid which shows that Pal & Sons is level 4 compliant and that it scored as follows:
Employment Equity 17.04
Skills development 15.00
Preferential procurement 13.55
Enterprise development 11.74
Residual element 13.72
George points out that the business’s fleet manager is black, as are all the supervisors. For this, and their investment in staff, Pal & Sons scored well on employment equity and skills development.
It also earned points for its social-investment projects, which include sponsoring two Witbank-based athletes to take part in the Comrades Marathon. Another initiative which stood Pal & Sons in good BBBEE stead was the decision to outsource its washing bay to a new previously disadvantaged business, Siyafunda. Not only does Pal & Sons give these new entrepreneurs that side of their business, they also helped them get Siyafunda up and running.
Sonya reckons the process of supplying Labour Aid with all the paperwork and telephone numbers they needed to complete their BBBEE audit took “a couple of days” of her time. The process cost Pal & Sons about R4 000. “It was one of the best investments we’ve ever made,” she says. Pal & Sons are finalists in the 2007 Africa SMME Awards contest. Winners will be announced in Johannesburg next month.
Decoding the codes
SINCE Pal & Sons was rated (in January this year), new BBBEE codes have been gazetted. In terms of the new codes, an exempt micro-enterprise (or ‘EME’, a business that has a turnover of under R5-million per annum), automatically qualifies for a Level Four rating. If there is black ownership of more than 50%, the business qualifies for a Level Three rating. Pal & Sons had its business rated by means of a scorecard, although they fell into the EME category. So-called Qualifying Small Enterprises (businesses with a turnover of more than R5-million a year and less than R35-million) have to comply with only four of the seven legs of the QSE scorecard, and not five, as was previously the case. According to Jannie Liebenberg of Nelspruit-based Labour Aid rating agency, to get all 25 points in the residual category, a business has to spend 1% of its net profit after tax. To get all 25 points in the Enterprise Development category, businesses need to spend 2% of net profit after tax.
Where will all the buses come from?
HOW is South Africa going to move the hundreds of thousands of football fans expected in 2010? According to Eric Cornelius of the Southern African Bus Operators’ Association, there is going to be a shortfall of at least 500 to 600 buses during the Soccer World Cup.
“If you spend R2.2-million on a luxury coach, you can’t just use it for a few weeks,” says Eric. “So we’re working hard with the (Fifa) local organising committee and MATCH (the body responsible for coordinating guesthouse accommodation) to come up with an alternative plan.” According to Eric, there is a strong possibility that the various stakeholders will create a special company that will invest in the buses South Africa will need for 2010 but that will have a life of about five years.
He says it is envisaged that shares in this company will be offered to those already in the transport industry.
-Sunday Times Business Times