IF PREFERENTIAL procurement has no impact on your business, are you exempt from any form of black economic empowerment (BEE)? Are there any types of businesses that BEE will never affect? And if it has a significance, what is the starting point?

Preferential procurement is the mechanism that will ultimately lead to most companies in SA taking the step towards BEE compliance. This carrot and stick approach has already seen many companies begin their journey. For some, however, the carrot is meaningless as there are no obvious benefits.

The first thing to think about is whether there is any legal obligation on you to implement broad-based BEE in your business.

It is technically impossible for government to legislate as to who you will employ, who you will buy from and how you should donate money to charities and other causes. But it can regulate how the state and parastatals go about doing this.

Your company is under no legal obligation whatsoever to implement. But there are a few technicalities to consider.

Broad-based BEE is made up of certain legislative requirements, employment equity and skills development are two examples.

If your company falls within the definitions of these acts you do have a legal obligation to adhere to this legislation. Section 10 of the Broad-Based BEE Act allows government to consider your company’s BEE status when granting certain licences and concessions.

If your business requires a licence (a liquor licence is an example) then you may find yourself struggling to get the licence if your credentials are not acceptable.

Certain industries have legislated BEE targets. The two most notable examples are the petrochemicals and the mining industries. Both industries have equity targets incorporated into the Act.

Licences are awarded only to those companies that meet these empowerment criteria.

I am convinced that broad-based BEE will never affect any company that does business only with the consumer, provided that, that business is not subject to the three requirements above.

For example, it is unlikely that, the BEE credentials of a plumber will be relevant and significant at three in the morning when there is a flood in a house.

If BEE is likely to have an effect on your company, it is important to consider how to implement the necessary initiatives. The subject of equity always elicits an extreme emotional response.

Many businesses owners say they will not give anything away; they would rather close down. What these businesses don’t realise is that, first, they don’t need to give anything away and, second, the chances are that no one actually wants a share of their business.

Janisch is a director of BEE consultancy The Caird Group. He keeps a daily BEE blog at http://bbbee.typepad.com/paul_janisch.