Joint Ventures and Tenders
By Werner van Rooyen, Director of HowToTender (Pty) Ltd which specializes in tender consulting and tender training.
Joint ventures are collaborative arrangements where two or more businesses come together to share their expertise to win a specific contract for a set period for a common purpose such as bidding for a tender. A Joint Venture is a separate entity and is not part of the individual participant’s own enterprise.
There are many examples of successful Joint Ventures, such as Sony-Ericsson, Virgin Mobile India Limited, Nokia (Siemens AG and Nokia Corp), Cadbury Schweppes PLC Carlyle Group Joint Venture and Chery Jaguar Land Rover Automotive Company. They are all well-known and are very lucrative.
Partners in a Joint Ventures join forces and make Joint Ventures a good business idea to compete if you do not have all the necessary skills, expertise, recourses, infrastructure, or capital that are required for a specific tender.
It is important to know the following 8 things about Joint Ventures:
A Joint Venture is a strategic cooperation where two or more people and/or companies agree to contribute goods, services and/or capital to a common commercial enterprise for the purpose of a specific tender or request for proposal.
- Difference between a Joint Venture and a Private Company
The moment two or more people and/or companies unite to do business together it can be construed of being a Joint Venture, but once these parties to this business register a formal private company then it is no longer a Joint Venture.
- Difference between a Joint Venture and a Partnership
A Joint Venture often sounds much like a Partnership but the main difference between a Joint Venture and a Partnership is that the members of a Joint Venture have come together for a specific Tender or Request for Proposal, while a Partnership is usually formed between two or more people to run a business for an unlimited period.
- Share expenses
Each member of a Joint Venture only shares the expenses of the specific Tender for which the Joint Venture was established.
- Income Tax
Each member of a Joint Venture is liable for their own Income Tax. If the Joint Venture is profitable the net income of the Joint Venture will be distributed to each member of the Joint Venture according to their percentage contribution towards the Joint Venture. The members will then be tax in their individual capacity or if the member of the Joint Venture is company, then the gains of the Joint Venture will form part of the income of the company and will be taxed according to company tax legislation.
Especially important to realize is that each member of the Joint Venture keeps ownership of their own personal fixed assets as well as their current assets.
- Bank account
It is important to open a separate bank account for the Joint Venture. You do not want your private funds to get entangled with the funds of the Joint Venture.
- Set of accounts
Always keep a separate set of accounts for the Joint Venture. You do not want the Joint Venture transactions to get mixed up with your own transactions or those of your company.
Remember, before you dismiss a Tender or Request for Proposal as undoable, think of teaming up with other businesses and/or people in the form of Joint Venture and bid through the Joint Venture. Do not underestimate the power of Joint Ventures.
Joint Ventures can bring you the success you always wanted without being trapped in a never-ending partnership or shareholding scenario.
Countless tenders have been awarded to Joint Ventures and many more tenders will be awarded to Joint Ventures.
We foresee that Joint Ventures will become an integral part of South Africa’s business sphere.
To learn more about this and many other tender conditions attend our “Become a Tender Expert” 2-Day workshops presented in Johannesburg, Pretoria, Durban, Port Elizabeth, and Cape Town. Book and pay online at https://howtotender.co.za/tender-expert-form/
Contact us at firstname.lastname@example.org should you require more information.
You can also purchase a Tender Manual (Handbook) on our website https://howtotender.co.za/ which is a step by step guide how to respond to a South African Tender. It includes examples of completed SBD forms.