Whilst most business owners are scared off by BEE terminology, B-BBEE is rather a simple government policy, which is mostly referred to as Black Economic Empowerment.
What is B-BBEE?
It is important to know that BEE is not forced upon any entity by law. So why is it important to comply with B-BBEE? Well, for starters with the implementation of the newly Amended B-BBEE Codes, companies will have to be pro-active in their approach to transformation in order to maintain:
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a good BEE score for enhanced business opportunities;
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access to state funding & public tenders;
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as well as, and most importantly, empowering the South African market.
B-BBEE (Broad Based Black Economic Empowerment) is essentially a policy aimed at levelling the economic playing field that has been distorted by decades of apartheid economics where blacks were denied opportunities.
Does it apply to your company?
The codes define three types of companies:
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EME (Exempt Micro Enterprises) with an annual turnover of less than R 10 million. These companies are automatically given a B-BBEE Level 1 with a 100% black shareholding OR a Level 2 with a 51% or more black shareholding OR a Level 4 with 50% or less black shareholding
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QSE (Qualifying Small Enterprise) with an annual turnover of between R 10 million and R 50 million. These companies are automatically given a B-BBEE Level 1 with a 100% black shareholding OR a Level 2 with a 51% or more black shareholding OR would be required to undergo a generic B-BBEE scorecard audit with 50% or less black shareholding
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Generic – companies with a turnover above R 50 million per annum undergo a generic B-BBEE scorecard audit.
How is it measured?
B-BBEE compliance is measured by means of a scorecard. The scorecard is based on various elements and measured out of a maximum of 100 points (excluding bonus points). The first step however would be to identify which scorecard you need to follow and the relevant associated targets.
What elements are measured?
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Ownership – this measures the percentage of black ownership shareholding in the business. This is regarded as a priority element and failure to comply with the minimum target (40% of Net Value) will result in the Level as obtained being discounted;
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Management Control – this measures the directorship, executive management, other executive management, senior management, middle management, junior management and disabled staff in the business;
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Skills development – this measures the amount of money spent on training of black employees and black people. This is regarded as a priority element and failure to comply with the minimum target of 40% will result in the Level as obtained being discounted;
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Enterprise and Supplier development – this measures your spend on helping other black owned enterprises grow, both suppliers to you and non-suppliers. This is regarded as a priority element and failure to comply with the minimum target 40% in all categories will result in the Level as obtained being discounted;
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Socio-Economic Development – this measures your spend on assisting charitable organisations.
What next?
Once you have collated all the data, proof and evidence required for your B-BBEE audit you come in contact with a SANAS accredited BEE Verification Agency. Together with the BEE Agency the entity has to undergo an audit to determine its BEE Compliancy Levels.
This takes place in 3 easy steps:
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Completion of Documentation and BEE Verification planning;
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Gathering of Evidence according to all the 5 elements;
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Verification of Evidence and calculating BEE Compliancy.
The score received during the B-BBEE audit is converted to a Level
(as indicated below for a generic amended scorecard):
So, why is it necessary to comply with B-BBEE?
A Scorecard = business, whereas non Compliance = less business/no business/inability to tender in the public sector/inability to receive state funding. To earn B-BBEE points on Preferential Procurement a company needs to ask its suppliers for their B-BBEE scorecard. So what happens if you cannot furnish a B-BBEE Certificate to them? Simple, they will begin looking for an alternate supplier who is compliant and can help them achieve a better score under Enterprise & Supplier Development, and thus in their overall score.
If you require any assistance during the planning and preparation phase leading up to your B-BBEE audit, or a preliminary gap analysis audit, or general B-BBEE advise, feel free to make contact with any LabourNet Representative.
For more information on the above topic, please contact the LabourNet Helpdesk at
0861 LABNET (0861 522638).
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