1. What is Black Economic Empowerment?

Black Economic Empowerment (BEE) is a programme launched by the South African government to redress the inequalities of Apartheid by giving previously disadvantaged groups (black Africans, Coloureds, Indians and Chinese) that are South African citizens economic privileges previously not available to them. It includes measures to adress participation of black people wihtin the ownership and management control structures of the busines as well as measures to addres skills development, enterprise and supplier development, preferential procurement and socio-economic development of black people.

2. What is BEE verification?

Black Economic Empowerment (BEE) verification is an independent and in-depth assurance process that seeks to verify the "Broad-Based BEE" (B-BBEE) status of companies, closed corporations and other economic entities. A measured entity (client) will have demonstrated through formal verification that it is in compliance with the B-BBEE Act and the B-BBEE Codes of Good Practice. The term "black people" in the context of B-BBEE refers to "African, Coloured, Chinese and Indian" people.

3. What are the elements of the BEE Scorecard?

It is called "Broad-Based" B-BBEE because it measures the participation of black people or the benefits accruing to black people over a broad-base of criteria or "elements" of an organization. There are the following elements on the B-BBEE general Scorecard (some sector codes provides for more elements):

  • Ownership (measures the interest black people have in the ownership of the business)
  • Management Control (measures the participation of black people in the strategic management structures of the business as well as the employement levels referred to as Senior, Middle and Junior Management)
  • Skills Development (measures the contributions the business makes to the development of its black employees' skills)
  • Preferential Procurement (measures the extent to which the business procures from other B-BBEE compliant entities)
  • Supplier Development (measures the contributions the business makes to the development of black owned small and medium sized businesses that are “Empowering Suppliers”)
  • Enterprise Development (measures the contributions the business makes to the development of black owned small and medium sized businesses)
    Socio Economic Development (measures the contributions the business makes towards facilitating access to the economy for black people in general)

4. What are the categories of businesses?

The Codes categorize businesses into three types depending on their size:

  • Exempt Micro Enterprises (EME's) are businesses with an annual turnover of below R10 mil. They are exempt from having to comply with the B-BBEE scorecard and merely needs to prove that their annual turnover is below the required turnover threshold. They are afforded an automatic Level 4 B-BBEE status. If they can also prove that they are “51% Black Owned” they get awarded an automatic Level 2 B-BBEE status. If they can prove they are “100% Black Owned” they get awarded an automatic Level 1 B-BBEE status.
  • Qualifying Small Enterprises (QSE's) are businesses with an annual turnover of between R10mil and R50 mil. They have to comply with the QSE scorecard which is similar to the generic scorecard but less onerouse with respect to targets and weightings. If a QSE can prove that it is “51% Black Owned” it is awarded an automatic Level 2 B-BBEE status and need not comply with any of the other elements of the scorecard. If a QSE can prove that it is “100% Black Owned” it is awarded an automatic Level 1 B-BBEE status and need not comply with any of the other elements of the scorecard.
  • Large Enterprises are business with an annual turnover in excess of R35 mil per annum. They have to be measured on all the elements of the generic scorecard.

Please note that the thresholds for EME's, QSE's and Large Enterprises entities measureable in terms of the general codes sometimes differ from those thresholds prescribed in terms of a sector code. An EME in terms of the generel codes may therefore not be an EME anymore when measured in terms of the Tourism Sector Code.

5. What are the different BEE Status levels?

These elements are represented on a scorecard and most elements contain sub-categories. Each element has a weighting attached to it and these weightings add up to 100 (excluding bonus points). Depending on the score a business achieves, it is allocated a particular B-BBEE status level. This B-BBEE status level in turn, translates into a B-BBEE Recognition Level (see the table below for the corresponding B-BBEE scores, -Levels and -Recognition Levels).

BEE STATUS SCORE ON SCORECARD RECOGNITION
Level 1 >100 points 135%
Level 2 95 but < than 100 125%
Level 3 90 but < than 95 110%
Level 4 80 but < than 90 100%
Level 5 75 but < than 80 80%
Level 6 70 but < than 75 60%
Level 7 55 but < than 70 50%
Level 8 40 but < than 55 10%
Non-Compliant <40  0%

 

The Recognition level attached to the B-BBEE Status level shows how much recognition a client of your business can obtain, on its preferential procurement scorecard, for procuring goods or services from you.

5. What are the Amended Codes?

The BEE Codes of Good Practice were introduced in 2007 and following a review the Dti published the Amended Codes in October 2013, with a 12 month transition period. This transition period was later extended to 30 April 2015. The Amended Codes has now become effective and Sector Codes are expected to align over time with these general Amendeed Codes. The table below shows the difference between the original BEE Codes and the Revised Codes, per Status Level. It also shows the procurement recognition (how much your customers can claim on their BEE Scorecard as a result of spend with you)

BEE Status (Level)  

2007 BEE Codes  

2013 BEE Codes  

Procurement Recognition

1

100+

100+

135%

2

85-100

95-100

125%

3

75-85

90-95

110%

4

65-75

80-90

100%

5

55-65

75-80

80%

6

45-55

70-75

60%

7

40-45

55-70

50%

8

30-40

40-55

10%

 

The Amended Codes have reduced the Scorecard Elements from 7 to 5 by combining Management Control and Employment Equity into one element and combining Preferential Procurement and Enterprise Development into one element. A portion of the old Enterprise Development element has been allocated to a new indicator called Supplier Development. The difference between the 2007 BEE Scorecard and the 2013 Scorecard is shown below;

Criteria

2007 BEE Codes  

2013 BEE Codes  

Weighting

Bonus

Weighting

Bonus

Ownership

20

3

25

0

Management Control

10

1

19

0

Employment Equity

15

3

-

-

Skills Development

15

0

20

5

Preferential Procurement

20

0

-

-

Enterprise and Supplier Development

15

0

40

4

Socio-economic Development

5

0

5

0

TOTAL

100

7

100

9

 

6. How will Sector Code companies be verified if their financial year-end is post 30 April 2015?

The DTI issued a notice of clarification on the 5th of May 2015 which stated that the transitional period for the alignment of the Sector Codes has been extended to the end of October 2015. Until such time as a sector code is amended or repealed, companies that are rated under such sector code will be rated as per the existing Sector Code notwithstanding the fact that they may have a financial year end that is post 30 April 2015. Once a Sector Code is gazetted in terms of section 9(1) of the Act the new Sector Code will however be applicable to all companies in that sector who have a financial year end that post dates the effective date of the particular Sector Code. Companies in the sector that have a financial period that ended prior to the effective date of the Sector Code will for one final time be able to be measured in terms of the old Sector Code. Subsquent to 30 October 2015 the Minister has decided to repeal two sectr codes i.e. the Construction Sector Codes and the Chartered Accountancy Sector Codes. The repeal was effective from 17 February 2016. Entities previously measureable in terms of these sector codes are now measureable in terms of the general Codes.

7. Does the EME turnover (R10m) bracket apply to Sector Code companies?

As all the Sector Codes have not yet been aligned with the Amended Codes, the EME turnover thresholds applicable to those sectors that are not aligned remain unchanged. The Amended Tourism Sector Code and Amended Media, Advertisement and Communications Sector Code contains different thresholds than that of the general Codes.

8. Who would qualify as a Supplier Development beneficiary? Do they need to be a supplier of mine?

EMEs or QSEs that are at least 51% Black Owned who are Empowering Suppliers will qualify as beneficiaries under Supplier Development; they need not be suppliers of the Measured Entity. While it is encouraged that Enterprise Development and Supplier Development initiatives are aligned with the supply chain of the Measured Entity, it is not necessarily a requirement. The definition of Supplier Development contributions speaks of contributions to ‘value-adding suppliers’, which do not exist in terms of the new dispensation. It can only be concluded that this should have said ‘Empowering Suppliers’ and that the reference to ‘value-adding suppliers’ was a typo in the legislation.

9. Will I receive automatic Empowering Supplier Status if I have Value Adding status? If not, what is the difference?

Only certificates issued under the old dispensation (including Sector Codes) and EMEs have automatic Empowering Supplier Status. It is not at all dependent on Value-Adding Supplier status, as the two concepts have completely different definitions. Value Adding Supplier is defined only in the old codes as “… an entity registered as a vendor under the Value Added Tax Act of 1991, whose NPBT summed with its total labour cost exceeds 25% of the value of its total revenue. Empowering Supplier is a new concept of the Amended Codes, and is described as a B-BBEE compliant entity which is a good citizen South African entity, compliant with all regulatory requirements of the country and a Generic should meet 3, while a QSE should meet at least 1, of the criteria set out in the codes. There are 5 possible criteria that could be met (4 of which are contained in the Amended Codes gazette no. 36928, and a fifth criterion was added by gazette no. 38765 on 6 May 2015). Generic Entities and QSEs must be verified in terms of meeting the conditions to be recognised as an Empowering Supplier.

10. Will national or domestic EAP stats apply in determining the EE and SD targets?

Should the majority of the staff of the Measured Entity be situated in a particular province, the EAP statistic for that province should be considered, following the precedent set by the findings of Solidarity vs Department of Correctional Services and 3 others (C368/2012 & C968/2012), ; in other cases (for example where the dominant province cannot be determined) the overall demographic representation of black people as defined in the Regulations of the Employment Equity Act and the Commission of Employment Equity Report would suggest that the National demographic should be applied.

11. Under which sub-elements of the priority elements does the 40% sub-minimum apply?

The 40% sub-minimums needed to avoid discounting of the final recognition level apply to the following elements as follows:

Ownership: 40% of the net value calculation; the Measured Entity needs to score at least 3.20 points under the Net Value indicator.

Skills Development: 40% of the total weighting points available for scoring, excluding bonus points; the Measured Entity needs to score at least 8 points (without bonus points) for Skills Development

Enterprise and Supplier Development: the 40% of total weighting points applies to each of the sub-categories, namely: Preferential Procurement, Supplier Development and Enterprise Development; the Measured Entity needs to score at least 10 points for Preferential Procurement, 4 points for Supplier Development and 2 points for Enterprise Development (excluding any bonus points) to avoid discounting.

Contact Details

Tel: 0861 277 283
Email: enquiries@aqrate.co.za 

SANAS Accredited BEE Verification

 

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