B-BBEE Simplified

What is B-BBEE?

B-BBEE refers to Broad-Based Black Economic Empowerment. It encourages companies to help transform the country with broad-based activities that benefit black people.

Black People:

Black means African black, coloured or Indian people who are South African citizens by birth or descent or who became South African citizens before 27th April 1994.

BEE compliance is measured by means of a scorecard (a broad-based scorecard). The scorecard is based on various elements and your company is measured out of a maximum of 100 points (in some cases it is possible to obtain more than 100 points).

The BEE Codes of Good Practice describe the mechanisms of the scorecard. The rating elements make BEE broad-based. They cover various aspects of the economy, society and the company.

The Seven Elements:

  1. Ownership – measures the percentage of shares in the business that are owned by black people (as per the definition above)
  2. Management – the directors and top management of the business
  3. Employment equity – the employees in the business
  4. Skills development – measures the amount of money spent on training of black employees
  5. Procurement – your suppliers and their scores
  6. Enterprise Development – your spend on helping other black owned enterprises
  7. Socio-Economic Development – your spend on assisting charitable organisations with black beneficiaries.

Points to Levels Conversion:

Once you have calculated a score, it is converted to a level. The best score is level 1. A company strives to earn more points on its scorecard because a good score helps secure business by offering a point’s incentive to its customers. The more compliant the business, the more points can be earned by the customer.

Points Level
Above 100 1
85-100 2
75-85 3
65-75 4
55-65 5
45-55 6
40-45 7
30-40 8
Less than 30 Non-compliant

Types of Companies:

Exempt Micro Enterprise’s (EME’s) are automatically awarded a BEE score of 65 points (level 4) or if majority black owned, a score of 75 points (level 3).

Sector Code Turnover Threshold
Codes Of Good Practice <R5 million
Construction Sector – Contractors <R5 million
Construction Sector – Built Environment Professionals <R1,5 million
Forestry Sector <R5 million
Tourism Sector <R2,5 million

Qualifying Small Enterprise’s (QSE’s) require a scorecard and can select any four of the seven elements. Their annual turnover is less than R35 million. * Except Built Environment Professionals – below R11.5 million.

Generic Enterprises need to comply with all seven elements of the scorecard. Their annual turnover is above R35 million. * Except Built Environment Professionals – above R11.5 million.

The BEE Scorecards:

The QSE Scorecard:

The QSE scorecard has the following components and points available:

Component Element Points Available
Direct Empowerment Ownership 25
  Management 25
Human Resources Employment Equity 25
  Skills Development 25
Indirect Empowerment Preferential Procurement 25
  Enterprise Development 25
Residual Socio-economic Development 25
Total   100

The Generic Scorecard:

The Generic Scorecard has the following components and points available:

Component Element Points Available
Direct Empowerment Ownership 20
  Management 10
Human Resources Employment Equity 15
  Skills Development 15
Indirect Empowerment Preferential Procurement 20
  Enterprise Development 15
Residual Socio-economic Development   5
Total   100

Becoming BEE Compliant:

Becoming BEE compliant, means calculating and producing a broad-based BEE scorecard. It is not enough to state “We are BEE” even if your business has taken some of the actions and begun meeting some of the targets. Being BEE compliant is only about the points/level you have earned and producing a scorecard to verify your status.

The best way to become compliant is to regard BEE as a process and not a one-time event. That way you will always be up to date with your information and never have that “last minute rush” to obtain your scorecard.

The process is to identify which scorecard you need to follow. Identify the steps you have taken to meet the required targets, and then collect the documentation and evidence to prove that score. Your scorecard will then need to be independently verified by your auditor or an accredited verification agency.

If you do not have valid, accurate and complete evidence, you will not earn points!

Why a BEE Scorecard?

By maximising your BEE status, you will be able to:

  1. By maximising your BEE status, you will be able to:
  2. Provide a competitive edge independent of your organisation’s size,
  3. Encourage large companies to invest in a compliant company,
  4. Assist in unemployment and poverty in the long term,
  5. Apply for tenders and,
  6. Showcase your B-BBEE level in your marketing material.

BEE and becoming BEE compliant is a long term goal. You need to prepare and work on the scorecard. When you are ready, becoming BEE compliant will become part of the daily running of your business.

The BEE Calculations:

The calculations are simple – in each instance you have an indicator. The indicator will have a target and a number of points available – you need to reach the target to earn the points.

Calculation Example

Socio-economic Development (SED) – (Social development, charitable donations to black people).

Target – spend 1% NPAT on black people for SED = 5 points; Actual – spent 0.5% NPAT

Therefore, 0.5%/1% NPAT * 5 points = 2.5

Frequently Asked Questions:

Q) Do I need to sell shares to black people to become compliant?
A) No, and if that is all that you do, you will still not be compliant. The scorecard is broad based and means that you need to support other transformation objectives to perform well on your scorecard.

Q) What penalties will I encounter if I do not comply?
A) You will not be fined or go to jail but you may not get the business you need, nor will your business be sustainable into the future.

Q) Where can I register for BEE?
A) BEE does not have a registration process. You comply by producing a B-BBEE Scorecard. The scorecard allows you to earn points that will help your customers calculate their own BEE scorecard.

Q) How many points do I need?
A) As many as your customers need or more than your competition. It depends on your requirements. Some industries will need a very high score while others may not even need a BEE scorecard.

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