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1. BEE Industry
1.1 How is BEE Compliance Expressed and what Level is considered Compliant?
| BEE CONTRIBUTION LEVEL | SCORECARD POINTS | PROCUREMENT RECOGNITION |
|---|---|---|
| 1 | 100 or above | 135% |
| 2 | 85 to 99.99 | 125% |
| 3 | 75 to 84.99 | 110% |
| 4 | 65 to 74.99 | 100% |
| 5 | 55 to 64.99 | 80% |
| 6 | 45 to 54.99 | 60% |
| 7 | 40 to 44.99 | 50% |
| 8 | 30 to 39.99 | 10% |
| Non Compliant | < 30 | 0% |
Level Four is considered fully Compliant.
1.2 When must the business entity be compliant?
On 6 January 2004 Government passed into law the Broad-Based Black Economic Empowerment Act, No. 53, 2003. The final B-BBEE Codes of Good Practice are now operational as of the date of publication in the Government Gazette, No. 29617, on 9 February 2007.
Although there are no direct financial penalties that could be applied to non BEE compliant businesses, the system ensures that Procurement managers and Buyers will favour businesses that are compliant since that enhances their own BEE Scorecard under the Preferential Procurement element provisions.
1.3 Does every business have to have Black people as shareholders?
Black shareholding can attribute a maximum of 23% to the Generic Scorecard, but there is no legal obligation that can be enforced. In any event, Qualifying Small Enterprises may choose any four of the seven Elements on which to be rated, and can leave out the Ownership element entirely, although black representation does contribute to bonus points as well as promotions under certain circumstances.
The Generic Scorecard consists of 7 Elements, of which Ownership is only one. The weightings excluding bonus points are as follows:
1.4 If the business has no Black shareholders, what is the point of going through a B-BBEE rating?
There are seven B-BBEE elements and each contributes to the outcome of the Scorecard and the ownership element is just one of these. Since ownership carries a weighting of maximum 23% and 28% respectively, based on either the Generic Scorecard or the QSE Scorecard, it is possible to achieve an acceptable B-BBEE Rating without having any Black shareholders in the business
| B-BBEE ELEMENT | WEIGHT |
|---|---|
| Ownersip | 20.00% |
| Management | 10.00% |
| Employment Equity | 15.00% |
| Skills Development | 15.00% |
| Preferencial Procurement | 20.00% |
| Enterprise Development | 15.00% |
| Socio Economic Development | 5.00% |
1.5 What is an Exempted Micro-Enterprise (EME)?
An EME is a business that has an annual turnover of R5 million or less (or R2,5 million in the tourism industry) OR a business that is less than 1 year old.
Such businesses qualify for a Level 4 BEE certificate undergoing a full BEE audit.
1.6 Do all business entities have to be B-BBEE compliant?
Only business enterprises (those classified as 'Exempted Micro Enterprises') with an annual turnover of R5 Million and less will be exempted. Such entities will automatically be recognized as Level Four B-BBEE Contributors with a procurement recognition level of 100%.
Start-up enterprises are Exempted Micro-Enterprises for the FIRST YEAR following their formation or incorporation regardless of their expected revenue. Tendering for contracts above R5 million does require Scorecard submission.
Businesses that are not exempt fall into one of two categories:
- Those with an annual turnover between R5 Million and R35 Million are measured under the QUALIFYING SMALL ENTERPRISES ('QSE') codes.
- Those with a turnover of R35 Million and above are measured under the GENERIC SCORECARD codes.
1.7 What is the difference between the QSE and the Generic Scorecard?
The Qualifying Small Enterprise ('QSE') must elect to be rated on any four of the seven B-BBEE elements. Where a selection is not specifically made by the business enterprise, the four best element scores will be used to calculate the final result.
This means that an enterprise can still achieve a reasonable B-BBEE rating, in spite of not performing well in three of the seven elements.
The Generic Scorecard includes all seven B-BBEE Elements, namely:
- Ownership
- Management Control
- Employment Equity
- Skills Development
- Preferential Procurement
- Enterprise Development
- Socio-Economic & Sector Specific Contributions
1.8 Who is SANAS?
SANAS (South African National Accreditation System) is the recognised accreditation body on behalf of the DTI. SANAS is therefore responsible for overseeing the development and maintenance of the required rating standards in the BEE industry.
1.9 Who is ABVA?
The Association of BEE Verification Agencies (ABVA) is an independent national membership organisation representing the black economic empowerment (BEE) verification industry.
1.10 What is a transitional B-BBEE score?
Until 8 February 2008, any business can select to have a transitional score calculated.
This means that the BEE status is calculated by taking ONLY the relevant Ownership and Management Control subtotals and multiplying it with a fixed factor of 1.92.
1.11 Can BEE Scorecard advise businesses on their BEE strategy and on ways to improve their BEE Score?
This does not form part of our core services, but we can recommend the services of Pointbreak Entrepreneurs, who specialize in advice of this nature. Visit the the following website to learn more.
www.pointbreakentrepreneurs.co.za
2. BEE Scorecard system
2.1 What type of BEE status and score confirmation is provided by BEE Scorecard (Pty) Ltd?
- The BEE Scorecard System is an online system that applies the DTI's Codes of Good Practice to your input data and provides an accurate electronic Scorecard and status of your Business.
- If you have extended access the system also provides a printable version of your BEE Scorecard, which you can distribute freely.
2.2 How confidential is the information that is captured in the BEE Scorecard system?
The confidentiality of your information will be honored and protected at all times. Access to the system is strictly controlled by secure username and password combinations.
All sensitive financial information that is required to determine a B-BBEE Score is further secured through 128bit encryption and is certified by Thawte.
No third party is able to access any of your businesses data, unless expressly made available by you for publication on our public website.
3. BEE Scorecard Ratings
3.1 Will the business obtain a different B-BBEE Score should the measurement be done elsewhere?
Rating Agencies must apply the content of the B-BBEE Codes strictly. However, as the Codes are also subject to some human interpretation, there remains some room for marginal error in the rating process. Since the BEE Scorecard system has been developed after an intense and extensive study of the Codes, we are confident that the cold, hard facts captured by the business enterprise itself will be converted by the system into a reliable and objective B-BEE Score and Status.
4. More on BEE Exemption
In view of the latest release of information by the DTI, the rules for BEE Exemption have changed as follows
- Being BEE exempted means having an automatic B-BBEE Contribution Level of Four and a procurement recognition of 100%
- Sufficient evidence of qualification as an Exempted Micro-Enterprise is an auditor's certificate or similar certificate issued by an accounting officer or verification agency
- Businesses with an annual turnover of between R5 and R35 million needs to only comply with FOUR of the seven BEE Scorecard elements
- Exempted enterprises DO qualify for a promotion to the next B-BBEE Status level under certain shareholding conditions
- The number of employees of the business also has no impact on exemption
- Start-up enterprises are Exempted Micro-Enterprises for the FIRST YEAR following their formation or incorporation regardless of their expected revenue. Tendering for contracts above R5 million does require Scorecard submission.