Broad Based Black Economic Empowerment has taken a few years to get the way it works rights. Companies that intend on being competitive and successful in South Africa need to start being compliant with this programme. This is why the ECS Group always encourages its clients to begin the BBBEE compliance programme.
There are several elements on the BBBEE scorecard and some will take longer to achieve than others. Long term planning of a company should include these elements and those that can be achieved in the short term should be planned for in current strategies.
The government has explained that BBBEE is not a “once off” initiative and should be a long term strategy plan for all businesses. They have also stated that they do not expect companies to be compliant from the onset, but they should be compliant over the next 10 years.
With the above in mind, the government has designed BBBEE codes to be followed in order to eventually achieve compliance. Ignoring these codes will have an impact on the ultimate sustainability of the business, so it is encouraged that companies take a look at them and implement them.
The BBBEE Act is not legislated against any company, however, government institutions and para-statals are required to comply.
With the above in mind, the act is driven through the supply chain. If a certain company wants to do business with the government, it has to prove its BBBEE credentials first. At the same time, a company can improve its BBBEE rating by doing business with other companies with high BBBEE ratings.
Business Classifications are determined by their size in terms of turnover of the company and the requirements imposed on them by the BBBEE Act.
A key objective of this act is to promote the growth and sustainability of small business in order to grow the country’s economy. This is why they are not forced to implement BBBEE codes as they may fail to prosper in an environment in which larger companies can easily comply.
Businesses have thus, been classified as Exempted Micro Enterprise (EME), Qualifying Small Enterprise (QSE) and Generic Enterprise.
Exempted Micro Enterprises (EMEs) are small companies with an annual turnover of less than R5million. They are not required to comply with BBBEE and are given an automatic Level 4 Contributor Status, while black owned companies are given a Level 3 Status.
Qualifying Small Enterprises (QSEs) have an annual turnover of less than R35million. Despite being small businesses, they have to comply with BBBEE codes, however, they have leniency as compared to the codes that larger companies have to adhere to. A QSE can choose to be scored against four elements on the scorecard.
Generic Enterprises have an annual turnover of over R35million. They are measured against all 7 elements of the generic scorecard. The weighting is determined y awarding points for each element on the scorecard, thus determining the overall score and status.
The 7 elements of the BBBEE scorecard are as follows:
BEE Recognition Levels show the status of a company’s BEE status based on how they score against the different elements. There are eight levels with level 1 being the highest and level 8 being the lowest.
There are scores of 30 points to 100 points, with those scoring 100 being level one and those between 30 and 40 being level eight. Those that score below 30 points are regarded as non-compliant and thus do not contribute to BEE,
The BEE Recognition level percentage is the amount of money spent on BEE companies or projects.
BEE Codes and Sector Charters
BEE codes are not all reasonable applicable in all organisational levels and industries. This is why sector charters have been developed to allow for black people to have access to this industry, but in a more appropriate and realistic manner.
So, the difference between a charter and a code is mentioned below.
A Charter is a statement intention by members of a certain industry that includes information on how they will transform the industry in terms of BEE.
A Code is a measurement of the above intention and is as binding as the BEE Codes of Good Practice. A sector code means that all business in that sector becomes bound by that code and not the BBBEE Act’s codes.
Ratings and BEE Verification Agencies
The South African National Accreditation Services (SANAS) website validates all accredited verification agencies.
A uniform verification system that is used by verification agencies ensures that all BEE verifications of different companies are valid. The verification agency is an independent body that uses approved and accepted methods of verification.
When verification agencies conduct their work, they are governed by two principles. These principles are confidentiality and impartiality.