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BEE Information - RKH Accounting CC blog

 

  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. 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