B-BBEE Stripped

The transformation world is very similar to the engineering field in that if you speak to an expert on the B-BBEE codes or to a Civil Engineer about bridge construction, I can guarantee you will be similarly lost after 15 seconds.

In fact, I already lost some of you at the “B-BBEE Codes” which, ironically, would be a great place to start.

Like any legislation there must be a very good reason for its existence, and beyond reason there must be a clear plan on how to implement the policy. An article titled “How is B-BBEE still around?” does a deep dive into the relevance of the codes in the greater context of South Africa’s history.

The purpose of this article, however, is to strip the complex Broad Based Black Economic Empowerment journey down to the“bare” essentials – the key components that make up B-BBEE as we know it today.

To begin: A bit of background

According to the South African government, the B-BBEE Act 53 of 2003 was established as a legislative framework for the promotion of black economic empowerment.

The overarching objective of all B-BBEE legislation is to rectify the catastrophic impact the apartheid era had on indigenous South Africans. The legislation specifically aims to promote the economic participation of Black People in the South African economy, with Black as defined in the codes to be Africans, Coloureds and Indians.

The B-BBEE Act empowers the Minister of Trade and Industry to issue codes of good practice as an implementation guideline and to publish transformation charters as industry-specific guidelines where the generic codes are not appropriate.

The sector-specific codes (each governed by their own transformation charter) are developed by stakeholders in the relevant sector.

The Minister also has the power to establish the Black Economic Empowerment Advisory Council that presides over all matters related to the B-BBEE Act.

The Minister of Trade and Industry appoints the B-BBEE Commissioner who is mandated to oversee, supervise and promote adherence to the B-BBEE Act in the interest of the public, and strengthen and foster collaboration between the public and private sectors to promote and safeguard the objectives of B-BBEE.

Who needs a B-BBEE certificate?

According to the codes, the following entities are measurable for B-BBEE.

All Organs of State and Public Entities

All Measured Entities engaging in economic activity with all Organs of State and Public Entities (in other words, companies doing business with SOEs, municipalities and so forth)

Any other Entity that undertakes any economic activity, whether direct or indirect, with any Entity that is subject to measurement under the Codes. In other words, if you are doing business with an organ of state, you need a B-BBEE certificate. If any of your clients are doing business with an organ of state, you need a B-BBEE certificate. If your client’s client is doing business with an organ of state, you need a certificate. In short … if anyone in your supply chain does business with the state, chances are that you will need a B-BBEE certificate.

The five elements of measurement

There are five elements of B-BBEE that are used in a scorecard against targets with weightings guided by the codes of good practice. The elements include:

  • Ownership Management
  • Skills Development
  • Enterprise & Supplier Development
  • Socio-Economic Development

For a detailed explanation on each element visit Mpowered’s knowledge platform.

Companies with a B-BBEE certificate are measured on some or all of the elements, depending on their size (see below). A company is awarded between Level One (the highest compliance level) and Level Eight (the lowest compliance level). If a company scores less than 30 points on the scorecard, it is deemed non-compliant.

Obtaining a B-BBEE Certificate – How to comply

 The size of your business (in turnover) will determine what you need to do in order to achieve your B-BBEE certificate. Exempt Micro Enterprise (EME): R10-million annual revenue or less

Exempt Micro Enterprise (EME): R10-million annual revenue or less

  • All businesses with EME status are exempted from B-BBEE compliance and receive automatic B-BBEE recognition level 4.
  • If the EME has at least 51% black ownership, the entity will receive a recognition Level 2 and entities with 100% black ownership will receive a recognition level 1.
  • A sworn affidavit or CIPC certificate (Companies and Intellectual Property Commission) are sufficient as far requirements go.

Qualifying Small Enterprise R10m – R50m annual revenue

  • QSEs that have at least 51% black ownership or 100% black ownership are subject to the same standards as EMEs, in that they will receive automatic recognition levels 2 and 1.
  • A sworn affidavit is a mandatory requirement
  • QSEs with less than 51% black shareholding must be verified by an accredited Verification Agency in order to determine their compliance level. No automatic compliance level is awarded.  

Large Enterprises R50m annual revenue or more

Also referred to as Generics, large entities are required to go through the verification process by an accredited Verification Agency. No automatic compliance level is awarded, regardless of the black ownership of the business.

Verification

B-BBEE certificates are issued by verification agencies accredited by the South Africa National Accreditation Systems (SANAS).

  • The accredited verification agency will assess the following to determine compliance levels.
  • Completion of documentation and B-BBEE verification planning.
  • Collection of evidence according to the five elements of B-BBEE.
  • Verification of evidence and calculating B-BBEE Compliancy.
  • For more information on the verification process click here.

Mpowered Business Solutions

Mpowered offers a solution that sits at the heart of the B-BBEE process, giving our partners the power of proactive compliance.

Our B-BBEE compliance management software and professional Account Managers have proved to be the potent weapon of choice by most of South Africa’s leading businesses. Our alliance partners, who are reputable specialists in their disciplines, come alongside Mpowered to provide “One Solution for All”.

This collaborative effort enables our clients – which range from companies, B-BBEE consultants and verification agencies —  to operate off the same technology platform to enable the seamless flow of data, information, scorecards and evidence throughout a company’s B-BBEE and transformation journey.

Our products include the BEEtoolkit, Supplier Management System, Beagle Scorecard Database and BeagleScore.

For more information visit our new website or call 011 447 2966.

Written by: Ivan Achiume