Since the amendments to the Codes of Good Practice for Broad-Based Black Economic Empowerment (BBBEE) came into effect in May 2015, there has been considerable confusion among businesses as to what it means for their BBBEE score going forward. The new Codes, which supplement the Broad-Based Black Economic Empowerment Act, No. 53 of 2003, introduced some big changes for scoring. While there was concern about having ratings lowered, there has been scope for certain businesses to actually improve their position. The goal for organisations now is to look at ways of getting their BBBEE score closer to Level 1 to improve their chances of success in the South African business landscape – and in this article, we discuss how this can be done.
The first area that should be examined is the turnover of the business. Under the revised Codes, businesses with an annual turnover of up to R10 million are classified as Exempt Micro Enterprises (EMEs), which are awarded automatic Level 4 status. This is a big change from the old Codes, under which EMEs were restricted to annual turnover of just R5 million. The category has been opened up significantly. The status can easily be upgraded to Level 1 or 2 depending on the percentage of black ownership; EMEs that are at least 51% black owned are classed as Level 2, and those that are 100% black owned, Level 1.
The new Codes have also changed the turnover threshold for Qualifying Small Enterprises (QSEs), shifting the bar from between R5 million and R35 million to the range between R10 million and R50 million, thereby widening and easing the middle category of enterprises in BBBEE classifications.
Unlike EMEs, many QSEs are required to comply with all of the sections of the BBBEE scorecard, which have been condensed from seven into five. Previously, QSEs only had to show compliance with four, so this change has made things a bit more challenging for some companies. The new sections are: ownership, management control, skills development, enterprise and supplier development, and socio-economic development.However, it should be noted that QSEs are eligible for the same black ownership ranking upgrades as EMEs.
To improve their BBBEE rating, businesses should start by looking at their supplier and enterprise development strategies, as this is a priority element on the scorecard. This means ensuring that they are dealing with empowering suppliers with good BBBEE scores of their own. Another tip is to focus on employing and up-skilling disabled black candidates, as this not only boosts BBBEE points, but is hugely helpful in terms of social upliftment.
Businesses can also conduct a competency review and training gap analysis to identify what is needed to better fulfill employment equity goals and best use their skills development budget. Efforts should also be made to work towards effectively increasing black ownership percentages. Businesses should calculate their BBBEE score on a regular basis – even monthly, if possible, to assess their progress.Cenfed are able to assist businesses with the improvement of their BBBEE scores under
Cenfed are able to assist businesses with the improvement of their BBBEE scores under the new Codes. Contact us to speak to a consultant about your current status and goals.